FedSmith Readers Not Planning to Use the TSP Mutual Fund Window

The majority of FedSmith readers who responded to our latest survey said they do not plan to use the new TSP mutual fund window.

Based on responses to our latest survey, our readers overwhelmingly told us that they have no plans to utilize the new TSP mutual fund window when it launches in June.

88% of survey respondents said that they do not plan to invest in any of the thousands of new mutual funds that will be offered when the Thrift Savings Plan launches the mutual fund window.

Even more telling, 89% of respondents said they are unwilling to pay the higher fees that will be required to use the TSP mutual fund window.

However, with respect to other issues, the responses were move evenly split. 44% of respondents are in favor of having the new mutual fund window. Also, responses were split 50/50 in response to the question, “Are you ok with the 25% limit of an individual’s total TSP portfolio value on the use of the new mutual fund window?”

Response Summary: Risk and Returns

What about risk and returns? Survey respondents have their doubts on these issues.

79% of respondents think that the new TSP mutual fund window will increase risks to TSP participants, and 19% think it will not change the current risks. Just 2% think it will result in less risk for TSP participants.

Will the addition of the mutual fund window increase or reduce risks for TSP investors?

  • It is likely to increase investor risk: 79%
  • It is likely to decrease investor risk: 19%
  • The risk to investors is like to remain the same: 2%

83% of respondents believe that federal employees will not get better returns on their investments by using the TSP mutual fund window than they would with the existing TSP funds.

What Types of Mutual Funds Do Readers Most Want Access to?

For those readers who are interested in the new mutual fund options, which types of mutual funds are they most looking forward to having available for their investments? Here is a summary of the top responses:

Specific Fund Families (i.e. Vanguard, Fidelity)20%
Sector funds (i.e. technology, healthcare)16%
Growth/large cap14%
Commodities (i.e. oil, gold)13%
Aggressive growth (i.e. small cap)13%
Growth and Income/Balanced12%
Emerging Markets10%
International 8%
ESG Funds (environment, social, and governance)4%

Other items mentioned included China based funds, income funds, and value funds.

As to whether or not respondents liked the idea of some lawmakers’ proposal to require that fund managers selected to oversee the new TSP mutual fund window be required to “racially, ethnically, and gender diverse asset managers,” only 20% of respondents thought that these quotas should be put in place for the selection of asset managers.

Thanks to all of our readers who took the the time to share their feedback in our latest survey!

About the TSP Mutual Fund Window

The new TSP mutual fund window will give TSP participants access to about 300 mutual fund families which means the total number of available mutual funds “will be in the thousands” as the Federal Retirement Thrift Investment Board (FRTIB) described it.

These new mutual fund options will come with additional fees. These fees and expenses fall into four general categories: 

  • An annual maintenance fee of $95
  • A per trade fee of $28.75
  • $55 annual fee
  • Fees and expenses imposed by the specific mutual fund(s) in which the participant chooses to invest

Investments in the mutual fund window may not exceed 25% of the TSP participants total balance, and the initial transfer into the mutual fund window must be at least $10,000. These two restrictions, taken together, would require a participant to have a minimum TSP balance of $40,000 before becoming eligible to invest through the mutual fund window.

Subsequent transfers to the mutual fund window would be limited to amounts that do not cause the portion of the participant’s TSP balance that is invested through the mutual fund window to exceed 25 percent of their total TSP balance.

The TSP has been in a transition process for the last few days to launch the mutual fund window as well as some other new features. You may have noticed, for instance, that there are no daily share prices for the TSP funds on May 26 and May 31 because transactions were frozen as part of the transition process (federal employees’ and retirees’ TSP investments remained active and in tact during this transition period, however). The TSP said that full access and transactions will be restored the first week in June 2022.

As of June 1, TSP participants have been able to set up the new My Account login that is a one time process as part of the rollout of new features.

However, the TSP posted a notice on its website the morning of Thursday, June 2, 2022 which notes that it is experiencing a surge in the number of participants setting up their new accounts which is also impacting call volumes for support. The notice reads, “We are experiencing high volumes of participants setting up their new login for My Account. This is also affecting ThriftLine call volumes, making hold times longer than normal. We’re working to address these issues. Thank you for your patience.”

For additional information about the TSP mutual fund window, also see these articles:

About the Author

Ian Smith is one of the co-founders of FedSmith.com. He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.