How needed is a TSP modernization?

LCDR Private RallyPoint Member — Tue, 28 Jul 2015 10:48:54 -0400

Modernization would increase flexibility and options to make TSP a better tool after government service is ended.

http://www.govexec.com/pay-benefits/2015/07/tsps-future-flexible-withdrawals-and-mutual-fund-options/118622/

What are your thoughts on the changes?

TSP’s Future: Flexible Withdrawals and Mutual Fund Options

But some changes would require legislation and are likely a long way off, officials note.

Response by SCPO David Lockwood made Jul 28 at 2015 11:03 AM

SCPO David Lockwood — Tue, 28 Jul 2015 11:03:15 -0400

Definately needed. With the new retirement will be TSP can become a good recruiting tool if done right.

Response by SFC Michael Jackson, MBA made Jul 28 at 2015 3:11 PM

SFC Michael Jackson, MBA — Tue, 28 Jul 2015 15:11:03 -0400

I don't think an overhaul of TSP needed, but its clients need to be better educated investors. Most people don't reallocate their investment into a diversified portfolio. In other words, people need to spread their money into multiple categories instead of one. The government understandably attempts to preserve the money investors put in first by putting them in to typically low-risk investments(usually the G fund). The uneducated or uninformed investor that doesn't change this, in many cases, miss out on the gains of the market that the other categories experience. TSP clients need to consider their goals and objectives, consider their risk tolerance, and invest appropriate to reach their goals. If you diversified under TSP, it can be an effective investment product.

Response by MSgt Private RallyPoint Member made Jul 29 at 2015 5:23 PM

MSgt Private RallyPoint Member — Wed, 29 Jul 2015 17:23:01 -0400

Any time they provide you more options, it better. But to echo another, education on how to use these options is necessary for each individual. Don't wait for someone else to teach you, research on your own and learn.

Response by PO1 John Miller made Aug 1 at 2015 12:55 AM

PO1 John Miller — Sat, 01 Aug 2015 00:55:30 -0400

We definitely need better options. I've currently got a little over $25K sitting in my TSP not doing a damn thing!

Response by SFC James Reeder made Aug 2 at 2015 8:53 PM

SFC James Reeder — Sun, 02 Aug 2015 20:53:10 -0400

Unless you are maxing out your Roth IRA contributions, the TSP is not worth it. You will be taxed when you withdraw it. When I withdraw from my Roth, all the growth is tax exempt. TSP would be better if the government matched contributions for service members like they do for DA civilians.

Response by LTC John Shaw made Aug 4 at 2015 5:08 PM

LTC John Shaw — Tue, 04 Aug 2015 17:08:58 -0400

LCDR Private RallyPoint Member Options are limited to keep costs low and the costs are very low compared to many options and the choices are well designed for passive or index based portfolio management. The last change was adding the Lifecycle portfolio options, which are good, low cost index based components. Passive/Index management has been superior to actively managed funds for most years in the last 20. I could see changes coming as the TSP is expanded as part of the new retirement program.

Response by MAJ Ken Landgren made Feb 19 at 2016 5:06 PM

MAJ Ken Landgren — Fri, 19 Feb 2016 17:06:12 -0500

I want to warn SMs who are close to retirement not to elect TSP. You will lose money in that proposition.

Response by MAJ Raúl Rovira made May 7 at 2016 1:17 AM

MAJ Raúl Rovira — Sat, 07 May 2016 01:17:57 -0400

The TSP works very well for accumulation while we are on Active Duty. The TSP lacks the flexibility that other financial institutions provide for distributions once we are retired and of age to draw. It is too restricting. This is one reason why so many knowledgeable service members transfer their money out of the TSP into a retirement account at a bank once they retires.

Response by SSgt B Mac made Jan 8 at 2020 3:48 AM

SSgt B Mac — Wed, 08 Jan 2020 03:48:32 -0500

This is an old topic but still relevant. Anything TSP or investing interests me and I like reading what others are seeing or thinking about regarding retirement accounts especially TSP. I don't think it needs updating but I think people need to educate themselves and build a strategy, OR, fall in line with a Lifecycle account and keep an eye on it.
I separated in 2009 after 10 years active duty. I decided to keep my funds in the account. At the time I had a Roth IRA, and some brokerage experiments, E-trade, Ameritrade Defunct Scottrade etc. I've contributed to company 401Ks when available and have been investing aggressively.
TSP strategy I still discuss with service members I run into that do not know how to invest in TSP.
I can no longer contribute to my TSP but fortunately my wife works at the VA and has a DA Civilian matched account that I manage for her. Whatever I do to her account I also do to my own. We keep a spread between the C,S, and I funds, and I have my wife's contributions spread the same monthly. If we anticipate a significant drop in the market I log into TSP.gov, interfund transfer 100% into G fund. G is safe, it doesn't grow much, maybe $0.01 a day or less on average, but also as far as I am aware doesn't lose. While the market corrects I wait for a good low value point and reinsert my funds back into C, S, and I finds but at the lower price. Basic technique, sell high, buy low etc. Considering in the past 10 years I have not been able to contribute, using my technique this account is 4x more compared to the value when I separated. My wife's account, we only maxed her TSP last year but have been consistent with her accounts over the past 10 years when she started working there. Between the both of us, it's the single largest valued account we have in our savings portfolio. The Lifecycle portfolios basically do all this for you, I like to have more control of what happens, but I've ended up losing a lot over the years but I don't get caught up in the loss in value.
It took years to get my wife to understand the total value really didn't matter until we were ready to retire and tapping into it. Even more difficult to get to be happy or content when the total value dropped, that it meant she was buying share, more shares, because they were cheaper, therefore would have more shares to sell on the back end when we hit 59.5 years old.
I spent years almost on a daily basic watching all the TSP funds comparing trends on which of my favorite 3 where performing and not. I admit I spend less time watching the performance, I just set it and forget it now. I invest in what is more volatile. True the GOV set's an individual up with the G fund, Bonds, if you decide to just open up the account and do nothing. I once met a SFC that asked my why he wasn't seeing the growth, that he kept all his contributions for the past 7 years in the G fund because it was safe, never lost. I explained the system to him and he was able to recover but that was 7 years of potential growth he has missed out on. I imagine he's doing much better today.
On the contractor side, I apply the same concept with a 401K. I used to monitor which funds performed the best. Usually there are 2-3 that outshine the rest, compare the 1yr, 3yr, 5yr, 10yr, max performance and take an analytical risk. So far, the last two companies, I discovered their own company stock was offered as a fund option in the 401k and did show the best growth, so I went all in and it has paid off. Max out the 401K, max wife's TSP, max out the IRAs, and then... company stock options. Some companies offer a 5% or some discount price on their company stock if purchased from payroll deduction program. Even if you sell the shares as soon as they are purchased you're getting away with a 5% bonus the company gives you. It's a way of tapping into profit sharing in a way.
I'm not a finance guy. I'm 41 and thinking a lot about retiring. I don't want to end up working deep into my 50s. I want to get out of the game and work somewhere like home depot or whatever I can find that i might enjoy on a daily basis. I'd like to work because i want to, not becasue I have to. I'm taking steps to make that happen. I hope someone can get something out of my notes. Good luck.