Tag: TSP

TSP stands for “Thrift Savings Plan” which is one of the most essential retirement plans offered to federal employees. It’s similar to the 401(k) plan in nature and one of its competitive advantage is that the FERS eligible employees receive automatic contributions to it.

Thrift Savings Plan (TSP) by Joe Kosek

Thrift Savings Plan (TSP)

By Joe Kosek

 

 

The Thrift Savings Plan (TSP) is a tax-deferred retirement saving and investment plan similar to a 401(k) plan in the private sector. For many federal employees, the TSP very likely will be their largest retirement benefit.

 

There are three types of TSP contributions:

 

  1. regular employee contributions;
  2. agency automatic (1%) contributions; and
  3. agency matching

 

Saving for retirement through the TSP has the following advantages:

 

  1. automatic payroll deductions;
  2. diversified choice of investment options;
  3. choices of tax treatment for contributions;
  4. traditional (pre-tax) contributions and tax-deferred investment earnings; and
  5. Roth (after-tax) contributions with tax-free earnings at

 

The TSP has a variety of investment options. The following is a brief summary of the available investment options:

 

  1. G Fund – Government Securities Investment Fund
  2. F Fund – Fixed Income Index Investment Fund
  3. C Fund – Common Stock Index Investment Fund
  4. S Fund – Small Cap Stock Index Investment Fund
  5. I Fund – International Stock Index Fund
  6. L Funds – Lifecycle Funds

 

If you are covered by the Federal Employee Retirement System (FERS), the TSP is one part of a retirement three-legged stool, which also includes your FERS basic annuity and Social Security benefits.

Federal Employees With More Than $1 million in Their TSP

More and more Federal Employees are amassing more than $1 million in their TSP or thrift savings plan account.  The reasons vary from the safety of the investment options to government contributions, to good performance. It is believed that if the funds continue to increase and people continue to invest in them steadily, the number of people who have more than $1 million will increase even further.

more than $1,000,000 in their TSP

More and more federal employees are amassing more than $1,000,000 in their TSP

How Many People Have More Than $1 million  in Their TSP?

As per reports, about 10,000 individuals have a thrift savings plan account over $1,000,000. It is also reported that about 1.4 million account holders currently have balances between USD 50,000 and USD 249,000 after an average of 18 plus years with Uncle Sam. It clearly indicates that most people have a lot of time to grow these accounts further.

In mid-December, 35,161 TSP account holders had a balance ranging from USD 750,000 to USD 999,000. The average account holder had been in the government for just more than 28 years which clearly indicates that these people grew their balances by regularly investing in S, C and I funds of thrift savings plan. These are indexes of the Large Cap (C), International Index (I) and Small Cap (S).

Earlier Investors of TSP

It is pertinent to mention that when the thrift savings plan started, the only federal employees who had million dollar accounts were typically well-to-do private sector lawyers who had turned into federal judges. People who joined the government after long and lucrative careers in the private sectors were also among first few of the thrift savings plan investors.

The Reasons Behind Attracting to TSP

Some people might wonder about why smart and rich people opted to switch their retirement savings accounts to the federal TSP. Well, there are a lot of reasons for that, number one being safety. All these reasons are explained below.

The Monitoring

It is a fact that as an investment, TSP is the most monitored Qualified plan available. Participants range from retired and active letter carriers to FBI agents, CIA officers to NASA agents and even the members of the Senate and House.

Unique Treasury-Securities

People also love investing in the thrift savings plan as they get unique treasury-securities, G-fund which is not available to any other retail investors.

Lowest Administrative Fees

Most Americans also like investing in the thrift savings plan because it has some of the lowest administrative fees in the business.

Recent Performance

It is expected that the number of federal employees who have more than $1 million in their TSP will continue to grow in the future as well because thrift savings plan has ended 2016 on a positive note and because of the age of the average employee being in some of their prime savings years.

Conclusion:

It can be concluded that the report which says more federal employees with more than $1 million in their TSP is good news for all the investors.  It clearly indicates that investors who opt for consistent savings efforts can also earn a lot of money over time if they stick to a plan. It is also quite clear that the recent performance of the TSP funds will lure more investors to it in 2017 which will probably increase the number of millionaire investors in the Federal government.

Mistakes People Make While Picking the Best Date to Retire

One of the most common realities of retirement is that you have the responsibility of picking the best date to retire. You may seek help in deciding when you will opt for FERS retirement. To help you out, we have mentioned the most common mistakes people make when choosing the best time to retire and how you can avoid those mistakes.

retirement

One thing to Know Before Picking the Best Date to Retire

Before you start thinking about picking the best date to retire, you should know exactly when your FERS pension would start. The answer to this question is the first day of the following month that comes after you retire.

