Should TSP Investment Options Be Expanded?

Should the TSP be expanded to include a real estate fund? Most readers say “yes.”

Should the successful Thrift Savings Plan be expanded to include real estate investment trusts (REIT)? The subject is controversial as we noted in a recent article.

Would TSP investors put money into a real estate investment fund?

Most readers think they are ready to handle an increasing complexity of investments in their TSP and would like to see the a REIT fund added to the list of TSP options. 65% of readers responding to a recent survey said the TSP fund options should be expanded to include this type of fund.

26% said it should not be expanded and 9% were not sure. 59% said they would put money into a TSP REIT fund. 26% said they would not and 14% were not sure if they would or not.

And, in response to the question "Would you generally like to see more fund options in the TSP or limit the options to those currently offered to eligible employees?", 65% said tyey would like more fund options. 22% said there were already enough options and 13% were not sure.

Here are a few of the comments from readers who responded to the recent survey. First are the comments from those who think the addition of a REIT fund is a good idea.

A Patent Examiner from the Patent and Trademark Office in Alexandria, VA writes: "I think I only want one more option — that of an REIT. In my taxable investments, my REIT has done extremely well — much better than other stocks or stock funds."

A manager for DFAS in Arlington, VA had this to say on the subject: "I’d rather have a few more specific fund choices, i.e. REIT, Foreign Bond, than the mish-mash ‘Lifestyle’ funds the TSP group is pushing."

A Systems Accountant from DFAS in Indianapolis thinks more conservative investors are holding him back: "Those paralyzed by additional choices are the same ones that are totally in the G fund. Why penalize those who want investment options?"

A Technical Specialist from DFAS has this opinion: "I definitely would like to see more options. I applaud the addition of the S and I funds. Give me more!"

An Entomologist from the USDA in Calilfornia contends: "Adding a REIT would give those living and working in less optimal housing markets a chance to invest in better ones. I’m concerned that less people would invest in TSP if there are too many options. All of us also have the option of investing in REITs through IRAs, which may be a better choice. This would preserve the simplicity of TSP for new investors."

An Assistant US Attorney in Houston also wants more options: "Give me as many options as possible and I will be responsible for my decisions. While I am unlikely to invest in a REIT at the present time, after the bubble I percived burst, I may be interested in that option. I have been very successful with the S and I funds, and I welcome any options."

A number of readers commented that they did not want to see a real estate fund added to the TSP options. Here are some of these comments:

A Mechanical Engineer from the Army in Ft. Knox says: "Why does the government always try to ‘fix’ something that works? I’ve seen articles the say the TSP is the ‘model’ system…’they should model SS after the TSP’…etc. So why would you want to mess it up? Who says Special Interest groups don’t run (or ruin) this country….."

An Analyst from the USDA in Ft. Collins, Colorado has this view: "If the Thrift Savings is to be a major part of a long term retirement plan for Feds then the number of options should be limited. There should be some ability to diversity but too many options promotes speculation, or at the least confusion and increased worry about being correctly invested."

An HR Specialist with the Department of Justice raises concerns about increased costs for all TSP investors: "One of the best aspects of TSP is the low administrative costs. I think that a REIT Fund would raise those administrative costs substantially for all the funds, thereby reducing my payout when I retire even though I would not invest my money in that fund. The real estate bubble could burst, just like the DotCom bubble did and enough of my investments are already tied up in my house. I need to diversify."

An Accounting Officer with the Department of Energy says a real estate fund is unnecessary: "I believe the TSP offers the right mix and number of investments. If someone is smart enough to consider REITs (a pretty sophisticated investment)–a quality that likely describes almost all of the federal workers who would opt to invest in this fund, they could do so very easily outside the government. That is, instead of contributing 10% to the TSP, with 20% of that going to a REIT fund, just reduce the contribution to the TSP by 2 percentage points and contribute the difference to a publicly traded REIT. One could even do so through an IRA so as to take advantage of the tax deferral aspects of the earnings. Why weigh the TSP down with too many choices?"

And, this warning from a Bankruptcy Analyst in Calinfornia: "REITs are too risky."

There you have the variety of opinion from our diverse base of readers! Thanks to all who took the time to vote in this recent survey and who sent in their opinions.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47