Throughout its history, the TSP has been simple. It began with one fund in 1987, increased to three funds in 1988 and reached the current number of five funds in 2001. The Lifecycle (L) funds were introduced in 2005. Though the TSP will be offering a “mutual fund window” within the next few years, there will not be any new funds in the TSP; those who want to invest in mutual funds will have to do so through the “window”.
The TSP’s simplicity hasn’t stopped our elected representatives from wanting to meddle with the investments available to us. Remember the push to add a real estate fund to the TSP just before the real estate market imploded in the middle of the last decade?
So, what has been proposed recently? One Senate bill would require the TSP to offer a fund that has no investments in fossil fuels. While I applaud efforts to reduce our dependence on non-renewable sources of energy, is the TSP the place to do it? If such a fund is added, what will be next?
A House bill proposes to ban the I Fund from investing in stocks from “peer or near-peer competitor nations”. This is aimed at Russia and China, but could be used against virtually any country in the developed world. Is this really wise?
HR 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 proposes many changes to retirement plans, including the TSP.
Among other things, the SECURE Act would allow penalty free withdrawals for childbirth or adoption expenses and raise the age by which one has to take required minimum distributions from 70 ½ to 72.
The bill would also repeal the maximum age (currently the year in which you reach 70 ½) for making contributions to a traditional IRA.
One downside to this act is that it would do away with the “stretch IRA”, requiring all inherited IRAs to be liquidated within ten years. The SECURE Act has passed the House, but faces an uncertain reception in the Senate.