Mistakes to Avoid When Picking the Best Date to Retire

Mistake Number 1- Not Knowing the Importance of Leave Ending Date

The most common mistake people make when they are picking the best date to retire is that they give up the annual leave that they have on books. In many cases, people get paid out for the leaves but sometimes the deserved money instead of leaves is not offered because people don’t realize that they need to retire by that leave ending date that year. The ending date will change every year so you must check OPM’s leave ending dates.

Mistake Number 2- Getting the Annual Leave Pay Taxed Heavily

When choosing the best date to retire, people often doesn’t realize that the money they get in exchange for the leaves is taxable as it considered as a part of your annual earnings. You may even get counted among the higher tax bracket because you saved more leaves and got a hefty compensation. A good way to deal with such a scenario is to pick a retirement date within the first few month of the year when the work earnings will be fewer and your leave payment will be taxed at a lower rate. You can also consult with a tax expert in this regard.

Mistake Number 3- Not Using the TSP Waiver Right

Many people plan to use the money from TSP when they retire but they are often not too clear about the age restrictions, which is a big mistake. You must be at least fifty nine and a half years old when you start taking money from an IRA or TSP. If you are younger than the said age, you will need to pay an early age withdrawal penalty as well as some normal income taxes. The whole deal could get very expensive.

There is an exception to this rule for TSP if you separate from or retire from a service in the year in which you turn fifty five or older, you can make withdrawals without any penalty. It’s known as a waiver.

Another related mistake people mistake is that they lose the waiver. You lose the waiver if you transfer the money available with TSP to an IRA. So, you should keep the money with TSP as long as possible and benefit from the waiver.

Mistake Number 4- Not Having Enough Savings for Essential Expenses Immediately Post Retirement

People expect OPM to start providing the FERS pension on the first day of the month after they retire and this is a mistake that you can avoid. You should know that the time needed by OPM to process your retirement application can vary a lot. So, you should pick the best date to retire only when you are sure that you have enough savings to take care of your regular expenses for a few weeks (about four to six weeks).

Conclusion:

So, before you start planning your retirement party, you should consider the leave balance, learn how to avoid getting the leave money taxed, decide when you will start using TSP and also ensure that you have a good amount of savings to keep you self -reliant until your retirement application is processed by the OPM.

When you take these precautions, you will pick the best date to retire like a pro and not lose even a bit of your hard earned money. One of the realities of retirement is that you need to make smart decisions and it’s possible to select the best date for FERS retirement or any other retirement if you read resources articles like this one.

Limits of Thrift Savings Plan in 2017

The limits of thrift savings plans in 2017, one of the most popular programs in the U.S. are mentioned here. It will help people to increase or decrease their contributions for the said year.  This information is vital for about 5 million U.S. civil service employees and retirees who are free to make use of this popular retirement program.

tsp

What are the Limits of Thrift Savings Plan in 2017?

The simple answer to the question of what are the limits of thrift savings plan in 2017 is USD 18,000. This amount is applicable for all the Roth and TSP traditional contributions. For people who are over 50 years of age, a catch-up contribution of $6,000 is allowed. The limits refer to the money people choose to withhold from the paycheck and deposit in the TSP.

Annual Addition Limit

The annual limits of thrift savings plan in 2017 is $54,000 for 2017 tax year. It includes all the elective deferrals mentioned above as well as the employer matching contributions and agency automatic contributions. It does not include the catch-up allowance which means the actual overall contribution limit to a TSP is $60,000 in 2017.

Some Facts

It is a fact that due to the TSP matching structure, the overall limit is rarely reached. As of now, the FERS agency automatic contribution rate is 1 percent of the annual salary and the matching contributions rate is dollar-for-dollar which can go up to 3% of the salary. It is 50 cents in the dollar beyond the said percentage and up to 5 percent of the salary altogether. Regardless of the salary of a person, the catch-up contributions are not matched.

It translated to a maximum contribution rate that is 4 percent of the salary. Since the highest matching contribution rate is 100 percent of the contributions, even the top paid government employees who are more than 50 years of age can theoretically contribute $24,000 via elective deferrals, get a 1 percent automatic contribution and receive an $18,000 match. Since the first and the last figures add up to $42,000, it would need a pretty big salary for the automatic contribution of the agency to produce a total which is close to the limit.

The Special Rule

While knowing the Postal Benefits: The Good The Bad and the Ugly of the TSP, one must remember the special rule that s offered to the members of uniformed services who are serving in a combat zone. This rule can push their contributions to the limit as the tax-exempt pay that is earned in a combat zone is not counted towards the deferral limit if contributed to a TSP but it is counted toward the overall limit.

