Many federal employees complain about the lack of investment choice inside the TSP given there are only 5 core choices.
But what if there were 5,000+ investment choices?
Would that be better?
Believe it or not, come the summer of 2022 it looks like thousands of options will be added to the TSP fund line up.
But is more always better?
I am not convinced it is.
What is a Mutual Fund Window?
The TSP is calling the upcoming fund options a mutual fund window. Basically it will allow you to access outside funds from your TSP.
For example, this option will allow you to invest in funds from other companies such as Vanguard.
When Will The New TSP Funds Be Available?
Based on many sources, it appears that the new funds would be available in the summer of 2022. This coincides with a new TSP recordkeeping contract that will give them the functionality needed to offer the new options.
But the government is no stranger to delays so I wouldn’t be surprised if things got pushed as well.
What Type of Funds Will Be Available
While we don’t have answers on the exact funds that will be offered we do know that the TSP would like to make new things available like real estate, emerging markets, and environment friendly funds.
But if 5,000+ funds are made available then I am sure there will be a little bit of everything.
Will It Cost More?
There will certainly be a cost to initiate and offer these new funds options. And whenever the TSP has higher costs then generally the federal employees investing in the TSP pay for it via the TSP fund fees.
However, the TSP board is predicting that by allowing more fund options more federal employees will choose to keep their money in the TSP at retirement. And if more money is in the TSP then the cost of running the TSP is spread out over more people and the cost per person actually goes down.
But time will only tell if this prediction comes true.
Should You Invest In The New TSP Funds?
For obvious reasons, it is exciting to get more options in the TSP. Afterall, there are many great funds out there. We will have to wait and see to know if the new funds will truly be better options than the already strong core TSP fund line up.
However, I am nervous about what this change will mean for the average TSP investor. I predict that this added complexity will only confuse the average federal employee which often results in inaction.
