TSP tips and trivia

I read a number of personal-finance discussion boards, and one of the largest is Bogleheads.org.  Their best feature is the user’s wiki, which has grown way beyond a basic FAQ page to become one of the Internet’s top unbiased online guides to investing and retirement.

Just over a year ago a poster started a thread on military investing topics which has been expanded and formatted as a new wiki page on military finances.  And, yes, they even linked to The Military Guide.

Take a look at their wiki page on the Thrift Savings Plan. I knew that the TSP was one of the world’s biggest collections of index funds, but then I came across the Federal Retirement Thrift Investment Board website. That eventually led back to the biographies of the FRTIB directors at the TSP website, where the executive director’s bio says: “The TSP services 4.5 million current and former Federal employees and Uniformed Service members with over $289 billion in assets, making it the largest defined contribution plan in the world.So now you know that servicemembers invest in the world’s largest 401(k)– and with the world’s lowest expenses, too.

One of the most comprehensive websites on using the TSP is Ryan Guina’s “Military Wallet” Thrift Savings Plan tab.  He explains both the benefits of investing in the TSP  and the drawbacks.  One of the more popular posts explains how to handle TSP tax-exempt contributions and withdrawals  , and he’s also following the Roth 401(k) plans for the TSP  (still scheduled to start during 2Q12).

Most TSP investors (especially busy servicemembers) are happy to contribute their allotments to the funds and to occasionally tweak their asset allocation. That’s probably the best way to handle our TSP accounts. However, many others would like to see more details on the TSP’s funds and compare them to products from major fund companies like Vanguard or USAA. The TSP funds still have the lowest expenses, but the TSP website doesn’t answer questions like: “How does the ‘C’ fund’s performance compare to the competition?” “How will the ‘I’ fund be affected by a foreign country’s debt default?”

One of the most frequent questions is: “What are the ticker symbols for the TSP funds so that I can track their performance on my investment software?”

The TSP managers don’t answer those questions because they don’t have a marketing staff.  (They have “only” 80 people to manage the world’s largest funds and they’re considered to be one of the smaller federal agencies.)  They don’t even want to pay for the expense of maintaining a TSP ticker system. To fill the information void, a host of unofficial TSP websites offer the data that you won’t get from the TSP itself.

One of these is TSP Center.  It includes archives of TSP data and share prices as well as a wealth of analysis tools for choosing an asset allocation. It also has a blog, a discussion board, and a “FantasyTSP” analyzer. You can download your own data or use their tools. You can tinker with different asset allocations and see how your TSP assets interact with your IRA and taxable accounts. You can follow their updates on Facebook.  If you have a question that the TSP website doesn’t answer, one of TSPCenter’s 4000 members can help you figure it out.

TSP Talk is another site full of tools and archives.  Its “TSP AutoTracker” gives you an easy way to monitor your TSP fund’s performance with daily quotes and analysis. Its “Tools and Utilities” section offers member blogs, data charts, and e-mail alerts for TSP news releases. The site includes a forum with thousands of members who’ve probably answered every TSP question ever asked. Yep, they’re on Facebook and Twitter  too.

These sites and tools cater to active TSP investors. Use them to educate yourself and to choose a TSP asset allocation that works well with the rest of your investments. Don’t turn into a trader– TSP investors don’t have to be involved in their fund’s daily twists and turns, let alone switching from one fund to another every month. For the vast majority of servicemembers the most important aspects of the TSP are making regular contributions, choosing an asset allocation you’re comfortable with, and rebalancing every year or two. (I only update our TSP fund data a few times a year and have never switched from one fund to another.) However, the blogs and discussion boards are fantastic education tools and reference sources. If you’ve been all over the TSP website looking for an answer, you might find it on one of the other websites.

I’ll be checking these sites over the next few months to see how the upcoming Roth TSP option is doing. If there’s a question about the rules or the implementation, these guys will be all over the answers.

Related articles:
Saving base pay and promotion raises
Retiring on multiple streams of income
Asset allocation considerations for a military pension (three parts!)
TSP withdrawal options
TSP annuity options
Exploring the Bogleheads’ Wiki – Asset Allocation (by Mel Lindauer of the Bogleheads)

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. Doug,

    As always great info and links. Seems some info has just crossed the lines today


    It certainly looks like withdrawling from the TSP will be a bit more complecated than getting funds into the TSP.



    • Wow, Jay, thanks! Someone really had their eye on the Register.

      I need to print this out and parse it. Could be several blog posts here…

      • Just lucky timing.

        With the large (ok huge) size of the TSP, some smart entrepreneur (or some large four letter banking/investment/insurance company) will see an opportunity and solve the difficulty of managing a TSP account (different types of invested income –Pre Tax/Tax Free and earnings-Taxable and soon Tax Free). The tricky part, as Ryan points out, will be the distribution side of the house (and the pool of people having TSP accounts is going to grow).

        Granted, the TSP staff will have some work to do here as well but I bet if a solution was presented to them……..

        Guess we will just have to continue with our manual input and do our best to keep it all sorted when we start taking distributions from a TSP account.


    • Thanks for sharing that link, Jay. It looks like distributions could be a tax nightmare for those who elect to use both the Traditional and Roth TSP at the same time and who don’t pay attention to the rules. On the flip side, when used properly, the Roth TSP could be a great tool for managing retirement investments.

  2. Thanks for the kind words, Nords. One topic I’ve been meaning to cover is whether or not it is better to leave your funds in the TSP when you leave the military if you have a lot of tax-exempt contributions. (if you don’t have a lot of tax-exempt contributions, then the TSP remains one of the best options due to the low expense ratios).

    My initial thought was that leaving your funds in the TSP was always better, since you aren’t able to maintain the status of tax-exempt contributions if you roll the funds into another 401k or similar retirement plan. However, if you roll your TSP into an IRA, you can move the regular contributions into a Traditional IRA and the tax-exempt portion into a Roth IRA.

    This could be a huge benefit for people with tax-exempt TSP contributions, since the TSP doesn’t track earnings from the tax-exempt contributions separately — withdrawals of tax-exempt funds are prorated against the total portfolio. So essentially, you are missing out on a lot of tax free growth and more importantly, tax free withdrawals. Rolling these tax-exempt funds into a Roth IRA gives you a chance to add funds to your Roth IRA, which you would otherwise be unable to do. An additional benefit is further diversifying your tax footprint in your retirement years by giving you more taxable and non-taxable retirement income.

    This could be one of the least known and understood military investment benefits out there. Looks like I have another article to write! :)

    • I’ve been sitting on a post for a year that would compare the lifetime value of investing in a Roth before or after the TSP. I have another post idea that would compare the lifetime values of leaving funds in the TSP after the service or rolling them over and converting them to a Roth. (One advantage of leaving your funds in the TSP is that it keeps you from doing stupid things with them in other places.) And I’ve been waiting to see how the Roth TSP rules would complicate that…

      I really like the idea of the tax-free funds going into a Roth IRA. But I’m just one guy and there’s a lot of surfing to be done here. We need research interns!

    Comment? Question? What's on your mind?