TSP board concerned about participants’ investing styles

The Federal Retirement Thrift Investment Board is planning to release a final recommendation on two new retirement investment funds by its April board meeting, but officials said Tuesday that they are concerned federal employees will invest their funds too conservatively.

The Thrift Savings Plan board wants to have "lifestyle" and "life cycle" funds available to federal employees by the beginning of 2005. The April board meeting should include recommendations on what form the funds will take and what restrictions, if any, will be placed on their use.

Thrift Savings Plan officials and board members said, however, that they are caught in a bind: Giving federal employees extensive choices encourages investment, but many federal employees are investing too conservatively and thus are not receiving sufficient returns in their retirement portfolios.

TSP officials already have spoken with potential vendors and after the April meeting the board will issue a request for proposals.

"Every vendor has indicated the more choice you give to participants, the more money you are going to see come into the fund," said Gary Amelio, the executive director of the TSP.

Some board members suggested that it was the role of the TSP leadership to help guide the investments to benefit federal employees. Board member Gordon Whiting said the board should consider tailoring the funds so that investors would get the best return on their retirement savings.

The options could include the lifestyle and life cycle funds-or more accurately, collections of funds. The lifestyle fund would draw from existing funds and could be arranged in a conservative, moderate or aggressive investment structure. The life cycle fund would begin with an aggressive approach and become more conservative as the end date of the investment approached.

TSP officials said Tuesday that the funds could be unveiled long before 2005, but they want to be sure that federal workers fully understand the options available to them.

"The technical side of this is the easy part," Amelio said. "We could get it going in two months if we weren't worried about communications."

The TSP board supported the emphasis on sending a clear message.

Andrew Saul, the chairman of the board, said Amelio should "keep the plan very simple and very clean and not complicated."

Board members also are conscious of ambiguous deadlines. The board already is dealing with a TSP computer mainframe that was supposed to have been installed in January 2004, but is now scheduled to be in place by May or June.

Saul pushed Amelio to set a clear deadline for the new fund options.

"I think that a good time to do this would be Jan. 1, [2005]" he said.< P>