Learning about L Funds by Todd Carmack

Todd Carmack discusses L funds and retirement 

The L Funds (Lifecycle funds) became part of the TSP allocation options in August 2005.   The objective of L funds is to provide a balance between risk and return combined with an employee’s future retirement year. The L Funds are designed to make life a little easier for federal employees by taking the guesswork out of trying to diversify and rebalance TSP allocations for retirement planning.

The L-funds are comprised of the six basic allocations of the Thrift Savings Plan:

G fund – government securities

F fund – government, corporate and mortgage-backed bonds

C fund – S&P 500 index fund (large cap companies of the US)

S fund – small to medium cap US companies

I fund – international stocks of more than 20 developed countries

These lifecycle funds offer both risk (exposure to stock market losses) and reward (exposure to stock market gains). The funds are designed to have greater risk in the portfolio the farther out your expected retirement date will be and a more conservative stance the closer you are to retirement. The idea is to pick the fund closest to your goal retirement date. Utilizing L funds and retirement planning can be helpful in preparing you for retirement. The funds will be rebalanced over time, going from containing higher percentages of risk (C, S, and I funds) to greater percentages of G fund as time gets closer to retirement.

Here is the current breakdown composition of the L funds:

L income – designed for those retiring in the next year or two.

G fund – 74%

F fund – 6%

C fund – 11.2%

S fund – 2.8%

I fund – 6%

L-2020 fund – retiring between 2017-2024

G fund – 50.28%

F fund – 5.72%

C fund – 24.32%

S fund – 6.48%

I fund – 13.2%

L-2030 fund – retiring between 2025-2034

G fund – 30.78%

F fund – 5.72%

C fund – 34.53%

S fund – 9.92%

I fund – 19.05%

L-2040 fund – retiring between 2035-2044

G fund – 20.43%

F fund – 5.57%

C fund – 39.8%

S fund – 12.35%

I fund – 22.20%

L-2050 fund – retiring between 2045-2054

G fund – 12.13%

F fund – 3.87%

C fund – 44.14%

S fund – 14.66%

I fund – 25.20%

These funds are rebalanced each quarter moving to a less risky mix of investment allocations with a greater percentage going into the G fund.

Source: www.opm.gov

Other Todd Carmack Articles

Social Security for FERS Employees by Todd Carmack

Understanding The Thrift Savings Plan, By Todd Carmack

Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack

Understanding Your FEGLI Coverage, by Todd Carmack

Disclosure: For informational purposes only. Investment advisory services offered through BWM Advisory, LLC (BWM). *Due to various registration requirements concerning the dissemination of investment and insurance product and service information, we are currently required to limit access of the following pages to individuals residing in states where BWM is currently registered. Investment and advisory services available only to residents where BWM is registered or where State determined registration thresholds have not been met. Please contact BWM Advisory for a copy of their most recent ADV for Registration and additional disclosure information. Investing involves risk. Always contact your own investment advisor before making any investment decision.

Taxes and Your TSP by David Fielder

tsp by david fielder

You’ve heard the old saying “The Devil is in the details”, well the TSP is a great example of that.   If you go to the TSP.gov website there are thousands of pages of information they expect you to know and understand.   Even if you had the time, who would want to read that stuff?   Well part of my job is to read the stuff that no to read and determine what parts of the information are useful to postal employees.  One of the most disturbing parts I found pertains to taxation of a non-spouses beneficiary when a current or former employee passes on. I think it is very important and wanted to shed some light on the situation here.

1.) Taxes on your heirs:   I always say in my seminars, “the good news is you work for the government, the bad news is you work for the government.”.   What does that mean? Well you have a great paying job and benefits but you have to also remember that your employer is in the tax business and will create rules that benefit them as a result.

Let’s take John a postal employee who passes away and has $200,000 in his TSP. He has listed his only son as beneficiary.   The money will pass to John but before he receives the money John will be taxed on the entire $200,000.    If his son already has a job making $75,000 a year the $200,000 TSP inheritance will make John pay taxes as if he made $275k that year!   Obviously, would this result in a higher tax bracket and in some cases reduces the amount heirs will receive by nearly 40% plus a reduction of whatever the son’s State Income taxes happen to be.

Now let’s look at this same situation if John had (at 59.5 or older or at retirement) rolled his TSP into a traditional IRA.   Now when John passes his son can use what is called a “STRETCH IRA” to reduce the taxes he might owe.   Using the Stretch IRA concept would allow a beneficiary to elect to receive either the full amount in the IRA or it allows them to “stretch” the payments out over their life expectancy. For example if John’s son is 45 the IRS will allow him to spread that $200,000 out over 45 years.   In this example John’s son would only have to pay taxes on roughly $4,000 each year versus paying taxes on the lump sum like he would from the TSP.

