The Thrift Savings Plan has set up a website with one purpose: to encourage federal employees to keep their money inside of the TSP after leaving their federal jobs.
The overall message is hard to miss – the webpage has a bright red background with white text at the top with a message in very large letters that says, “STAY WITH THE TSP.” A screenshot is below:
Continuing to scroll from there leads to a couple of videos which tout the reasons why a federal worker should leave money inside of the TSP after leaving federal service.
The first video, titled “ONCE YOU’RE GONE, YOU’RE GONE,” features a profile from a woman who says moving to an IRA was one of the “single worst financial decisions” she had ever taken with her savings. She says the commissions and fees were the main culprit behind her hatred of the IRA.
The second video titled “DON’T MOVE!” continues with the theme. It says the TSP’s costs are reason enough not to move your money because they are so low. However, it also encourages viewers to move money from outside IRAs into the TSP.
There’s also a list of 7 questions the TSP recommends you ask prospective third party financial institutions before moving your money over to them which is clearly designed to sway one’s decision away from other financial firms. The introductory text for this Q&A feature reads, “Other financial institutions might try to pull you away from the TSP. Their expensive funds can devour thousands of dollars from your savings and postpone your retirement several years. Check out these questions to see how other institutions stack up to the TSP.”
At the end of the main page, however, there is a statement which reads, “In the end, each individual’s situation is different and should be considered when making this decision. Our goal is to help provide the tools you need to make the best choice for yourself.”
But with so many strongly worded messages preceding it designed to sway your decision to go with the TSP, it’s hard to take it very seriously.
The TSP may well be the best place for a federal employee to leave his money after leaving federal service, but you will have to look elsewhere for impartial advice (or least advice with another opinion).
So we know where the TSP stands on the issue, but does anybody recommend rolling your TSP over to an IRA after federal service?
The answer is yes.
In a post I wrote recently, I summarized advice on this subject from Dave Ramsey, a financial advisor who has a nationally syndicated talk radio show. He frequently tells people that call him that they can outperform the TSP funds and have a better selection of mutual funds if they roll their TSP over to a traditional IRA after leaving federal service.
FedSmith.com author and financial advisor Jesse Black has also weighed in on the subject. He offered some prudent advice in a recent blog post in which he answered a question he had from a FedSmith.com user. Jesse said that it’s important not to make generalizations about TSP rollovers. He noted that each federal employee’s financial situation is different and you ultimately need to investigate and do what is best for you, so that may or may not involve rolling your TSP over to an IRA. You can read Jesse’s full response at Should You Always Roll Your TSP Over to an IRA?.
FedSmith.com author and financial advisor Randy Silvey looked at the subject in depth in his article TSP or Not TSP? THAT is the Rollover Question!. Randy provided a detailed outline of what a rollover is, when it can be done, and unique characteristics of both the TSP and traditional IRAs. He too said it will depend on an individual’s circumstances and explained why he thinks this is important.
And finally, FedSmith.com author and federal retirement expert John Grobe said in his article, Your TSP: Roll It Over or Leave It?, that if a financial advisor is telling you to roll your TSP over to an IRA, be sure to ask why. Is it for his gain only, or is it really best for you? John also talks about some of the tax implications of not doing a rollover correctly and how much money that mistake will potentially cost you.
As with any service, there are good financial advisors and there are bad ones, so you should always interview several and make sure you find one that meets your needs. Even if you think you’ve hit a home run with your first interview, talk to one or two others; if nothing else, that can help solidify your decision to go with the first person.
There’s no question the new TSP website is biased in favor of keeping people within the TSP, but if you are debating whether or not to roll your TSP over to an IRA, it’s worth a read, just don’t let it be your only source of information, just as you shouldn’t only interview one financial advisor.
The articles I’ve referenced above and in the links below are a good starting point to help you, but always be sure to do your homework, and never do something that you don’t understand and just because somebody else is telling you to. Find a financial advisor with whom you are comfortable and who aligns with your personal goals and beliefs. After thoroughly gathering the necessary information, you ultimately then can (and should) make your own decision to do what is going to be best for your needs.