Thrift Savings Plan will soon offer mutual funds, mobile app and other requested services
Stars and Stripes February 18, 2022
The federal government’s Thrift Savings Plan is catching up with services already provided by similar firms in the civilian sector: a mobile app, online chat assistance and electronic funds transfer.
Starting this summer, the savings plan – the equivalent of a 401(k) retirement account for military members and civilian workers – will also offer mutual funds for the first time in addition to its stable of index funds.
The changes, announced by the Federal Retirement Thrift Investment Board on Jan. 26, come in response to requests for these services by plan members seeking greater investment flexibility, board spokeswoman Kim Weaver told Stars and Stripes by email on Thursday.
Mutual funds invest in a changing list of securities chosen by an investment manager and will try to outperform the stock market. By contrast, index funds track specific securities in stock market indexes, such as the Standard & Poor's 500, Dow Jones and Nasdaq, that are seeking market-average returns, according to NerdWallet.com.
“The mobile app will allow participants to do all the transactions they can do on the website,” Weaver said. “Including having access to a chat feature that can then connect the participant to a live contact center representative.”
To invest in mutual funds through the thrift plan, account holders must hold a $40,000 minimum balance and make a minimum investment of $10,000 into mutual funds.
"The initial investment of $10,000 is intended to ensure that TSP participants are moving enough money into the mutual fund window to reduce the effect of the account, transaction and mutual fund fees charged by the mutual fund window and the funds,” Weaver said.
The Thrift Savings Plan became available to uniformed service members in 2001, and since December the average account balance is around $40,000.
Federal employees had access to the thrift plan starting in 1987; the average account balance in the Federal Employees Retirement System is around $181,000, according to the Federal Retirement Thrift Investment Board website.
Participants in the Thrift Savings Plan will pay a $55 annual access fee and a $95 service fee to participate in mutual funds. A baseline, per-trade fee of $28.75 will vary depending on the fund.
“The number of mutual funds offered in the mutual fund window will be in the thousands,” Weaver said. “The TSP is requiring that the mutual fund window offer the lowest cost share class of each mutual fund to its participants. The number of funds will fluctuate as mutual funds join or leave the mutual fund window platform.”
The current administration fees for the index and Lifecycle funds average at 0.043 cents per $1,000 invested, according to Weaver.
“The mutual funds offered through the mutual fund window will have their own costs associated with them,” she said. “They are not controlled by the TSP, but rather by the mutual fund owner.”
Thrift Savings Plan members should do research before moving money over to the mutual funds, or at least wait until a year has passed to review fund performances, says financial counselor Felix De Jesus at Marine Corps Air Station Iwakuni, Japan.
“As of now with the current way the indexes are and the Lifecycle funds, they really answer to most people’s desires in building wealth, because they are moderate plans,” De Jesus told Stars and Stripes by phone Thursday. “Now mutual funds, depending what mutual fund it’s focused on, in what industry in the stock market, it can fluctuate in volatility and earnings.”