Taxes by David Fielder

The obvious question is why can’t the TSP stretch those payments like everyone else?     In my opinion there are two primary reasons they won’t do it. First, they are in the tax business.   Think about how many postal employees pass away every year. Think about how much TSP money is passing to heirs.   That’s a huge stream of revenue for the government.   Second, the TSP always brags about their low fees.   Well along with low fees come fewer services and options.   Because they collect very few fees, they are not willing to service the stretch payments to your beneficiaries.

If you are 59.5 or older or retired you can roll your TSP into a traditional IRA and offer your heirs the opportunity to take advantage of Stretch IRAs and other option the TSP does not offer that a Postal Benefits expert may be able to help you with. If you would like to learn more or have any questions please feel free to give me a call.

More from David Fielder

David Fielder Author Page

Postal Benefits Group: Delaying Social Security

Solving the FERS Retirement Puzzle by David Fielder

Getting the FERS Flu before Retirement? by David Fielder

Postal Benefits: The Good, The Bad, and The Ugly of the TSP by David Fielder

David Fielder
Tuesday 4 April 2017

David Fielder

President

Postal Benefits Group

www.postalbenefitsgroup.net

Office: 636-875-5306

Cell:     314-540-2802

[email protected]

 

The Roth TSP by Todd Carmack

Todd Carmack talks about the Roth TSP

banner_3 Todd Carmack discusses TSP options.

Having the privilege of helping so many federal employees, it amazes me just how few people are taking advantage of the Roth Thrift Savings Plan, a simply fantastic opportunity.

The Roth Thrift Savings Plan was made available to federal employees in 2012. It differs from the Traditional TSP in that contributions to the Roth TSP are made with after-tax dollars instead of pre-tax dollars. The money grows tax-deferred, similar to a Traditional TSP; however, withdrawals from the Roth TSP come out tax-free. Distributions from a Traditional TSP are taxed as income.

We are currently in a low tax rate era based on tax rates over the last one hundred years. In my opinion, the low-tax era is unlikely to last. In the 1970’s, the highest marginal tax bracket was 70%. In 2013, the highest marginal tax bracket was 39.6%.

As a result of the staggering U.S. debt and increases to the budget for Medicare, Social Security taxes may have to increase to keep pace. In the United States, someone is turning 65 years old every seven minutes, the expenses that Medicare and Social Security must absorb will increase dramatically.

Some Tax experts like Ed Slott (CPA and author) and David Walker (former Comptroller General of the United States) predict that the tax rates will have to double or our country will go bankrupt.

What does all this mean? It means that saving now, in a Roth IRA or Roth TSP, along with using other instruments like Indexed Universal Life Insurance, which could provide for tax-free loans and withdrawals in the future, is probably a financially intelligent way to produce a tax-free income for the future. You will need to wait five years from the start date of your Roth TSP to qualify for the tax-free status for distributions but considering these are your retirement dollars it would be inappropriate to use these types of accounts for short-term liquidity needs.

There are always risks (taxes are a risk, as well as the risk of putting money away in an account that has a long-term objective) but if you are interested in having a more comfortable retirement you may want to do what you can to lower your future tax bill. You may want to consider a Roth TSP as part of that equation.

*Source: Kitchen, B. & Kap, E. (2015), Wealth Beyond Wall Street.

Other Todd Carmack Articles

Social Security for FERS Employees by Todd Carmack

Understanding The Thrift Savings Plan, By Todd Carmack

Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack

Understanding Your FEGLI Coverage, by Todd Carmack

Disclosure: For informational purposes only. Investment advisory services offered through BWM Advisory, LLC (BWM). *Due to various registration requirements concerning the dissemination of investment and insurance product and service information, we are currently required to limit access of the following pages to individuals residing in states where BWM is currently registered. Investment and advisory services available only to residents where BWM is registered or where State determined registration thresholds have not been met. Please contact BWM Advisory for a copy of their most recent ADV for Registration and additional disclosure information. Investing involves risk. Always contact your own investment advisor before making any investment decision.

Getting Started Early for a Successful Retirement by Kevin Wirth

Kevin Wirth Explains How to Get Started Early for a Successful Retirement

Nearly everyone dreams about the day they can retire. Regardless of whether you plan to hike in the mountains, relax on the beach, or volunteer in a faraway place, one thing is for certain, and that is in order to have a successful retirement, a good plan should ideally be in place.

Unfortunately, though, not everyone has the opportunity to do an ample amount of long-term planning. That may be due to an unexpected health situation, an offer of early retirement, or some other event that has moved up the clock on your leaving the world of employment.

