Conspiracy Theory And The TSP

The TSP is a model retirement investment program. Some readers think if it is available to federal employees, it is too good to be true.

Some people are determined to be unhappy about their lot in life.

Anyone who reads the thousands of comments submitted by readers will find a wide variety of opinions on topics that impact or at least interest federal employees. Many readers are unhappy about their pay (too low), benefits (not enough of them), performance appraisal system (part of the "good old boy system"), their supervisor (shows favortism to other people), and the proposal to modernize the civil service system (designed to cut pay for feds).

But one topic that one might think would brighten everyone’s day is the Thrift Savings Plan (TSP). TSP investors have made money in the program and it is often cited as a model retirement investment plan. And the TSP is changing all the time to make the program even better for retirement investors. Those TSP investors that do not want to move their money around into the different funds on a regular basis will soon be able to participate in the lifecycle funds that should make having a diversified portfolio even easier.

And, if that isn’t enough, the cost of running the TSP funds are lower than any available to private sector employees. In other words, more of your investment money stays in your fund to continue to earn money for you rather than being paid out in management expenses. As a practical matter, this means that you will have more money available to you in retirement. Peter Fitzgerald (R-Ill.) commented in the article cited that the expense ratio for the average index fund is 63 basis points. For the TSP it is 11 basis points. This means that for every $100 you invest, the cost is 11 cents. (It has been lower at other times.)

One other item: The G fund is unique to the TSP. Some readers have commented that anyone can buy a bond fund so the G fund is no better and no worse than that is already in the market and available to anyone. There is some truth to this in that there are plenty of bond funds around and many private sector retirement plans include a bond fund. But the G fund is unique. The bonds in this fund are sold to the TSP by the federal government. These bonds mature in one to four days (holiday weekends) and are backed by the US Treasury. In other words, there is no safer investment available anywhere.

Some readers have commented that the TSP fund isn’t that much different than private sector retirement accounts so there are not any real advantages. Under this theory, apparently much of the press and the federal government is engaged in a large conspiracy. The purpose of this conspiracy: convincing federal employees they have a good deal in the TSP that is better than their counterparts in industry when, in the reality of the conspiracy mongers, no program for feds is better than that in private industry. Some readers though are so used to looking at the dark side that they "know" Uncle Sam would not give them a program better than that available to the rest of America.

For these conspiracy theorists, here is a tidbit that may make you think again. Congress also participates in the TSP program. So, if you think there must be a hidden agenda in order to be convinced you are getting a good deal, perhaps this will suffice. Congress wanted to give its members a good deal and you are able to go along for the ride.

The TSP program is a good deal and is getting better. With the lifecycle funds coming soon, anyone can invest in the TSP and have a reasonable chance for a better retirement program. The excuses for not investing in this program are diminishing. Look at the bright side–the TSP is a tremendous benefit to being a federal employee.

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