Securing Your Future – A Look At the TSP

For the second month in a row, the Thrift Savings Plan’s S Fund returned in the red. And in fact if you look over 12 months, the S Fund is up more than 20%.

According to statistics from the Federal Retirement Thrift Investment Board, all other TSP funds yielded gains in April, albeit small ones. Kim Weaver, Director of External Affairs for the Federal Retirement Thrift Investment Board, told Chris Dorobek on the DorobekINSIDER program that 2014 has been a pretty good year for the TSP so far.

“No matter who you are, the returns are good,” said Weaver.

Due to the rise in all regular funds, the L fund also rose. The L fund is a 20/20 fund that you set when you’re going to start tapping that money. “The L fund readjusts as it moves forward,” said Weaver. “It becomes less in equities, more in treasuries and bonds.”

On the other hand you have the F fund, which is made up of corporate bonds. “The issue with bonds in any time when interest rates are expected to rise, bonds are expected to probably fall. You never can tell exactly what’s going to happen, but that’s the conventional wisdom. The F fund has been sort of a low return for the last 12 months or so,” said Weaver.

The TSP is also rolling out a new life annuity contract to MetLife. “Under the Federal Employee’s Retirement Systems Act, we have to offer our participants the ability to use their TSP money to purchase an annuity. We do that through contract since we don’t provide the annuities ourselves,” said Weaver. “We awarded that contract to MetLife. It’s not a heavily used option; less than 1% of our participants select an annuity. There are a number of options that you can select under the annuity program for just yourself, or with a survivor benefit. And so all of that is laid out on our website. But we will continue to offer that service if people would like it.”

Participants can now also use the Roth option. “The traditional TSP has always been pre-tax dollars. You don’t pay taxes on the money you’re contributing now, but when you take your money out of the TSP after you separate, you’re going to pay taxes,” explained Weaver. “The Roth TSP is exactly the opposite. Assuming you meet a few IRS rules, the account’s been in existence for 5 years and you’re 59 ½, when you take that money out, you will not pay taxes on it.”

“For members of the uniformed services,” continued Weaver, “especially those who were sort of younger, lower paid, if you aren’t paying much in taxes now, a Roth account is great, because your taxes are gonna be higher in 30, 40, 50 years. As of last month, uniformed services made up 46% of our ROTH accounts.”

It’s not all good news for the TSP, though. According to security analysts, the TSP website has been giving away clues about users’ passwords. Cyber crooks can gather clues about the necessary elements of creating a login from the plan’s website and use them to make a convincing phishing email. The U.S. Government Configuration Baseline recommends passwords be no less than 12 characters, but TSP only required eight.

In the wake of the report the TSP is making some changes. “Luckily were not affected by Heartbleed at all, but we had long been planning to improve the security of our passwords,” said Weaver. “This past Saturday, we rolled out the requirement for a more secure password. Users will be prompted to change their password. We will not be contacting anyone to change their passwords. So if you get an email telling you to change your password at the Thrift Plan, that’s not coming from us.”

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