The Thrift Savings Plan has gotten more expensive in 2023. Problem after problem headlined the TSP news in the previous year of 2022 and they have started 2023 with more of the same.
I wanted to do a brief follow-up of my article last year on TSP expenses and whether or not the TSP is cheap. TSP expenses are relatively low compared to the industry but by no means are they the lowest. The following table shows what the TSP’s expenses were in 2022 compared what they have increased to in 2023.
The next table shows TSP expenses compared to expense ratios of similar funds at Fidelity which can be found on their website at fidelity.com.
I received a response from the TSP in regard to my last article critiquing some of the indexes that I used to compare to TSP funds. One of the critiques was comparing the I fund (EAFE index) to another index that uses the FTSE index as a benchmark. The FTSE considers South Korea and Poland to be part of the index where the EAFE does not. This difference is so insignificant that I haven’t had one person ask about it in my 20 years in the industry.
While I would call TSP’s expense ratios low, they are not the lowest in the industry. If a person was looking for investments with the cheapest expense ratios, then the TSP is not the answer. However, most people that I talk to are looking for a combination of low expenses and a custodian that is easy to work with.
I have also discussed issues that TSP participants have had accessing their money. There is no reason to go into all of them but know that TSP has been really difficult to work with recently. One of the newest inconveniences is when you try to do a transfer through the website you will be greeted with the message that it doesn’t recognize the address and you must wait seven days to process the transfer. What happens on the 7th day? God rested? Therefore, the TSP thought that was a good number?
The bottom line is that the TSP has become increasingly difficult to work with in the past year and while other custodians are reducing expenses the TSP has increased their expenses. They say they want participants to keep money in TSP, but their actions are telling a different story.
Brad Bobb, CFP® is the owner of Bobb Financial Inc, and an expert in retirement planning for federal employees.