Changes Proposed for the TSP

TSP millionaire by Bill Eager

The Federal Retirement Thrift Investment Board (FRTIB) is tasked with running TSP and making any required changes from time to time, and it’s worth noting that it has done a spectacular job. There is the withdraw limit changes that FRTIB has to see through by November 2019. That is just an example of the changes the board is expected to implement with time.

It is worth noting that the FRTIB is not the only board interested in seeing some changes passed. There are other parties in this as well like for example Sen. Jeff Merkley, D-OR, The Retirement Investments for a Sustainable Economy Act (S. 3424) recently proposed the establishment of a TSP fund stock option to avoid investment in fossil fuel companies. It is providing a green investment option for conserving the environment.

Usually, TSP collects data over time and according to their fund sheets on the website, the last data which was on December 31st, 2017, there were three stock funds which had fossil fuel companies in their midst. Actually, in the C-Fund category, Exxon-Mobil sits at the top ten of the available stocks. In the I-Fund category, Royal Dutch Shell and British Petroleum also make it in the top ten.

There are many changes that the thrift board is planning to see through and a “mutual fund window” is really on the cards for implementation in the nearby future. It allows all interested TSP participants to a specific amount of their TSP in external mutual funds without much hassle. This window will give participants a lot of freedom and provide investors with wide discretion on what type of funds one chooses to invest in. In a way, green mutual funds could be inclusive in this new arrangement.

There is no shortage of plans, and there is another proposal that involves the reduction of the rate of return of the TSP G Fund. It is something that has been included in budget plans of House Republican this year, and it’s aimed at making the thrift board well-off. There was also a case of benefit cuts that are most likely to be kept aside because of the midterm elections that completely changed the dynamics of the House with new personnel on board. However, the implementation of all these plans will have to take place sooner or later especially if the council commits to them.

One of the things worth noting is that G Fund pays interest that’s roughly the same as mid-term government bonds. It, however, bears no risks at all if by any chance interests go up. In most cases people that support lowering the rate always see it as a way of financing since when the rates are reduced, a lot of capital is freed for other purposes.

According to a House bill passed last year, everyone that took part in G Fund would be offered a long-term rate on what was deemed as short-term security. That was right and the best deal the feds could come up with.


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