Would Harry Brown trust TSP to hold a lot of assets?

[MiniB]

I'll be getting a federal job soon and one consideration is to transfer all of my Roth IRA assets into TSP for the low ERs and access to the G-Fund which seems like a tax-payer subsidized free lunch.

My theory would be eventually holding all my stocks and cash in the TSP and holding long term treasuries in a separate IRA, and holding Gold physically.  This assumes 75% of my assets are tax sheltered at this point.

Would Harry Brown trust TSP to hold 50% of your assets?  He had a strong distrust of government.  I'm pretty sure if the government were out to get me personally they could easily reach out to my Vanguard account just as easily and freeze it.

[pplooker]

Exactly.

Browne was an interesting man with a very healthy distrust of systems, be they government or corporate.  Even he realized you had to trust somebody, though.  Browne seemed to choose the best of many bad choices when he gave advice.

I remember reading in his book, forget which one, that be believed that there wasn't anything wrong with your using a government service or taking what the government had to offer, but you must realize the strings attached.

If you qualify for the TSP you obviously are in that position anyway to have already thought about that.  I personally doubt he'd recommend you go one way or the other, Browne was very big on individualism and letting other people think and do as they pleased.

The TSP isn't nearly as risky as many other insituitions, imho, FWIW.

[KevinW]

I can't speak for Browne, but personally I would be fine with using the TSP if I had access to it.  Keep in mind that the F, C, S, and I funds are index funds, so you are only trusting the TSP to buy specific securities on your behalf.  As index funds they are supposed to buy and sell according to very specific and simple instructions that the index sponsor is responsible for.  They would have to try pretty hard at being incompetent to screw that up badly.  All of the hard decisions are being made by the companies/agencies whose stocks and bonds are in the indices.

It seems like the G and L funds involve a bit more management risk, so I would do my due diligence on those.

In general I try to minimize my dependence on employer benefits, such as retirement plans, life insurance, etc.  I get my whole salary from one organization, which is already a lot of eggs in one basket.  I prefer to be more of an independent operator.  So I prioritize Roths over 401(k)s/equivalents, and rollover funds out of company plans at the first opportunity.  If my relationship with my employer turned sour I wouldn't want them to be in control of both my salary, and a huge chunk of my invested net worth.  My $.02.

[Greg]

I can't speak for Browne, but personally I would be fine with using the TSP if I had access to it.  Keep in mind that the F, C, S, and I funds are index funds, so you are only trusting the TSP to buy specific securities on your behalf.  As index funds they are supposed to buy and sell according to very specific and simple instructions that the index sponsor is responsible for.  They would have to try pretty hard at being incompetent to screw that up badly.  All of the hard decisions are being made by the companies/agencies whose stocks and bonds are in the indices.

It seems like the G and L funds involve a bit more management risk, so I would do my due diligence on those.

In general I try to minimize my dependence on employer benefits, such as retirement plans, life insurance, etc.  I get my whole salary from one organization, which is already a lot of eggs in one basket.  I prefer to be more of an independent operator.  So I prioritize Roths over 401(k)s/equivalents, and rollover funds out of company plans at the first opportunity.  If my relationship with my employer turned sour I wouldn't want them to be in control of both my salary, and a huge chunk of my invested net worth.  My $.02.

Looking at this old thread. I'll be joining the federal workforce next week and will be investing with a Roth IRA and a Roth TSP. I'll have to figure out after a few years if I leave do you leave the money in the TSP or do you roll it over into a Roth IRA. True you'd get more flexibility with a IRA but TSP has such low expense ratios and has the G Fund which seems like it'd work better than most components as the cash component of the PP.

I wouldn't think there'd be a huge risk of having funds in the TSP versus other sources. And even if there is risk, we have the gold portion as our SHTF scenario. I'd probably keep funds in taxable as well since I'll be going over my limits for a Roth TSP and IRA so that should hopefully add institutional diversification for mitigating counterparty risks.

[AdamA]

I can't speak for Browne, but personally I would be fine with using the TSP if I had access to it.  Keep in mind that the F, C, S, and I funds are index funds, so you are only trusting the TSP to buy specific securities on your behalf.  As index funds they are supposed to buy and sell according to very specific and simple instructions that the index sponsor is responsible for.  They would have to try pretty hard at being incompetent to screw that up badly.  All of the hard decisions are being made by the companies/agencies whose stocks and bonds are in the indices.

It seems like the G and L funds involve a bit more management risk, so I would do my due diligence on those.

In general I try to minimize my dependence on employer benefits, such as retirement plans, life insurance, etc.  I get my whole salary from one organization, which is already a lot of eggs in one basket.  I prefer to be more of an independent operator.  So I prioritize Roths over 401(k)s/equivalents, and rollover funds out of company plans at the first opportunity.  If my relationship with my employer turned sour I wouldn't want them to be in control of both my salary, and a huge chunk of my invested net worth.  My $.02.

