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Think Twice Before Rolling Over Your TSP

Author: Lawrence S. Jacobs Date: 08/18/2014

Categories: Estate Planning and Administration, Partnership Planning, Tax Services

If you or anyone in your household is a Federal employee, you know that TSP is shorthand for your Thrift Savings Plan – a retirement savings plan that many people outside the government truly envy. As I help clients with their estate plans, a TSP is often one of their biggest assets. Among other things, we work to make sure that beneficiary designations are set up properly to accomplish your specific objectives.

If you have a TSP, and especially if you are at or near retirement, I recommend reading this article from the August 17th edition of The Washington Post headlined: “As brokers urge IRA rollovers, ex-workers ditch their low-fee federal retirement plan”. There’s good information here about the financial benefits of the plan, especially its low management costs, which contribute to returns on the accounts. There are also some solid cautions about the risks of switching out of the plan.

Of course, it’s up to you and your financial advisor to determine if rolling a TSP over to an IRA is right for you. It may well be. But the author points out how some financial institutions downplay the comparative effect of fees in non-TSP accounts. I also appreciate the point made in the article that the TSP offers relatively few investment options compared to what you can get in the broader market. I know from my own experience and my conversations with clients that it can be tempting to take what feels like a more “sophisticated” approach to investing. Nobody wants to feel guilty of taking the easy way out. Whatever you do needs to be carefully tailored to accomplish your specific objectives.

I’m always happy to talk to you about any of the factors at play in your estate plan. If you don’t have a financial advisor, I can recommend one of the professionals who regularly work with my clients. If you need help or have questions, please contact me at ljacobs@mcmillanmetro.com or (240) 778-2330.