Retirement & Financial Planning Report

Retirement savings plan participants who get professional advice tend to get better results than those who go it alone, according to a study done for the Aon Hewitt consulting firm.

The study said examined more than 700,000 employees participating in 401(k) programs—which generally operate under the same laws as the TSP and therefore have the same general features—and found that those using professional help had average annual returns, even after any professional fees they paid, of 3.3 percent above those managing their own portfolios.

The TSP does not provide investment advice nor does it have arrangements with outside advisors who might assist participants in their decisions. Instead, it has touted its target-date lifecycle funds that effectively make investment decisions for the participant by creating a mix suitable for the person’s age and continually adjusting it to maintain that balance plus make it more conservative over time.

However, the study found that “many workers investing in target-date funds are not using them as intended, ultimately lowering their investment returns.” The problem, it said, is that such funds are designed to hold the entire balance in an account but many investors have money in other funds as well and/or attempt to time markets by shifting money in and out, undercutting the benefits of that investment design.