We are approaching the less than a year mark before switching over to the blended retirement series. I have decided to do an overview of what each component of TSP is and why it is to your benefit to use it for your primary investment vehicle. First part of the series is why do TSP at all? When we are bombarded by advertisements for robotic investment services known as “Robo Investing”, this looks appealing to make awesome market return without managing the money. I’ve noticed how a lot of service members are dicking themselves over with the following robo-investing services:
|Robo-Investing Service||Annual Fees (%)|
|Vanguard Personal Advisor Services||0.3|
|bloom||$99 a month|
There are a few I have consulted that make the stupid decision to invest in Betterment or Wealthfront which charge more than ten times the cost of TSP. There must be a fundamental misunderstanding of math here with these guys. If we look at the cost in terms of basis points, we see that Personal Capitol charges 89 basis points where TSP charges 3.9 basis points, almost 23 times more expensive.
Despite having exclusive access to TSP, some of you are forgoing this benefit by not contributing to TSP. Rather than putting your $18k away automatically into TSP, some are putting their post tax money in essentially the same funds (or in even worse funds that don’t beat the index) in the above private services. Keep in mind TSP charges between 0.026% and 0.039%, meaning that for every $100,000 saved in the plan, military members paid only $26 to $39 in annual fees. In contrast Personal Capitol charges $890 on the same $100,000, putting it essentially the same funds or funds that return less than these index funds.
I don’t know about you, but $890 a lot of fucking money, costing thousands in earning in the future! Even the $350 a year Betterment charges for essentially the same collection of index funds is appalling. These bastards are over charging you, but you think your cool because your hipster friends use it. Not worth it!
Start your 2017 right and don’t be an idiot by ignoring the single greatest military benefit of TSP. Also imagine that sweet 5% base pay match in 2018 when you switch to BRS. Let your civilian sucker friends fall for robo-investing, stick with TSP, as it is one of your military benefits!
Happy New Year!