TSP Mutual Fund Window (Updated March 2023)
Mutual funds are new to TSP and offer greater investment flexibility. This is the first time that TSP has allowed it’s investors to invest in assets outside the TSP Funds. The move comes with strict restrictions and higher fees. Hopefully, TSP removes some of these restrictions and lowers the fees to allow for younger investors to take advantage of this opportunity should they choose. Using the mutual fund window transfers money out of your account to open a separate investment account provided by TSP’s mutual fund window vendor. Here is a link to TSP’s Mutual Fund Window Fact Sheet.
A mutual fund pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Mutual funds are companies, and investors buy shares in them just like people buy stock in other companies that produce goods or provide services. Each share of a mutual fund represents an investor’s part ownership in the fund and the income it generates.
TSP Website
Thrift Savings Plan Mutual Fund Window Restrictions and Fees:
- Your initial transfer to the mutual fund window must be $10,000 or more but may not be more than 25% of your total TSP savings.
- You must have at least $40,000 in your TSP account to ensure that your initial transfer isn’t more than 25% of your total TSP savings.
You may not invest more than 25% of your total account balance in the mutual fund window at any time. This means younger TSP investors will have to wait until their accounts hit a $40,000 minimum prior to investing. Additionally, for those who prefer mutual funds over the TSP funds, the 25% cap will hold them back from allocating a larger position.
Fees you’ll pay
- $55 annual administrative fee to ensure that use of the mutual fund window does not indirectly increase TSP administrative expenses for TSP participants who choose not to use the mutual fund window
- $95 annual maintenance fee
- $28.75 per-trade fee
- Other fees and expenses specific to the mutual funds you choose, which you can review in each fund’s prospectus
These fees can start to add up if you aren’t allocating a large enough percentage of your pay towards your TSP. My short term recommendation is to open your own retirement account with a broker of your choice to invest in Mutual funds, stocks, or ETFs. The fees will be less but you will have to manage two accounts, TSP and the other retirement account.
Next, we’ll learn how to take out a Thrift Savings Plan Loan and how to make Thrift Savings Plan withdrawals.