“Doing nothing” is an investment management decision. Image: Andrey_Popov/Shutterstock.com
By: Scott Swisher, TSP Change AlertsThe Federal Retirement Thrift Investment Board (FRTIB)—the entity responsible for administering the TSP—recently published their May 2024 meeting minutes. In those minutes are the results of the FRTIB’s recent L Fund allocation review reinforcing a prior key finding that, “TSP participants of all ages would benefit from a more aggressive stance—more of C, S, and I Funds, and less of G and F Funds.” What does that mean? TSP participants would have better performance results if their individual investment accounts had more stock/equity exposure and less bond/cash exposure.
I have previously written an article for FEDweek about the conservative nature of the TSP’s L Fund glide path. Here is the immediate problem…the benefit of TSP participants of all ages having more equity exposure in their L Fund investments won’t be completely phased in until 2032!
You don’t have that long to wait! As I write this article, we are sitting near all-time financial market highs, meaning this shortcoming of the L Funds has almost certainly already cost you money! How much more money will it cost you by 2032?
Periodic investment management decisions are required to take part in the TSP. Now stop. Read that first sentence again. Yes, periodic investment management decisions are required.
“Doing nothing” is an investment management decision. In my opinion the wrong decision, but a decision nonetheless. As of the date of this article, doing nothing for a new Federal government employee results in that employee being automatically enrolled in the TSP with a 5% contribution rate investing in the L Fund that, based on your birth year, corresponds to typical retirement age. Call me crazy, but this doesn’t sound like “nothing” to me.
“Doing nothing” results in decisions being made for you by your plan administrator, in this case FRTIB, who will be taking another 8 years to implement a change their own study demonstrates will benefit TSP participants of all ages.
The other option is to make your own TSP investment management decisions. These decisions need only be periodic in nature, but they do require you to pay attention on occasion. I’m not talking about daily decisions, there are already plenty of those daily decisions that you make. And you likely don’t need to add to that pile! From what clothes to wear based on the weather, how to avoid that traffic jam on the way to the office, what you’re having for dinner, etc, etc. You are undoubtedly already overloaded with daily decisions. I’m talking about making investment management decisions at most a few times a year. Isn’t your financial future worth your attention a few times a year?
The choice is yours. Choose wisely!
Scott Swisher helps federal government employees better manage risk where they hold their largest amount of investment account assets, in their TSP accounts. He is owner of TSP Change Alerts, a company providing TSP tactical reallocation services to individual federal government employees. Scott can be reached at scott@tspchangealerts.com.
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