In any case, the good news is that you still have some options on your side for making the most of your finances, as well as your insurance benefits, for your retirement years. The best way that you can ensure success beforehand, then, is to start by taking a good inventory of what you’ve got.

Getting All of Your Retirement Ducks in a Row

As you plan for this next phase of your life, the most important aspects from a planning standpoint will include the following:

  • Insurance – Because health care can be a retiree’s biggest expense, you will want to make sure that you have good coverage here. If you won’t be eligible for Medicare yet, and if being added to a spouse or partner’s employer-sponsored health plan also isn’t an option, then there are ways that you can take your FEHB (Federal Employees’ Health Benefits) with you – provided that you meet certain criteria. You will also want to ensure that you don’t leave your loved ones vulnerable to financial hardship when it comes to life insurance. So, be sure that you check into either an individual plan of coverage, or consider taking your FEGLI (Federal Employees’ Group Life Insurance) coverage with you in retirement.
  • Financial – A good, solid financial plan is also an essential aspect of a successful retirement. This is because in order to live the lifestyle that you desire, you will need a way to replace your current income. Therefore, you should start by obtaining an approximation of how much you will be receiving from your retirement annuity when that time comes. If you’re covered by FERS, inquire as to how much income you’ll get from Social Security benefits, too. Because this income won’t likely be enough to completely replace your employer’s salary, you will also want to give yourself a boost by maxing your contributions while you still can to the TSP (Thrift Savings Plan). This will help you to obtain a larger amount of payout when the time comes to convert your savings into income down the road.

Once you have actually decided when the big day will be, you will want to get your retirement paperwork filled out in plenty of time. Typically, you should do so approximately two months prior to your actual date of retiring. This will help to ensure that all goes well – and just in case there are any glitches, you will have some time to get things straightened out and back on track.

More from the Author: Kevin Wirth

Kevin Wirth Author Page

Kevin D. Wirth and Associates – Federal Retirement Experts

Federal Employees Eligible Retirement by Kevin Wirth

Higher FEGLI Rates in 2016 by Kevin Wirth

Investment Fees Cutting Down on Retirement benefits of the Millennials

The Millennial Generation is often encouraged to invest more towards retirement benefits in order to get higher benefits when they retire. But things don’t seem to be as simple as that. A recent analysis has revealed that a lot of money invested by the millennials towards retirement savings often ends up towards investment fee.

Retirement benefits Fee too High?

retirement benefits

The analysis of retirement investments was done by NerdWallet. The analysis revealed that if millennials pay just 1% towards the investment fee, they would end up losing more than $590,000 as it will be counted as lost returns. The figure is based on the entire course of their savings lifetime.

The Benefits and The Loss

Time seems to give a big benefit to the generation Y. They have the advantage of at least three or four decades to create their own nest egg as compared to their precursors. This time is also an enemy because the investment fees grow with time. The analysis has exposed that the impact of constantly rising investment fees can cut down the retirement benefits of a millennial by over 25%.

The Instances

The analysis was done on a subject who was a 25-year-old person  depositing $10,000 in the retirement savings fund every year. The savings account already had $25,000. The subject earned an average annual return of 7%. The person planned to retire after reaching the age of 40 years. Only 1% investment fee snowballed over time as the portfolio of the subject grew.

In one scenario it was seen that a mid-cap mutual fund that had the ratio of just over 1% was to earn $1.77 million after a time span of 40 years. The ETF also grows at a rapid pace. The index-based exchange-traded fund that had the fee of 0.09 percent was to grow to $2.3 million in the span of 40 years.

Fees in Other Vital Plans

A very similar analysis has revealed that a target date fund which is commonly used in the 401(k) plans that had a 0.75% fee were to grow to $1.9 million within the time span of 40 years. A robo-advisor portfolio was to grow to $2.2 million in the same time span.

Impact on Overall Reduction

The analysis also found out that every dollar deducted in the form of investment fee would be one dollar less left to invest in the retirement benefits.

Federal Employees Need Retirement Help: Survey

A recent survey has revealed that most of the government employees need a lot of help in learning about their retirement benefits. They need someone to guide them on their finances so that they can have a peaceful retirement. The survey also exposed the fact that most federal workers would prefer to retire at the minimum retirement age if they were to be financially secure. They would also invest in the TSP more if they could get the benefit of retiring early.

Federal employees are Least Informed

The survey was conducted on 557 federal employees. About 33 percent of them admitted that they were well informed about their retirement benefits. Only around 6 percent said that they were fully informed. The survey was conducted by Silver Light Financial and Federal News Radio.

Feds Need Training

In the same survey 74 percent of the respondents admitted that they need training on retirement benefits related topics and they don’t need any incentive to attend that training.

