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Francis Xavier (FX) Bergmeister, CFP

Increasing diversification can be overwhelming and time-consuming. In his play, As You Like It, Shakespeare has Rosalind ask her lover, Orlando: “Why then, can one desire too much of a good thing?” Some five hundred years later Thrift Savings Plan (TSP) participants might want to be asking the same question directed toward the number of choices soon to be available for them

Currently, the TSP choices are composed of five core index funds: government securities, fixed income, common stock, small stock-capitalization, common stock, and the international (G, F, C, S, and I). Several versions of all the core funds are also allocated among ten versions of the Lifecycle (L) fund. These L funds allow participants to select a target date appropriate for their planning time horizon. Each quarter the L funds adjust the balance of the core funds from a higher risk profile to a lower risk profile. All L funds upon attaining their target date morph into the L Income fund.


At the time of this article’s writing, there are over 100,000 TSP millionaires. Several factors are responsible. Low expenses, contributions on a payroll basis supplemented with a generous match from the federal government, diversity, and an index fund methodology. The overarching effect is a simplistic and not time-intensive approach for investors to create wealth for retirement.

The forthcoming TSP mutual fund window, which should open sometime this summer will allow participants to have access to thousands of additional choices of funds. Users will be able to invest up to 25% of their total TSP balance into the new mutual funds with a minimum investment of $10,000. The enormous variety of funds to be available in addition to the existing five core funds, ten versions of L funds, and the L income fund may create for some.

The proposed design of the TSP mutual fund window will only allow participants access after they attain at least the $40,000 threshold in their total retirement account given that $10,000 is the minimum investment. That is a good milestone because it will mean new participants should have several years of involvement with the TSP process before stepping up to the mutual fund window. But what about those participants with several years of experience and a TSP total investment already beyond $40,000?

Could too many choices for retirement flexibility in the TSP mutual fund window be too much of a good thing? Barry Schwartz in his book, The Paradox of Choice, wrote: “Learning to choose is hard. Learning to choose well is harder. And learning to choose well in a world of unlimited possibilities is harder still, perhaps too hard.” Dr. Schwartz’s research and advice have been embraced by several sectors of industry and put to practical use.

Fidelity Investments, in its third-quarter 2020 retirement report, shared that fewer than 16 investment options were offered within the defined contribution plans of large corporations it serves in an administrative role. A decade ago, the average number was a total of 26 investment choices. It should be noted Fidelity counted a target-date series collectively as a single fund when considering options. Fidelity’s data also showed 69% of Millennials invested exclusively in a target-date fund. This may be attributed to automatic enrollments which defaulted to that option.

Vanguard discovered that despite a menu of investment choices in retirement plans, 62% of the participants used only one fund and on average, the participants used 2.4 options in 2019, which was fewer than the 3.3 choices selected in 2010. Vanguard found that for every 10 mutual funds in a retirement plan, participation rates dropped by 2%, with some employees even foregoing employer matching contributions.

TSP participants may be unaware of another benefit inherent to the design of the federal government’s defined contribution program. The amount of time one must spend on her or his investments is minimal. The few index fund choices available in the TSP menu allow participants to enjoy time in other more enjoyable activities. The less time one spends on investments, the more time available to other pursuits. Mutual fund window usage will demand a considerable commitment of time compared to the five core index funds and the L funds.


Federal and military employees who have years of TSP experience may not realize that while their investing experience may encompass sometimes over a decade or two it may be shallow and limited in scope for selecting the most appropriate funds for their needs from among thousands of choices in the mutual fund window. Malcolm Gladwell, in his book, Outliers popularized the idea it takes over 10,000 hours of intensive practice to achieve mastery of complex skills in order to become as good as Bill Gates is at computer programming. The Certified Financial Planning Board of Standards endorses a similar rule. The Board requires CFP® professionals to have completed at least 6,000 hours of professional experience as a requirement before attaining certification.

Becoming competent enough to explore the thousands of alternatives to the TSP core funds and L funds can be an extended journey. I would caution TSP participants to approach the debut of the mutual fund window with the same discretion as a visit to a pet shop or animal shelter. Puppies can be wonderful. Just be prepared to spend more time than you may have initially imagined in caring for them as an owner.

Francis Xavier (FX) Bergmeister, CLU®, ChFC®, CASL®, ChSNC® has been Certified Financial Planner® for 30 years. He is a graduate of the Wharton School and earned a Doctor of Arts from George Mason University.

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