U.S. Government’s Investment Options Are Good but Could Be Great
The U.S. Federal Thrift Savings Plan’s Lifecycle Funds’ unique status as part of a huge government entity is a blessing and a curse.
As the workplace retirement savings vehicle for U.S. federal civilian workers and uniformed services members, the Federal Retirement Thrift Savings Plan stands as the largest defined-contribution plan in not only the United States but also the world. Its more than 6.7 million participants include most employees of the U.S. government, such as postal workers, military personnel, agency employees, and members of Congress.
Like most U.S. retirement savings plans, target-date strategies are important and growing components of TSP. They are known as the Lifecycle or L Funds, and more than half of TSP’s 6.7 million participants have directed at least a portion of their assets to these target-date funds; of those, 2.3 million workers invest solely in the L Funds. To offer a measure of independent analysis to L Fund investors and the advisors who serve them, Morningstar reviewed the L Funds through a lens similar to the one used to examine target-date investment strategies available to the general public, examining the funds’ Process, People, Price, Parent, and Performance.
Here, we explore the main advantages and disadvantages of TSP L Funds. Let us know if there are any other TSP-related questions that you’d like us to pursue in the future.
Thrift Savings Plan L Fund Advantages:
- Rigorous annual testing of asset-allocation glide path.
- Access to G Fund that provides U.S. government-guaranteed yields with no bond-market risk
- Underlying funds rely on well-regarded managers via BlackRock and State Street Global Advisors.
- Access to G Fund that provides U.S.-government-guaranteed yields with no bond market risk.
- Among the lowest expense ratios available to investors.
- Unmatched level of transparency via board meetings and various reports available to public.
- Returns have soundly matched expectations by protecting in down markets.
- Long-term results consistently ahead of peers. Click HERE to read more.
FERS, TSP and Leaving a Federal Job Before Retirement Age
Not everyone who starts a federal career will end up still being a federal employee at the time they retire. I remember when I started as a federal employee; I thought my job (city letter carrier) was going to be but a stop on my career journey. Twenty-six years later, I retired from Treasury as a federal employee. But that’s not the path all new-hires take; many of them end up leaving the federal government at some time, maybe soon after hiring on, or maybe half-way through their work life. This article is directed to those who think they will leave federal employment at some point prior to retirement and will discuss what happens to their FERS retirement and their Thrift Savings Plan.
If, when you separate from federal service, you have at least five years of civilian service, you will be entitled, at some future date, to a deferred annuity under FERS. It is almost always better to leave your FERS contributions on deposit with OPM than to withdraw them. With as little as five years of service, you will be entitled to the deferred annuity at the age of 62. Click HERE to read more.
Five Things Federal Employees Should Know for Retirement
Knowing the ins and outs of retirement is challenging, especially for federal government employees.
After years serving the federal government, it’s time for federal employees to reap the many unique rewards a federal retirement plan offers. Retirement preparation is hard for everyone, but navigating federal benefits can add a layer of complexity and red tape that may seem daunting to even the most seasoned financial professional.
I have a heart and passion for serving federal employees. My mother, who is also my best friend and now works for me, is a retired federal employee. I have successfully helped her navigate her federal employee benefits and financial plan to retire at the age of 57. Also, my mentor, whom I meet every month, is a retired deputy commander at the U.S. Defense Logistics Agency (DSCC), and many more of my family members are retired federal employees. In addition, our firm has many clients who are current or retired federal employees. Really, I was forced into becoming a federal employee specialist. Click HERE to find out more.
Senators Want Update from OPM On Federal Retirement Improvements
Bicameral lawmakers are urging the Office of Personnel Management to share its plan to reduce wait times for processing federal employees’ retirement claims. Feds often have to wait two to three months to start receiving retirement benefits after they submit a claim. The delays stem from OPM’s legacy retirement system, which is largely paper-based. OPM has piloted a retirement services modernization project, and the lawmakers are asking for a timeline on when OPM will roll that out on a larger scale. The letter from lawmakers comes after OPM received an influx of retirement cases at the start of 2023. (Duckworth, Durbin, Kelly urge Office of Personnel Management to address delays in delivering federal retirement benefits – Sen. Tammy Duckworth (D-Ill.))
- For the first time in more than a decade, House lawmakers are asking whatever happened to Circular A-76? In a letter to the Office of Management and Budget (OMB), Republican House Oversight and Accountability subcommittee leaders want details about how agencies are complying with the Federal Activities Inventory Reform or FAIR Act of 1998. The subcommittees are asking for total number of employees across government and the total number per agency who are performing inherently non-governmental work. They also want to know how OMB is vetting agency FAIR Act reports to help them determine which jobs should be considered for outsourcing. The subcommittees are asking for responses by April 14. (Letter to OMB Director Shalanda Young – House Oversight and Accountability Committee)
- Calling all vendors providing grant management services, the Grants Quality Service Management Office wants to hear from you. The Grants QSMO released a request for information to gather market research on commercial services. The QSMO currently features six shared services all from federal providers. This new RFI is trying to understand what commercial services are available to address the gaps in their current offerings. Additionally, the shared services office is trying to help the federal providers who are limited in the number of customers they can serve. Responses to the RFI are due April 24. (Grants QSMO RFI – General Services Administration). Click HERE to read more.