Quote:
Originally Posted by Broken Arrow
The article seems to suggest that a better alternative is the government TSP.
But 401(k)s can be every bit as good as the TSP. For example, my current 401(k) company is Fidelity, and their lifecycle funds are just as competitive as TSP's counterparts.
|
Very good point... From my knowledge as a participant in the TSP, there are some good and bad things about it. But in essense, the TSP is the exact same as a 401k, except it's managed by a gov't office. Compare these to your average 401k, and really there isn't anything here that a good investment company can't do (or at least mimic).
The good:
- Simplicity. Only 5 funds to choose from (plus 5 "Lifecycle" funds).
- Hands-off management. Each of the 5 funds are index fund based. The lifecycle funds are simply varying proportions of the 5 funds based on the timeline.
- Ultra-low expenses. The TSP funds' expense ratios currently vary between .015%-.019%. You can't find anything anywhere with expenses that low.
The bad:
- No matching for military members (though I believe civil service employees get up to a 5% match).
- Enrollment is a bit messy. For my peers and I, it took us up to 2 months to finally get enrolled and into the system so we could go online and select our allocations.
- Website and phone systems are both a bit awkward to get access to, and are the only ways to work with the program -- there are no physical offices in which you can go talk to somebody.
- No Roth option (though rumor has it that this is in the works).
So understanding that, I recognize how the author could argue that the TSP could be nationalized and be effective for everyone... But in the end, they're the exact same thing as 401k's!! I agree with BA that putting the entire American workforce into the program would almost assuredly overload and cripple the program.