This is an excellent question for anyone who's planning on retiring from military service and has yet to decide what they want to withdraw from Thrift Savings Plan account.
The TSP expense ratio may be low, but it doesn't necessarily mean that your money will grow as quickly in this plan as it would elsewhere.
And if you're looking at investing your TSP or a 401k might not be right for you and why the Veteran Retirement Rescue (VRR) strategy is a better fit to protect your life savings with lower fees.
What is so Special About the Low TSP Fund Fees Ratio?
The administrative cost for TSP is a minuscule 0.068%! Regardless of whether you are using target date funds, the C fund, or any other TSP funds, this is the percentage removed from your account each year by the federal government to pay for the investment advisory services that manage the investment options in TSP.
Yes, the TSP expense ratios are cheaper than any other way for military members to invest in the retirement system; since when is something cheap the best option?
Looking for something cheap, always trying to cut a deal or get a bargain doesn’t allow us to think outside of ourselves about how we can create abundance.
The good news is that is exactly what we are doing at US VetWealth with the VRR Strategy.
Low TSP Expense Ratios Can Be Misleading
There are a few reasons why the Thrift Savings Plan (TSP), isn’t always the perfect investment vehicle for every service member and federal employee just because of the low TSP fees.
There's far more to consider than the investment costs of the index funds and the average net expense of your investments.
We're told by all sorts of entities that TSP is one of the best benefits that the military can have, and as a financial planner, of course, I've had to say that line for years solely because of the low expense.
Sometimes I even believed it because they're right. TSP funds are a very low cost for a retirement account. You can't get any more low cost when you talk about an investment account, so therefore based on that metric alone, it's the best deal.
The less percentage that you have coming out of your investments every year, the more opportunity there is for your money to grow.
Your TSP Account is Not A Fiduciary
If you're hoping that over 20+ years that the cheapest option will give your investments some sort of growth, great. But at the same time, who's managing your TSP?
Are you your own fund manager?
Are you paying attention to how you can withdraw funds?
Being a fiduciary required the investment advice to TSP participants to be in the best interest of their own retirement plan.
How many people do you know who say they've been investing in a TSP for years and years, and it turns out that they just had their investment in the G fund and F fund barely earning 1% investment returns?
Or they had way too much of their dollar amounts allocated to I fund or the S fund taking too much risk with their life savings.
What good does it do you to be cheap, then, when your money hasn’t even grown over the years or you lose it when the market becomes volatile?
TSP Administration is Cumbersome
How often have you tried to log into your TSP account and realized you forgot your password only to have to wait weeks to get it to reset.
Or perhaps you wanted to move more money to the C fund from the F fund government bonds because you saw an opportunity in the stock market but weren't able to transfer money in time between funds in time.
The missed opportunity is a cost.
If you have taken any sort of loan from TSP now you have to pay attention to the tax status if you aren't able to repay it before retirement.
Now, imagine dealing with these types of issues when you are years away from active duty service and don't know who to call for help?
Using the VRR strategy solves this problem because it transfers your TSP account to a fully managed program so you can focus on more important things.
What is the Cost to Use Your TSP Funds?
What's your intention for you using your own funds?
If you have been investing in TSP funds, a Roth IRA, or 401 (k) plans for the majority of your retirement funds then you need to be sure you understand how you can access it and whether or not you need to pay taxes.
In addition to investment expenses like any mutual fund, you don't want to forget about the potential costs of early withdrawal options and income taxes.
Roth TSP contributions are after-tax and you can generally access those individual funds without penalty.
However, most participants' dollars are invested in the tax-deferred portion of TSP. Those dollars will be taxed as future income in addition to the taxes paid on your military retirement pension.
With the VRR insurance and annuity, we help you manage more than your investment strategy, we can design an income strategy that minimizes the cost so that you can maximize what you keep.
What is the Veteran Retirement Rescue (VRR)?
And when you’re leaving the military with an existing TSP and not sure what to do with it then you should consider Rolling your account into the VRR Strategy.
Are you a veteran or retiring from the military with over $250,000 saved in retirement accounts?
Or is your combined post-military income greater than $150K per year?
If so, you will be able to qualify.
A Better Individual Retirement Account
You've worked hard for your money and you deserve the best post-military life possible. That's why we've partnered with some of America's top financial institutions to bring you the Veteran Retirement Rescue Plan.
This program offers high-income veterans and those who have at least $250K in their retirement plans the opportunity to leverage the insurance of their retirement savings in the form of the best-fixed index annuities and life insurance products available.
Protect What You've Earned
This strategy insures your savings against stock markets loss while also insuring you against taxation and inflation. And the best part, in many cases there is no cost to you at all!
So if you're looking for a safe, reliable way to protect your hard-earned TSP, IRA, or 401(k) savings, look no further than the Veteran Retirement Rescue Plan.
Book a call today to learn more about this exciting new program!