Changes are being made to the Thrift Savings Plan account. In an effort to improve the choice of investments available to investors within the TSP (currently restricted to five funds plus the L-series target date funds), the Federal Retirement Thrift Investment Board (FRTIB) is making a “mutual fund window” available to plan participants beginning this upcoming summer.
For federal workers wondering what this exactly means and how it impacts their retirement savings, here is a basic explainer of the TSP mutual fund window.
What Is the TSP Mutual Funds Window?
A mutual fund window is a sub-account within your TSP in which you can move part of your retirement assets (within limits) and invest them in a broad array of diversified mutual funds that would not otherwise be available to you within the TSP. Essentially, you will now have the ability to invest a portion of your TSP contributions in funds beyond the standard TSP funds (G, F, C, S, I and L).
What Is the Immediate Impact?
Whenever any retirement plan moves providers, there is a “blackout period” that prevents distributions or investment changes. This is to make sure every penny is accounted for. According to TSP.gov, the “key transition dates” as of this writing start May 16 and extend to the first week of June. It is expected that all transactions become temporarily unavailable starting May 26.
TSP Mutual Fund Window Rules and Costs
The proposed rule by the FRTIB to establish the TSP mutual fund window along with its costs and limitations was published in the Federal Register on 1/26/2022. Comments recently closed on March 28.
Ultimately, the details will not be disclosed until the final rule gets published, but the initial proposal included costs totaling $150 per year for anyone that uses the window (no additional cost if you do not), about $29 per trade, a limit of 25% of your total TSP account within the window, and availability only to participants with an account of $40,000 or greater. Of course, this can all change with the final rules.
As an example: if you have a balance of $500,000 in your TSP, you can put up to $125,000 into the TSP mutual fund window. Your costs would be a $150 flat fee plus trading costs – let’s say $180 if you make six buys or sells a year. That totals $330 per year, or 0.22% of your initial TSP mutual fund window balance.
Consider a TSP Review from a FERS-Experienced Financial Adviser
What does this mean specifically for you? Is it worth the additional cost and risk to establish the window in your own account?
Well, that greatly depends on your personal situation, including your financial goals, income and age. For a definitive answer then, get a TSP review with a FERS-experienced financial adviser who can help determine what investments are most appropriate for you.
If you do not have one, feel free to speak with a financial adviser at Advance Capital Management.
Kurt Mears is a Chartered Retirement Planning Counselor who provides federal workers with comprehensive wealth management solutions, such as retirement planning and investment advice, to help them achieve their financial goals. Contact him for a free, no obligation financial consultation.
Learn more about government retirement benefits, including the FERS basic benefit, the Thrift Savings Plan and other retirement planning steps, by downloading our free, easy-to-understand guidebook, FERS Made Simple: Understanding and Maximizing Your Benefit.