The proposed new legislation to create new withdrawal options for TSP investors has raised questions about another area in which many investors say the program falls short, the range of investment options. While many similar 401(k) programs offer dozens of fund choices, the TSP continues to offer just five basic funds–the C, S, G, F and I–and five lifecycle L funds–Income, 2020, 2030, 2040 and 2050–which combine the basic funds in proportions that are more aggressive the longer the time frame. As with the limited withdrawal options, the limited investment options have been called a major reason that many investors transfer their money out to IRAs after separating rather than keeping their TSP accounts open.
The TSP first received authority in 2009 to create an investment window in which investors could steer at least part of their accounts to outside funds, presumably the offerings of a large mutual fund company that the TSP would contract with. The TSP let that authority sit on the back burner until 2015, however, when the governing board formally committed to opening that window. Meanwhile it laid out issues to be explored first, such as fees for investors who would use that option, limits on how much of an account could be held outside the TSP, policies for borrowing against the account, and more.
That initiative itself was put on the back burner by the need to comply with a change in law to begin automatic enrollment of new members of the uniformed military with a matching government contribution. The TSP in commenting on the proposed widening of withdrawal options said that it doesn’t expect the investment window to be available until 2020.