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.