TSP

In 1979, punk rocker Ian Dury released a song called Reasons to be Cheerful, Part 3. The song included such reasons for cheerfulness as “cheddar cheese and pickles” and “Charlie Brown and Snoopy.” It’s too bad that the Thrift Savings Plan never recorded a list of the reasons that TSP participants have to be cheerful about their investments in the TSP. If it had, the “reasons to be cheerful” list would look something like this:

Part 1. The TSP’s low expenses. The TSP funds have among the lowest expenses in the business. There are several reasons for this that we won’t delve deeply into here, but they include: 1) The TSP funds are all low cost index funds; 2) The TSP doesn’t have a large advertising budget; 3) Forfeited TSP contributions are used to lower expenses.

Part 2. The generous match received by FERS participants. Around 20% of private sector 401(k) plans have no match at all, and the average match for those that do is $0.50 on the dollar up to 6% of salary; or 3% total. If a FERS participant is contributing 5% of their salary to the TSP, they are getting a government match of 5%.

Part 3. TSP participants are allowed to change their contribution allocations (both the amount and where they are invested) each and every pay period if they wish to do so.

Part 4. Two inter-fund transfers are allowed each month. Inter-fund transfers allow participants to re-balance their TSP accounts. In fact, more than two are allowed as long as the extra transfers move money into the G fund.

Part 5. It’s easy to roll over money from your TSP to IRAs and other tax deferred investments once you have separated. You can also roll money from qualified plans and accounts into your TSP while working as well as after separation.

Part 6. The TSP will be making withdrawal options more flexible due to the recent passage of the TSP Improvement Act. The Thrift Board was given two years from the passage of the act last fall to implement the more flexible options, and they hope to get it done more quickly than that.

So, while the TSP does not offer anything as salacious as Dury’s biggest hit, Sex and Drugs and Rock and Roll, if you invest regularly and take advantage of agency matching you could wind up with a nice fat retirement account.