Who has your TSP account? Uncle Sam or Bernie Madoff?

Most federal and postal workers belong to the TSP, Uncle Sam’s version of a 401k plan on steroids. They belong whether their job is helping represent the U.S. at the UN, duty some remote embassy, delivering mail, directing air traffic or helping run the nation’s COVID-19 vaccine program. Sometimes half the people you see featured on the nightly news including members of Congress or federal judges — are in the TSP.  For good reason. It’s simple, covers the investing waterfront in options and is the envy of many private sector investors — from Warren Buffet to the late John Bogle — who said they wish they had something like it. Oh, and there is that 5% match from the government.

Yet when they retire from government, or leave it for a non-federal job, many feds move some or all of their money out of the TSP. Some want more investment options. Others want to be able to access their money faster and easier. Some take most of their money out of the TSP but leave a token amount which makes them eligible to return later on. The TSP has some of the lowest administrative fees in the business, which, over time, can boost the account balance significantly. So why leave, ever?

That’s a question that long-time fed and financial coach Abraham Grungold said he gets a lot. He’s been a long-time successful investor in the TSP and he generally encourages them to stick with it.

Some experts predict a record number of retirements this year. And maybe next. They say the long-predicted retirement tidal wave is finally about to hit. So whether you are thinking about leaving Uncle Sam sooner rather than later, the TSP decision is one of the most important you may make.

Here’s what he recently wrote:

The Thrift Savings Plan. Move your account at your own peril.

The Thrift Savings Plan (TSP) has a 30-year track record of successful returns and has the lowest fund expenses. You are in total control of your account. There is a website that is filled with available resources and the TSP does not contact you to pressure you into making one investment versus another. To my knowledge, there has never been a scandal associated with the TSP since its inception.

As 2020 came to an end, federal retirees began to contemplate whether to take their TSP with them. Many federal employees mistrust the government, and I have even heard conspiracy theories that the government will misuse the TSP accounts. Has the government ever defaulted on a U.S. Saving Bond or not paid a Social Security check? The answer is no. Many federal employees say they need more control, so they are taking their money out and putting it with an investment brokerage house. But now you are probably turning over that control to an investment advisor or an investment manager.

At the financial seminars that I attend, I hear the financial experts give the advice of taking your money out because your investment options are limited in the TSP. You already have excellent choices and low expenses, so why take the risk of going to a brokerage house?

The following are examples of those who sought greener pastures and found themselves taken for a ride:

  1. Certificate of Deposits. Allen Stanford, Stanford Investment Group, lost $7 billion of his investors’ money to a certificate of deposit investment scheme.
  2. Blue Chip Stocks and Options. Bernie Madoff, Madoff Securities Inc., lost $2.5 billion of his investors’ money to a blue-chip stocks and options scheme.
  3. Annuities. Wesley Michael Woodward, Ringler Insurance Agency, lost $4.6 million of his investors’ money to an annuities scheme.
  4. Precious Metals. Gary Bates, FAMC, lost $21 million of his investors’ money to a Precious Metals scheme.
  5. Real Estate. Nicholas Costas, Agape World Inc., lost $100 million of his investors’ money to a real estate mortgage investment scheme.
  6. 2020 Scandals. There is the Merrill Lynch investment manager scandal which paid the government $44 million. There is the Raymond James/Stow scandal that took approximately $1 million from senior account holders. And the Robinhood Online Broker marketing scandals paying the government $65 million.

It is certainly your choice to take your money out of the TSP. But as a retiree who has worked hard to build up their TSP, maybe keeping it where it is is the least risky move of all. I tell my clients if you plan on moving your TSP account, you need to ask a lot of questions and read the fine print.

Financial success can easily be achieved; it only takes a little effort.

Any questions or comments please contact me at Grungold LinkedIn or my Facebook page at FERS Federal Employees.

Nearly Useless Factoid

By Alazar Moges

A contronym, often referred to as a Janus word or auto-antonym, is a word that evokes contradictory or reverse meanings depending on the context. Specifically, a contronym is a word with a homonym (another word with the same spelling but different meaning) that is also an antonym (a word with the opposite meaning).

Source: Grammarly

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THRIFT SAVINGS PLAN TICKER

Jan 25, 2021 Close Change YTD*
L Income 22.4290 0.0023 5.15%
L 2025 11.3187 -0.0001 -
L 2030 39.4738 -0.0027 11.26%
L 2035 11.7976 -0.0011 -
L 2040 44.4263 -0.0058 13.16%
L 2045 12.1231 -0.002 -
L 2050 26.4490 -0.0055 14.79%
L 2055 12.7910 -0.0061 -
L 2060 12.7911 -0.0061 -
L 2065 12.7912 -0.0061 -
G Fund 16.5178 0.0012 0.97%
F Fund 21.0851 0.0471 7.50%
C Fund 57.4356 0.2073 18.31%
S Fund 79.4762 -0.1268 31.85%
I Fund 36.0432 -0.2115 8.17%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.