TSP Rollovers: A Scandal in the Making?
TSP Rollovers Make Bad Press
Lately, there has been a splash of negative articles about feds choosing to roll their TSP accounts over to IRA’s and managing funds themselves.
45% of federal retirees take their money out of the TSP, causing a reduction of about $10 billion per year from the $420 billion it currently holds.
So What’s All the Fuss About?
The fuss is about vacating the well-performing and low-cost TSP index funds. Why would anyone want to mess with that?
Index Funds and the Shoeshine Boy
Although its authenticity is questionable, just about everyone knows the famous story of Bernard Baruch and the shoeshine boy. A very brief version goes like this:
Someone asked the famous financier how he knew to pull out of the market before the crash of 1929. He said his shoeshine boy was giving him stock tips.
Everyone is a genius when the stock market continually goes up. Index funds are perfect for just such an occasion. It’s what they do best. They ride the wave.
G Fund It?
When the tide is high, everyone is surfin’ safari.
But what do you do when the tide is out to sea, especially when you are retired and you don’t know when the next big wave will come to your TSP? What if your TSP base jumps like it did in 2008?
There’s really never an unkind word to say about the tried and true G Fund, but…wait for it…growth.
Remember the saying, “A man does not live by savings alone”? (Okay, I just made that up.) But the point is, most people can’t save enough money for retirement by stuffing it under the mattress or into the G Fund.
The money has to grow at least enough to beat inflation. Obviously, I wish gasoline was still $.30 a gallon. Or that I could buy a Krispy Kreme for less than $.50. But what can you do?
Does The Shoeshine Boy + The G Fund = An L Fund?
Market crashes and inflation: how do you beat both? Does the answer lie in the L Funds, with index fund mixes that change as you get older?
Penny Stocks and Suave Brokers
TSP rollovers may happen because slick brokers entice people to buy penny stocks or index funds that have very little difference than the TSP. But many people leave the TSP because they want a professional to actively manage their account and personally lead them through retirement.
So you call a plumber to fix a pinhole leak in your copper pipe, but getting through retirement is a do-it-yourself activity? Hmmm, I’m not sure about that one.
Warren Buffetts and Financial Advisors
Warren Buffett is probably the greatest stock picker in the history of mankind. A good retirement strategy might be to simply put all your money in Berkshire Hathaway and go back to bed.
On the other hand, you could find a certified financial advisor who couples reasonable retirement objectives with reasoned investment choices, and work with them to build your investment strategy. The choice is yours.
For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client’s expectations – because we have high expectations of ourselves.