Financial Confidence

About 66 percent of the respondents admitted that they would prefer to retire as soon as they cross the minimum retirement age if they think they were financially confident. About 36 percent of respondents said that they expect to retire at their MRA. About 53 percent of those who were not expecting their MRA said that they won’t retire because they believe they won’t be able to financially sustain their lifestyles.

TSP and Early Retirement

Federal employees also said that they were willing to invest more to their Thrift Savings Plan if it could help make a meaningful impact on their retirement. About 93 percent retirees admitted it. They also wanted to reduce their retirement age and about 60 percent of the respondents said that they would add at least 5 percent more to the Thrift Savings Plan if they have a better understanding of it.

The Gap

It now remains to be seen whether the results of the survey would motivate the government agencies and the retirement investment service providers to better educate the federal employees. It is clear that if federal workers could get free training on retirement benefits, they would feel more secure about retirement and would not worry about their financial stability after retirement. Their situation is a lot similar to a person who has got a vehicle and a destination but doesn’t know driving.

TSP Numbers Are Better Again

When the Thrift Savings Plan (TSP) numbers were in a bad shape in the beginning of 2016, most people did not expect them to improve too soon. The numbers were positive in the month of March and now the latest data reveals that they are positive again. Most of the funds are still in negative figures but there have been slight improvements in the funds when compared to the March data.

The Biggest Gainer of the TSP Data

Some good news for the TSP investors is that many funds had posted best monthly funds of the year. So their investment is yielding some results. The I Fund has got the biggest monthly return in the month of April. The fund which invests in international stocks got a return of 1.89 percent. However, the fund remains in the negative when its 12 months performance is analyzed. It stands at -9.94 percent.

The Poor Performer

The S Fund was 1.73 percent in the month of April. It has seen a downslide as it was 8.24 percent in March. The S Fund invests in small-cap stocks and it is also in the negative. It is at -8.53 percent in the last 12 months.

The Unaffected Performer

G Funds hardly showed any change. The fund that invests in U.S. government bonds was 0.15 in March. It is now 0.14 percent in April. The slight change of the fund is not a new thing. It is the only fund that has been the lease affected in the last 12 months. Its 12-month figure is 2.05 percent.

The Biggest Loser

The C Fund which invests in common stocks of the 500 companies in the Standard & Poor’s 500 had a sizeable difference. It was 6.69 percent in the month of March. It is now 0.39 percent in April. It’s currently at 1.29 percent for the past 12 months.

The Improved Fund

The fixed income index investment fund, known as the F Fund is at 0.41 in the month of April when compared to the 0.93 percent in the month of March. It has improved in the last 12 months. It went from 2.35 percent to 3.05 percent.

The Overall Performance

The overall performance of all the TSP funds, when compared on a 12-month period has been negative with the exception of the L Fund. It is the only fund that has seen some improvement during that timeframe.

Are you a TSP user? Here is everything you need to know

The Thrift Savings Plan, more commonly known as TSP is one of the most used and probably the greatest investment programs available to the federal employees and retirees. In this article, we intend to cover all the details regarding it that employees should ideally be aware of.

ALL YOU NEED TO KNOW ABOUT TSP:

The Thrift Savings Plan (TSP) is available to all of the FERS members along with the members of the Military Retirement system (MRS) and CSRS or the Civil Service Retirement system.

Just like any other private sector 401(k) or an IRA, you can make the choice between a Roth or a traditional tax treatment regarding your TSP account. If you choose the traditional option you will have to pay your taxes on the contributions and earnings only when you withdraw at retirement.
Most of the federal officers can become recipients of automatic contributions of around 1 percent and 5 percent of base pay of agency-matching contributions. Once we reach 2018, military personnel will also have this luxury.
If you are a member of the FERS, then after three years you will be able to vest in automatic contributions.

The cost of doing TSP business is really low. During 2015, per every grand invested, the cost would come out to be a meager .029 percent. Yes, a mere 29 cents. It’s safe to say that there isn’t a cheaper investment program out there.

The Thrift Savings Plan has enticed many federal officers to start investing over the years and it’s expected to constantly draw attention from employees who intend to make their retirement lives a lot easier and financially securer. We tried really hard to find any substantial downsides but failed. If you can think of any, let’s know in the comments!

TSP Board May Need More Funding

The Thrift Savings Plan, or TSP Board may need more funding for the fiscal year 2016. The main reasons behind it are the cyber security upgrades and the external audits. Another reason is due to the increasing membership. The board is not sure about the extra money needed for the budget, but plans to lay it out soon.