Looking at this old thread. I'll be joining the federal workforce next week and will be investing with a Roth IRA and a Roth TSP. I'll have to figure out after a few years if I leave do you leave the money in the TSP or do you roll it over into a Roth IRA. True you'd get more flexibility with a IRA but TSP has such low expense ratios and has the G Fund which seems like it'd work better than most components as the cash component of the PP.

I wouldn't think there'd be a huge risk of having funds in the TSP versus other sources. And even if there is risk, we have the gold portion as our SHTF scenario. I'd probably keep funds in taxable as well since I'll be going over my limits for a Roth TSP and IRA so that should hopefully add institutional diversification for mitigating counterparty risks.

I don't think he would trust or mistrust the TSP more or less than anything else.  He would view it as an adequate choice for some, but not all, of your wealth. 

[Reub]

The G fund pays a higher interest rate then you can get for a similar vehicle and it is guaranteed by the full faith and credit of the federal govt. From the tsp website:

Investment Strategy

The G Fund invests exclusively in a nonmarketable short-term U.S. Treasury security that is specially issued to the TSP. The earnings consist entirely of interest income on the security.
Risks

The G Fund is subject to inflation risk, or the possibility that your G Fund investment will not grow enough to offset the reduction in purchasing power that results from inflation.
Rewards

The payment of G Fund principal and interest is guaranteed by the U.S. Government. This means that the U.S. Government will always make the required payments. In other words, your G Fund investment is not subject to credit (default) risk.

The G Fund interest rate calculation is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity. As a result, participants who invest in the G Fund are rewarded with a long-term rate on what is essentially a short-term security. Generally, long-term interest rates are higher than short-term rates.

[Greg]

I can't speak for Browne, but personally I would be fine with using the TSP if I had access to it.  Keep in mind that the F, C, S, and I funds are index funds, so you are only trusting the TSP to buy specific securities on your behalf.  As index funds they are supposed to buy and sell according to very specific and simple instructions that the index sponsor is responsible for.  They would have to try pretty hard at being incompetent to screw that up badly.  All of the hard decisions are being made by the companies/agencies whose stocks and bonds are in the indices.

It seems like the G and L funds involve a bit more management risk, so I would do my due diligence on those.

In general I try to minimize my dependence on employer benefits, such as retirement plans, life insurance, etc.  I get my whole salary from one organization, which is already a lot of eggs in one basket.  I prefer to be more of an independent operator.  So I prioritize Roths over 401(k)s/equivalents, and rollover funds out of company plans at the first opportunity.  If my relationship with my employer turned sour I wouldn't want them to be in control of both my salary, and a huge chunk of my invested net worth.  My $.02.

Looking at this old thread. I'll be joining the federal workforce next week and will be investing with a Roth IRA and a Roth TSP. I'll have to figure out after a few years if I leave do you leave the money in the TSP or do you roll it over into a Roth IRA. True you'd get more flexibility with a IRA but TSP has such low expense ratios and has the G Fund which seems like it'd work better than most components as the cash component of the PP.

I wouldn't think there'd be a huge risk of having funds in the TSP versus other sources. And even if there is risk, we have the gold portion as our SHTF scenario. I'd probably keep funds in taxable as well since I'll be going over my limits for a Roth TSP and IRA so that should hopefully add institutional diversification for mitigating counterparty risks.

I don't think he would trust or mistrust the TSP more or less than anything else.  He would view it as an adequate choice for some, but not all, of your wealth. 

AdamA,

Perhaps you know about this (or others). Is it possible to have a TSP and do partial rollovers into an IRA without leaving Federal Service? I haven't found anything on their website yet stating this, just after leaving service you can rollover into an IRA (or keep your TSP).

The reason I ask is because I'm still building up my PP but I'm still quite low on U.S. LT bonds. All of my LT bonds currently are in a taxable account and I'll be opening up a Roth IRA this year and putting 5k into LT bonds. TSP however has a 17k cap so I'd be able to put a lot more money into there but they do not have a LT bond option. I was wondering if you can take money out of the TSP to roll into an IRA so that I could have more tax-deferred space for LT bonds to get to my 25% allocation quicker than 5k in LT bonds and the rest in taxable.

[FarmerD]

Despite the opinions of most others here,  I don't like the TSP that much.

My biggest problem is that the government can borrow against TSP funds in case of a debt limit crisis.  Of course they promise to make TSP members whole again which is great if you believe them.  I'm afraid in a true crisis, you may not be made whole for a long time.  That's why I pulled my money out of the TSP before the last debt crisis and rolled it over to my Vanguard IRA.   

Any way you look at it, there's fewer peices of paper between you if you buy treasuries directly in your IRA. 

Your money----->Vanguard-----> US Treasury

Your Money------>TSP administrators-------> Tim Geitner--------->US treasury

http://www.washingtonpost.com/wp-dyn/co ... 01262.html
http://www.fedsmith.com/article/2876/wh ... ds-if.html
http://www.washingtonpost.com/blogs/fed ... _blog.html

Yes the G fund is inexpensive compared to Vanguard's short term funds but is 0.10% really important?  Likewise the C fund. 

