The Federal Retirement Thrift Savings Board (FRTIB)- aka the folks who run the TSP- recently released their update to their Strategic Plan. Here are some of the highlights (quotes in italics, GubMints commentary in normal font).
The only down side to the shrinking Customer Base (through Fed attrition and lack of participation by Active Duty) is a possible hike in TSP fees to compensate for reduced sales volume.
For those arriving late to the GubMints party, make sure you read my gushing post declaring that You and the TSP should be Best Friends Forever.
TSP Customer Base
- As is true of the general population, our largest cohort of participants is aging and starting to retire.
- As of 4/30/13, almost 40% of our participant population was age 50 or older. A decade earlier, that figure was less than 31%. Retirees are being replaced by younger employees.
- While the ongoing discussion about sequestration and cutting Federal benefits creates uncertainty in the Federal population, at year-end 2012, the Office of Personnel Management (OPM) projected an increase in the total Federal Employees’ Retirement System (FERS) population over the next five years (2013 – 2017) from 2.51 million to 2.67 million (almost 6.4%).
- The uniformed services has 1.2 million active duty members who are eligible to participate in the Plan, but currently do not. While the numbers of active duty members may decline in the coming years, this segment will continue to be our growth engine. Roth TSP has special appeal to this population.
- Baby boomers retire.
- In the last four years, the number of separated participants maintaining an account with the TSP has grown from 800,000 to 1.2 million. This growth is likely to continue as more baby boomers move into retirement. Separated participants do not have to keep their balances in the TSP; they can transfer any or all of their funds to an IRA at any time. Any large spike in withdrawals could cause the TSP to shrink and negatively impact our cost structure.
- Money will eventually leave the TSP. Withdrawals may be a result of retiring baby boomers who are taking their money out immediately upon retirement, after age 70½, or as a result of death. Regardless, money-out transactions are labor intensive. A big increase in this activity has the potential to exceed our capacity.
- TSP features and services look restrictive compared to higher fee IRA providers who offer best-in-class advice and planning tools, personal service options, greater withdrawal flexibility, and unlimited fund choices. The investment industry will use these differences to entice our large and growing population of separated participants to move their investments out of the TSP.
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