My post about why I don’t max out my TSP is the most read post on my blog. That’s *not* the message I want to send to my readers. That article was more of a personal story about my financial journey. If I would have known at 18 what I know at (almost) 38, I’d be on a much different financial path (and probably retired). For those of you who got here randomly, the Thrift Savings Plan (TSP) is similar to a 401(k) plan for federal employees with both Roth and Traditional TSP options. And it is the best employer-sponsored retirement plan in the USA. So here is a list of reasons why you should invest in your TSP (if you have access to it).

Low Fees

The TSP has the lowest fees of any 401(k) plan in the nation. And fund fees are even lower than Vanguard! Investment fees can hamstring even the most diligent saver. These little devils siphon off your investment principle and earnings invisibly without you even knowing it (unless you read the fine print). Many employee sponsored 401(k) or 403(b) plans have extremely high fees. If you have a million saved in one of those accounts, you’d be throwing away $30,000 a year at 3%.

Luckily, the federal government set up the TSP in a way to protect federal workers. As a result, we get the lowest fees possible. The trade-off for the low fees is there are some restrictions on investments. You can only select from 5 different funds and you’re limited in the number of trades you make. But these are both good things! (see reason #2)

No confusion

The TSP is comprised of 5 core funds:

• The G fund provides a guaranteed rate of return of ~2%
• The F fund tracks the Barclays Capital U.S. Aggregate Bond Index
• The C fund tracks the S&P 500 Index
• The I fund tracks the MSCI EAFE (Europe, Australasia, Far East) Index (I= international)
• The S fund tracks the U.S. Completion Total Stock Market Index

Additionally, the TSP has “L funds” which are life-cycle or target date funds and are made up of a mix of the GFCIS funds.

In short, the TSP contains everything you need to build a winning retirement portfolio and no extra crap you don’t need. There’s no actively managed fund with a 2% annual fee and 5% load. Also it does not contain crypto funds, commodity funds, or Ponzi schemes. It’s set up for the average investor to win.

It’s set up for buy and hold

Many individual savers screw themselves over by trading when they should be investing. Luckily, the TSP limits the number of trades you can do. While you can always move 100% of your portfolio balance to the G-fund at any time, you can’t trade between funds more than twice a month. This limit helps keeps fees low. And it also stops people from day-trading their retirement funds, which is something you shouldn’t do anyway!

It has a great match!

Another of the many reasons you should invest in your TSP is that it has an awesome employer match. For civilian federal employees, they match up to 5% of your income when you invest 5%. That is so much free money you’re missing out on if you don’t invest!

You can invest a lot of money

Because the TSP has the same rules as 401(k)s you can invest a lot of money ($19,500 in 2020) in a tax-advantaged manner. You can choose whether you want to invest in a traditional, tax-deferred TSP or in a Roth (after tax) TSP. Either way you can save a large chunk of your income each year tax-efficiently. If you’ve already maxed out your TSP, here is a list of the best Vanguard funds for you to continue investing.

You shouldn’t need any more reasons to invest in your TSP!

The TSP is the perfect retirement account. When you invest in the TSP, you can be assured that you invest with an organization that has your best interests in mind and plenty of ways to withdraw money from your TSP when you need it. Now it’s just a matter of automating those savings!

What do you think are the best reasons people should invest in their TSP? Leave a comment?