VICENZA, Italy -- This week's article is all about the Thrift Savings Plan, also known as TSP.
When one of our community members asks this old Soldier and financial adviser, "How can I grow my discretionary income," my only answer is "the Thrift Savings Plan."
Christine Benz, Morningstar's director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances, described the TSP as "a winner and well worth investing in if Uncle Sam is your employer."
Most private entities' retirement plans possess layers of administrative fees and overpriced investment options. But not our TSP. BlackRock, the asset management firm that manages TSP funds, only charges 29-cent management fees for every $1,000 invested. BlackRock is the No. 1 asset management firm in the United States with more than $4.65 trillion under management. This firm is the best of the best when it comes to asset management. When BlackRock CEO Laurence D. Fink speaks, other asset management firms such as The Vanguard Group, Fidelity Investments, J.P. Morgan Asset Management, PIMCO and even the French "Green Bank" Credit Agricole Group listen.
I am not trying to sell my fellow Americans snake oil, nor am I saying "greed is good." What I am saying is stop making excuses and rationalizing why you, the keeper of your keys, cannot start investing today. English economist John Maynard Keynes stated, "The importance of money flows from it being a link between the present and the future." What is your future? Is it full of beautiful car payments and excessive debt? Or is your money working to purchase that "just fabulous" oceanfront property, or a house near James "Grizzly" Adams somewhere far from a power grid, or a house near Mr. Coston on a lake in Florida? Let's talk money, folks! I cannot stress enough the beauty of owning your own home and financial independence.
The Thrift Savings Plan contains four index funds, a government securities fund, and five lifecycle funds. Every fund allows you, the investor, to select a (pre-taxed) traditional IRA or a (after-tax) Roth IRA contribution plan. I will break down the TSP funds by risk levels for you risk-averse folks:
The G Fund invests in U.S Treasury securities. The C Fund invests in the Standard & Poor's 500 (S&P 500) Stock Index. The F Fund invests in U.S. government, mortgage-backed, corporate and foreign government (issued in the U.S.) sectors of the U.S. bond market. The S Fund invests in the Small Capitalization Stocks Index Fund. The International Stock Index Investment Fund, the I Fund, possesses the most risk. Every fund possesses a certain level of volatility. The five L Funds, or "lifecycle" funds, invest in a professionally designed mixture of stocks, bonds, and Government securities. The L Funds are "time horizon," meaning the L income fund is for individuals needing their investment funds by 2017; the L 2020 Fund between 2017 and 2014; the L 2030 Fund, 2015 and 2034, the L 2040 Fund, 2035 and 2044, and the L 2050 Fund, 2045 or later.
I can talk all day about why it is important to pay down debt, not add your children's names to the "sandwich generation" list, and start saving and investing for your future. Stop making excuses, walk into the light of saving and investing, and become a member of the 31 percent of Americans, out of approximately 321 million people, whose financial future does not entail working a menial job after retirement just so you can pay the bills. Lastly, please remember what W. C. Fields said: "A rich man is nothing but a poor man with money."
"Know What You Owe, and Know Why You Owe It!"
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