Then there's the liquidity problem.  When I rolled my TSP account over to my Vanguard account, the entire process took 4 months.  Write a notarized letter to the TSP administrators, wait 6 weeks, cooordinate rollover with Vanguard, write another notarized letter, wait 6 weeks, finally they agree to transfer my money to Vanguard in 4 weeks.  Even if you keep your money in the TSP you can only move the money around during their "open season" as opposed to a Vanguard IRA where you can move your money with a simple click of your mouse. 
Considering the tiny benefits, I feel it's much more convenient and perhaps safer to have my retirement funds in Vanguard. 

[Benko]

Despite the opinions of most others here,  I don't like the TSP that much.

Perhaps I don't know enough or you are in a different situation than I (are you already retired?) but I'm a gov't employee and put in monthly retirement contributions to my TSP account part of which the gov't matches.  I can only do this within the TSP unless you know something I don't.

Even if you keep your money in the TSP you can only move the money around during their "open season"

It seems like you can transfer money anytime (within limits):

"Each calendar month, your first two interfund transfers may redistribute money in your account among any or all of the TSP funds. After the first two, your interfund transfers can only move money into the G Fund..."
https://www.tsp.gov/planparticipation/i ... IFTs.shtml

[AdamA]

Is it possible to have a TSP and do partial rollovers into an IRA without leaving Federal Service?

I'm not sure (and I couldn't figure it out from the website). 

However, you can borrow half of the amount in your account from yourself (if you were thinking that the partial rollovers would be a helpful way to rebalance). 

[AdamA]

Despite the opinions of most others here,  I don't like the TSP that much.

My biggest problem is that the government can borrow against TSP funds in case of a debt limit crisis.  Of course they promise to make TSP members whole again which is great if you believe them.  I'm afraid in a true crisis, you may not be made whole for a long time.  That's why I pulled my money out of the TSP before the last debt crisis and rolled it over to my Vanguard IRA.  

Any way you look at it, there's fewer peices of paper between you if you buy treasuries directly in your IRA.  

Your money----->Vanguard-----> US Treasury

Your Money------>TSP administrators-------> Tim Geitner--------->US treasury

http://www.washingtonpost.com/wp-dyn/co ... 01262.html
http://www.fedsmith.com/article/2876/wh ... ds-if.html
http://www.washingtonpost.com/blogs/fed ... _blog.html

Yes the G fund is inexpensive compared to Vanguard's short term funds but is 0.10% really important?  Likewise the C fund.  

Then there's the liquidity problem.  When I rolled my TSP account over to my Vanguard account, the entire process took 4 months.  Write a notarized letter to the TSP administrators, wait 6 weeks, cooordinate rollover with Vanguard, write another notarized letter, wait 6 weeks, finally they agree to transfer my money to Vanguard in 4 weeks.  Even if you keep your money in the TSP you can only move the money around during their "open season" as opposed to a Vanguard IRA where you can move your money with a simple click of your mouse.  
Considering the tiny benefits, I feel it's much more convenient and perhaps safer to have my retirement funds in Vanguard.  

I don't think the TSP is necessarily better or worse than an option like Vanguard or Fidelity or whatever.  The risks, as you point out, are different,  so why not just use both?  

[FarmerD]

Benko/AdamA,
To clarify my points above:  If you are still in federal service, by all means contribute up to the maximum in the TSP.  If you are retired from Federal service (like me), you may want to transfer your funds out of the TSP into your regular IRA account for the reasons I pointed out above.  Likewise I think the OP should fully participate in the TSP but I question whether IRA money should be transferred into the TSP.

Another reason you may want to transfer out of the TSP when retiring is the narrow choice of funds available in the TSP as opposed to say Vanguard.  In a Vanguard IRA you have access to a long bond fund like EDV or access to treasury direct, and you can buy a gold etf.  You don't have access to these in the TSP.  

Side note:  One of the TSP administrators told me you can't roll over your TSP to a regular IRA while still in federal service.  I don't know if that has changed.

[Greg]

Benko/AdamA,
To clarify my points above:  If you are still in federal service, by all means contribute up to the maximum in the TSP.  If you are retired from Federal service (like me), you may want to transfer your funds out of the TSP into your regular IRA account for the reasons I pointed out above.  Likewise I think the OP should fully participate in the TSP but I question whether IRA money should be transferred into the TSP.

Another reason you may want to transfer out of the TSP when retiring is the narrow choice of funds available in the TSP as opposed to say Vanguard.  In a Vanguard IRA you have access to a long bond fund like EDV or access to treasury direct, and you can buy a gold etf.  You don't have access to these in the TSP.  

Side note:  One of the TSP administrators told me you can't roll over your TSP to a regular IRA while still in federal service.  I don't know if that has changed.

I haven't found anything on that either of being able to roll a TSP into an IRA while still in federal service. Perhaps it is possible but you would have to speak with someone about it. It also looks like from their website that you can not take a Roth IRA and roll it into the Roth TSP (you can roll over a Roth 401k into a Roth TSP). You can however take a regular IRA and roll it into a TSP if desired.