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TOPICS
TSP to roll out new funds in two weeks
Participants in the Thrift Savings Plan can allocate money to new "life-cycle" funds starting Aug. 1, the TSP Board announced Monday.
The TSP, which is a 401(k)-like system for federal workers, currently has five investment funds. This sixth set of funds will allot resources among the five already existing options: government securities, fixed income securities, common stocks, international stocks, and small and mid-size companies.
The concept behind the new funds is to automatically shift investors' money from a mix of riskier to more conservative investments as participants age, according to TSP literature.
"Proper asset allocation is critical to optimum long-term growth in retirement savings," TSP Executive Director Gary Amelio said.
There will be five different "life-cycle" funds available based on the dates participants think they will begin withdrawing money from their TSP accounts.
For participants who foresee retirement around 2040, for example, 42 percent of their money will be invested in common stocks and 5 percent in government securities, the most conservative fund.
Participants who predict retirement around 2010, on the other end of the spectrum, will have 43 percent of their funds put into government securities and 27 percent in common stocks.
Amelio said surveys "have all shown that about 90 percent of plan participants either never ever reallocate their account balance or do so less frequently" than they should. "A great number of participants either never get on, or fall off, the participant frontier," Amelio said.
The TSP Board hopes the new fund will work to correct this problem.
As of Monday, information on the funds was available on the TSP Web site. That information will be followed by a postcard and subsequently a DVD explaining the new fund, which will be mailed to all 3.4 million TSP participants.
On Aug. 1, participants will be able to allocate new funds, or transfer money from other funds, into a "life-cycle" fund through the Web site or by phone. Initially, Amelio had discussed a date of July 1 for possible rollout.
The new funds will operate at no additional cost to TSP participants, according to Amelio. Participants can continue to make their own investment decisions and put money into the other five funds as they wish.
Despite discussion in the past of making the "life-cycle" funds the default for participants who do not designate specific funds for their money, the default fund will remain the G fund for the time being, according to TSP spokesman Tom Trabucco.
COMMENTS
- The L funds should be the choice of the account holder. Is Mr. Gary Amelio going to be responsible if the L funds lose money? Can Mr. Amelio guarantee each person no money will be lost for investing? Maybe the reason people do not contribute to TSP or only distribute to the G Fund is because they don't trust the market. A good example is the change President Bush has suggested for the Social Security program to invest in the market. The way the Social Security plan is set up now people know how much money they will receive, but if it's invested into the market, they may win more or they may lose more. The economy is too unstable to take chances. For years financial advisors have told us to save for our retirement, now those wise people who saved will be penalized if the Social Security program changes as suggested. The people who were smart enough to save money will be penalized (punished for saving) because they will not receive the full expected amount of Social Security because they have money saved. Wrong! They worked years and paid years into the Social Security account and they should get their full expected amount. I will manage my own TSP account. I'm sure other people feel the same way. That is my money and it is my decision on how I want it distributed. My message to Mr. Amelio and Congress on the L funds default: hands off! Bobbi Schell Posted October 20, 2005 2:04 PM
- I find it amusing that someone proposed to make this new L fund the "default" fund. As long as the ONLY fund the Government will withhold to support their budget deficits is the "G" Fund, it WILL remain the default. And the reason why? Because that is the ONLY fund that guarantees a return and will never suffer a loss. Tip out. Tip Posted July 20, 2005 3:39 PM
- If you believe this stuff I definitely want to sell you my swamp land. GovExec.com reader Posted July 19, 2005 7:20 AM
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