As we noted in an article last week, the billions of dollars in the federal Thrift Savings Plan are a tempting target for companies that would like to get a piece of that financial action. After all, is there any investment company that could not benefit from collecting the investment fees from a few billion extra to invest?
Baby boomers are or will be retiring in droves–at least that is the prediction of many retirement experts. Mutual fund companies are sometimes salivating at the thought of being able to invest all of the money currently kept in company retirement plans–including the billions owned by federal employees through the Thrift Savings Plan (TSP).
Congress is seldom able to resist keeping its institutional fingers out of helping to spend a few hundred billion dollars–either to help interested campaign contributors or to ensure their own re-election. While some companies are using their lobbying money to convince Congressional representatives it is in the best interests of women and minorities running investment companies to gain access to the federal TSP’s billions, other companies are taking a more direct approach. They are directly appealing to federal employees to roll-over their TSP savings into funds or investment options run by private investment firms.
The issue has come up again in Congress, but with a different twist this time around. In this instance, it isn’t a Congressional committee trying to insert itself into helping companies access the billions in the TSP.
Sen. Herb Kohl (D., Wis.), chairman of the Senate’s Special Committee on Aging, says investment vendors TIAA-CREF and Fidelity Investments have run "misleading" advertisements. The purpose of these "misleading" ads: to entice federal employees to roll over their money from the TSP into their own investment funds.
The ads appeal to federal employees who are retiring. If you have money in the TSP when you retire, as most retiring federal employees do, you can leave your money in the TSP program. The expenses for the TSP are very low–lower than any other plans around. But, if you don’t know you can do that, or if you think you can do better with a wider array of investment options, you can pursue the options in the "misleading" ads cited by Senator Kohl.
The ad from Fidelity is aimed at federal employees, especially in Washington, DC, probably because there are so many federal employees there and those that are there have a high average annual salary and more money to invest. The Fidelity ad refers to converting "your old TSP" to a Fidelity IRA.
The TIAA-CREF ad has a simllar approach. "Do you know when your TSP retires? Your TSP won’t last forever…make sure your assets continue to work for you throughout your retirement. So roll over your TSP to a TIAA-CREF IRA."
According to an article in the Wall Street Journal, the president of Fidelity notes that all of the company’s advertising materials undergo a legal review and that some federal employees may want to take advantage of the wider investment choices available through Fidelity than are available through the TSP while others would be better served by remaining within the TSP program.
TIAA-CREF has stopped running its ads.
It’s your investment money, your retirement future and your personal decision as to how to invest your money. But, if you are thinking that you have to roll-over your TSP funds when you retire, do a little more research. If you choose to invest your money other than in the TSP, do it with the knowledge that you have a choice.