May seems to be shaping up rather well for those invested in the Thrift Savings Plan, all things considered.
That’s according to Tom Trabucco, Director of External Affairs with the TSP, who talked with Chris and Amy on the Daily Debrief on Tuesday.
“If these numbers hold through the month of May, it will be our third positive month in a row.”
Trabucco says, in the last two months, the total amount of money invested in the TSP has gone up $15 billion.
The improvements, he adds, are also across the board; no one fund is doing much better than any other.
“We see consumer confidence turning and people are coming back. Undergirding it all, of course, is the value of these companies that the TSP invests in through the stock funds and the bond fund, of course. People are starting to recognize that the fundamental value of those companies is getting better.”
In addition to this good news, Trabucco says it’s important for investors to remember that not every year is going to be a positive one.
He says the way to really add value to your overall retirement fund is to reduce the costs associated with it.
“I pick up $100 occassionally at . . . an ATM if I’m going out some place and want some cash in my pocket. [It is] $3 for $100 to get that money out. In our world, that’s 300 basis points. So, every time you want to get $100 out of the machine on the wall, you’ve got to pay 300 basis points. Now imagine if you’re doing that for your retirement contributions as they’re going into your fund.”
Trabucco points to a recent article that states that, working with even smaller numbers, one could lose almost 23 percent this way if he or she is investing in a higher yielding fund, versus a low cost fund such as the TSP.
“[The TSP] delivers benefits year after year by following that simple statutory requirement that we’ve got to track the index funds and do it for a low cost — and we do it year after year. This year our expenses our expenses are still under one basis point. For the past couple of years, we’ve been in the two basis point range and it looks like we’re going to be in that range again — and that compares to anywhere between 100 and 150 basis points for funds that you can get on the open market.”
Trabucco says, normally, people are willing to overlook such costs when times are good. Lately, though, the market hasn’t been performing so well, which has allowed TSP participants to see how good they really have it.
“[Basis points] add up over time, and that’s the point. It’s cumulative. Time after time after time they keep coming out, so to the extent that you can reduce those costs, you’re immeasurably improving the value of your retirement.”