TSP Concerns & More Changes

Pinnacle Personnel Services LLC  |  Debbie Hatch

With so much being reported over the past couple of days, and wide-spread hysteria about TSP, I’d like to clarify a few things.

First, THE CONCERNS.

While I won’t name specific names, several “professional” reporting agencies and “experts” have shared this picture on their various sites.  It is designed to do nothing but upset people, advance a political agenda, and increase their company clicks, likes, and shares.

Those are the currency of social media.  It’s not factual!

Yes, “it is happening again”.
No, it’s not new.  We’ve seen this several times already.
It’s not “suspending payments into employee pensions”.
It’s not “just like Social Security”.

No, it has not had negative consequences to employees in the past and it will not this time.  Yet, I’ve also seen numerous employees changing their investment elections and making withdrawal decisions based upon faulty information.  That’s sad.

As has always been the case, it’s only the G Fund. G invests into government securities anyway.  I explain it in class this way.  “If you
are investing in G, the money typically comes out of your account and flows downstream to the government budget.  Right now all that’s happened is they’ve damned off the river.  They can’t wait for the money to flow downstream.”  That’s it.

It’s not just my opinion.  Here’s what TSP has had to say, “As of today, December 13, 2017, the U.S. Treasury was unable to fully invest the Government Securities Investment (G) Fund due to the statutory ceiling on the federal debt. However, G Fund investors remain fully protected and G Fund earnings are fully guaranteed by the federal government. This statutory guarantee has effectively protected G Fund investors many times over the past 25 years. G Fund account balances will continue to accrue earnings and will be updated each business day, and loans and withdrawals will be unaffected.”

Next, THE CHANGES.  I’ve previously sent an email about the TSP Modernization Act being signed into law back on 17 November.  Nothing has changed with that.  TSP continues to work on updating implementing regulations and computer systems.

In addition to the new law, TSP has decided to change distributions from split TSP accounts.  Currently if you contribute to both Roth and Traditional TSP, and make a withdrawal, that withdrawal is prorated from both.  For example, lets say 70% of your total account balance is in traditional and 30% is is Roth. When you withdraw money, it comes out 70% from traditional and 30% from Roth.  That is no longer going to be the case!

In the future (again, regs and computer systems need to be updated) you will choose where the money comes from.  This is an excellent change. You can read more about it here.

As always, please don’t hesitate to let me know if you have questions about anything to do with retirement planning – or if you think of topics you’d like me to blog about.

Debbie

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