Thrift Savings Plan among best investments

1. Best Investment Plan

2. Thrift Savings Plan among best investments

3. Many financial experts agree the single best investment plan available to Department of Defense employees is the government’s Thrift Savings Plan, commonly referred to as the TSP. • The TSP is the largest 401(k)-type plan in the nation with $454 billion in assets and 4.7 million current and former federal employees, including its military investors. • Most financial experts highly recommended investing in the TSP because it is potentially the single best way for DoD employees to build wealth. • Its ultra-low costs, simple investment options, matching option for civilians, new Roth tax-free investment feature and large contribution limits make it the front-runner for anyone eligible to participate. • The costs to operate the TSP are extremely low. It is a no-load type investment, which means there are no upfront expenses to participate. The expense ratios associated with the TSP (annual operating expenses expressed as a percentage of the average net assets) are incredibly low by any standard. The industry average expense ratio is 1.02 percent.

4. The TSP average expense ratio by comparison is .029 percent — less than one third the cost of the industry average. That is a big deal. Over time, it can easily mean the difference of tens of thousands of dollars or even hundreds of thousands for long-term investments of 30 or 40 years. • The TSPs simple best investment plan options make selecting the right funds an easy choice. Other than the life-cycle funds, which I will explain shortly, you only have five primary funds to select from — the G, F, C, S and I funds. • The G Fund, which is where your money automatically goes when you initially set up your account until you elect to change it, is the largest of the funds representing 43 percent of the all the money in the entire TSP. • The G Fund is merely a savings account and even though it has not had a losing year since 1988, it has only averaged 5.43 percent since its inception in 1987. • It has averaged only 3.19 percent over the last decade, which has been mostly a growth market and therefore is not a great place to invest your money for the long term, particularly if you are not going to withdraw your money for retirement for five years or more.

5. One problem that many do not understand is that if you do not specifically give instructions to move your money from the G Fund, the money will remain in the G Fund for the duration of your investment. • I was speaking with a close friend just the other day about his TSP account that he has had for the last 20 years. He didn’t understand how I had more than half as much in my account as he had in his since I’ve only been investing in the TSP over the last five years. • When I asked him how he had his money allocated between the funds he said “I don’t know.” His money had sat in the G fund the entire time earning “savings account” rates. [Source: http://www.ftleavenworthlamp.com/article/20150716/NEWS/150719579]

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