Thrift Savings Plan TSP TSP

TSP Board Budget Data

The Federal Retirement Thrift Investment Board (FRTIB) was assigned $220 million in 2016. The board is predicting that it could spend $151 million even before the beginning of third quarter. The main reason behind such spending is the need to have resources that help in cyber security upgrades and external audits.

The Announcement

The announcement regarding the need for more funding was made by the FRTIB executive director, Greg Long. He made this announcement during the monthly meeting of the board that was held on April 25. He said that though the agency needs to do a bit of work regarding the budget allocation, it seems almost certain that they will need more money from the board. The estimate regarding the amount of extra money required would be clarified next month.

The Cost of Cyber Security

The main reason behind the agency running ahead of schedule on the budget is that it is putting a lot of money in to boost its cyber security. The agency is working with external auditors to finish a study of best practices with regard to cyber security in the private sector firms.

More Data and Better Service

The agency is also focused on using more data to take better decisions and offering better communication and services to the TSP participants. The TSP enrollment is higher than it has been before, and it is expected to continue to grow until 2018.

About 89% of people who have opted for Federal Employment Retirement System (FERS) have enrolled in TSP. The number of active duty military members who are enrolled in the TSP is about 44%.

Call Centre Service

In order to provide better service to the growing TSP members, the agency is aiming to create a better consolidated call service center as a part of the Expanding Participant Retirement Engagement Services and Solutions (ExPRESS) contract. The draft related to the RFP of ExPRESS participant call center services is scheduled to be released during the first week of May according to the board.

Know the actual value of a FERS and TSP annuity

When we say that the majority of the federal officers will not have a million dollars (or more) in their TSP Accounts when they retire, we back our statement with facts. Researchers have revealed that only .5 percent of all the officers have over a million dollars in their TSP accounts.

TSP thrift savings plan
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KNOW MORE ABOUT YOUR TSP AND FERS ANNUITY:

When we talk about retirement income though, there is a huge possibility for the federal officers to generate the income that would absolutely have a requirement of possessing an investment portfolio of at-least, if not more than a million dollars. Let’s take an example. An employee that is a member of the FERS has around 30 years of service under his belt. His high three salary is 90 grand on average. If this person undergoes retirement at 62, then he would be receiving an annuity of around 29,700 dollars every year.
Now, the question here is this: How much will this person have to invest if he intends to generate 29 thousand and 700 in investment income? If we assume that the withdrawal of the account has a value of 4 percent, then the investment portfolio would have a value of around 742, 500 dollars.
Now if we consider that the person has collected around $400 thousand dollars in their TSP after spending 30 years in service. If he takes a 4 percent withdrawal every year during retirement, this would present him with a surplus 16 thousand dollars.
Now, between the FERS and the TSP annuity, the person would receive 45,700 every year, and if you are wondering, it would take around $1,142,500 dollars to generate that type of investment income.
All of this needs to be kept in mind along with the realization that the following deductions will no longer be there once you retire:
1. Medicare Tax
2. FERS Retirement
3. TSP
4. Social security taxes

Private sector studied by the TSP board for insight in cybersecurity

The office of Enterprise Risk Management of the Federal Retirement Thrift Investment Board has been in operation for around 3 years now and they have been really busy since their inception. Currently, they have decided to study the private sector in a bid to collect insight in cyber security.

PRIVATE SECTOR TO BE STUDIED BY THE TSP BOARD:

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The office has been doing a great job, as indicated by Jay Ahuja who is the FRTIB’s chief risk officer. He admits though that there is still a long way to go and that their job is far from being finished just yet. Ahuja said on March 29th that they have been working on risk assessment and management for quite some time now and have been setting up infrastructure for it too but still there is room for improvement just like there was at the start.
In their bid to fight cyber terror, the office of enterprise risk management has decided to study the private sector to be astutely able to know how to tackle cyber security and risk management related issues. Ahuja says that there is a strict timeline being followed by the organization and that he expects them to wrap things up by the mid of May so that the board can go ahead and contemplate how to move forward. FRTIB has had a hard time tackling cybersecurity as well. Around 123 thousand participants’ information was compromised through one of the board’s contractors in 2012. Since then they have been receiving heavy criticism about the security issues that they are having.

While the study is still yet to take place, it’s expected that it’s going to not only help in creating awareness but will also provide the organization with some valuable insight on how to tackle cyber threats and ensure cybersecurity.

TSP Funds Show Positivity in March 2016

The TSP funds, which are a preferred retirement saving option of the federal employees has been far too close to the red line. The investors have been waiting for some good news since last 3 consecutive months. The hope of the investors proved to be right when TSP funds became positive in the month of March. All the funds saw an increase for the month of March but the growth of the funds in the year 2016 was not positive for all the funds.

