One of the overlooked features of the mutual fund window is limiting fees by using investments in the same fund family. Image: Montri Nipitvittaya/Shutterstock.com
I have read many of the articles. I have even written a few of them myself. Yes, the TSP’s mutual fund window is not perfect. Not much in life is perfect, yet we seem to make the best of most situations. We should be doing the same with the mutual fund window.
The number one complaint about the TSP’s mutual fund window is the numerous fees associated with using the window. Here is the problem with continuing to dwell on the shortcomings of the mutual fund window…it biases you hindering your ability to assess what is possible. There is a famous saying out there, “the eye sees only what the mind is prepared to comprehend.” It certainly applies to how most are looking at the TSP’s mutual fund window!
This is the only question you should be asking yourself about the mutual fund window: Can I use the window to better achieve my financial goals? For example, can the window help me increase my account balance? Reduce account risk? Gain exposure into other desired asset classes?
Three tips to consider:
1. Watch the amount of your window contributions: To open a mutual fund window account, you must have an overall minimum TSP account balance of $40,000 and move $10,000 of that account balance to the window. It will cost you the $150 enrollment/annual fee and the $28.75 transaction fee to get this $10,000 invested in the window. This is ~1.8% of your $10,000. TSP representatives placed parameters around this initial $10,000 minimum investment for a reason. I wouldn’t recommend exceeding the 1.8% expense for subsequent contributions to the mutual fund window.
2. Don’t transact often: At $28.75 per transaction, I wouldn’t recommend transacting in the window very often, at most a few times a year. Doing so is likely to significantly diminish the benefits of using the window in the first place.
3. Use the same fund family: One of the overlooked features of the mutual fund window is limiting fees by using investments in the same fund family. So what do I mean by the same fund family? This is fancy talk for using mutual funds from the same provider. So say for the sake of argument the mutual fund window contained a mutual fund investment called Smith Investments Gold. And I didn’t want to own this investment anymore. I wanted to sell it and buy Smith Investments Technology. I could get this done in one transaction in the mutual fund window by entering the transaction as an “exchange” in the mutual fund window, paying only one $28.75 fee instead of two, one for the sell and another for the subsequent buy. A great way to limit mutual fund window fees!
If all of this sounds too daunting, consider working with an investment professional. The TSP’s mutual fund window in private sector company 401(k) plans is better known as a self-directed brokerage account (SDBA). According to Charles Schwab’s 1st Quarter 2024 SDBA (aka mutual fund window) Indicators report, the average end of quarter account balance for those SDBA users having an investment advisor was nearly double those who didn’t, with the balance for those with an advisor being $526,997 and those without an advisor being $286,431. Yes, professional management of a SDBA/mutual fund window account, or any 401(k) account for that matter, is a thing!
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.
Shutdown Meter Ticking Up a Bit
Judge Backs Suit against Firings of Probationers, but Won’t Order Reinstatements
Focus Turns to Senate on Effort to Block Trump Order against Unions
TSP Adds Detail to Upcoming Roth Conversion Feature
White House to Issue Rules on RIF, Disciplinary Policy Changes
Hill Dems Question OPM on PSHB Program After IG Slams Readiness
See also,
Legal: How to Challenge a Federal Reduction in Force (RIF) in 2025
The Best Ages for Federal Employees to Retire
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process