Details of the TSP Funds Growth

All the TSP offerings grew in the last month. The S fund grew to 8.24%. This fund is mostly invested in the stocks of mid-sized or small companies. Unfortunately, the growth was not able to erase the damage done in the past few months and it was down by 0.7% for the year 2016.

The C fund that includes all the common stocks saw a growth of 6.79%. It was up by 1.37% for the year. International stocks also gained 6.59% in March and yet they were down by 2.24% for the year 2016.

The F fund gained a very low boost during the last month when compared to its peers. It was just up by 0.93%. The growth of this fund for the year has been 3.13%. This fund has only the fixed income bonds. The G fund that implies government securities fund was the fund that achieved the lowest growth. It grew by just 0.15% in March which took its overall growth till now to just 0.49%.

L Funds Proved to be the Constant Positive

The L funds had a good growth too. This fund is designed to help move the investors to a portfolio that is slightly less risky. The L Income which is meant for people who have already started with the process of withdrawing their money saw a growth of 1.53% in March. Other L funds also grew slightly. L 2050 saw a growth of 5.94%. L 2040 grew by 5.25%. L 2030 had a growth of 4.54%. L 2020 grew by 3.35%.

A good thing for the TSP investors who have invested in the L funds is that all the L funds have managed to stay in the black till date for this year. L income growth has been 0.62% till date. L 2050 grew by 0.15% till now. L 2040 has grown by 0.3%. L 2030 saw an increase of 0.39% and L 2020 of 0.47%.

TSP Board to Develop Best Cyber Security and Risk Management Procedures

The Office of Enterprise Risk Management of Federal Retirement Thrift Investment Board is studying the loopholes in its cyber security and getting inspired from the private sector to ensure that no TSP data is leaked ever again. Unfortunately, a data leak did happen in 2012 and the board never wants to let the incident repeat itself.

TSP Board on the Right Track

Mr. Jay Ahuja, Chief Risk Officer of FRTIB said that the office has 3 more years left before it succeeds in including risk in the strategic decision making and the board’s culture. He said that there are many typical risk management functions in place but a lot still needs to be done. The statements were made as a part of board’s monthly meeting that was held on March 29.

Learning from the Private Sector

The TSP board is now planning to take help from the private sector to ensure that best practices regarding the risk management procedures and cyber security are developed. The board wants to know everything about the measures the private sector companies are taking. The board also wants to know how they harden their entrance and what mechanisms or controls they have in place.

The Hacking Attack

TSP data had also suffered a cyber attack in 2012. Data of about 123, 000 people were compromised when hackers attacked one of the board’s contractors. The board faced a lot of criticism from Congress and Labor Department since then because it made very slow progress in getting its cyber security fixed and it was also not quick enough in responding to the queries made by outside auditors.

The Measures Taken

The board has made some improvements since then. It helped audit organizations with 14 internal audits in the last 5 months and it is planning to do 11 more in the next 11 months.

Training the Employees

The TSP Board’s Office of Enterprise Risk Management is also dedicated to finding the root cause of the problem. Hence, it has announced the initiation of a new risk training program for the employees working as a member of the board.

The TSP Board’s Office of Enterprise Risk Management will ensure that the training program teaches the employees about the existing audit activities and when (and why) an employee should respond to the Labor Department. The scope of the training can also increase in the future and include many other risk management activities, said Mr. Ahuja.

Is TSP all that good?

TSP The TSP is the Federal Government’s retirement account

TSP or the Thrift Savings Plan is one of the well-reputed retirement plans in the country at the moment. With a very low administrative fee that charges only .029 percent of the balances (which is much lesser than that charged by other 401(k)-type plans), it’s a great investment. But is there a catch? Or is it just too good? Let’s see.

Analyzing TSP:

TSP was established in 1986 by the federal government of the US in the bid to provide traditional pension benefits to its employees. The idea was to make the transition from CSRS or the Civil Service Retirement System to a more pragmatic system where the income will be directed from the social security of the employees. The federal employees in the beginning didn’t consider TSP as worth their time but gradually it gained accolades.

The last 30 years have seen some stark advancements being made to the Thrift Savings Plan. It has been offering an ever changing income supplement to the Social security and the defined benefit components of the FERS. This slight variance is depended on the differences in the investment strategies of the participants and how much the employees are willing to put in the fund. A meager 1 percent is always put in as an investment after an employer match of the same figure. The maximum you can go is 10 percent with an employer match of 5 percent.

While there are aspects of the TSP that could be improved, we are pretty certain that it’s one of the retirement plans that is loved by most and will be loved by many who follow. But is it worthy of being extended to be available to the private employees of the state as well? This is a decision that the government has to take and we hope that they make the right one.