Upcoming Changes in the Thrift Savings Plan
Change is a comin’…
The Thrift Savings Plan (TSP) puts out regular videos updating participants. Here’s a run down of all the changes mentioned in their latest video.
I Fund Benchmark Change
The TSP I Fund is the TSP’s international stock index fund. It currently tracks the MSCI EAFE (Europe, Australasia, Far East) Index. This means that it invests in 21 developed markets in Europe, Australasia, and the Middle East. It does not invest in emerging markets, which are often riskier but reward those who are patient with more growth potential and a higher return. You can nerd out and read all the intimate details here.
They are going to be switching to the MSCI All Country World Index Ex-U.S. index. This index is broader and includes both developed and emerging markets.
Overall, this is a good thing. The current I Fund doesn’t provide worldwide stock representation, but the new one will. The change is slated to take effect in early 2019.
Lifecycle Fund Changes
They are going to be doing an annual review of the asset allocations in the Lifecycle funds. To me, the asset allocations are a little too conservative, especially for someone with a military pension, but that is only my opinion. Hopefully they’ll get a little more aggressive in their allocations.
Finally, they are moving from 10 year increments in the Lifecycle Funds (2020, 2030, 2040, etc.) to five year increments (2025, 2030, 2035, etc.). Again, this seems like a good move. The more options investors have to fine-tune their retirement plans, the better.
This change is anticipated in 2020 when they retire the L2020 fund and it becomes the L Income fund.
Right now they have one fund manager for their funds, but just in case something unanticipated occurs, what they call a Black Swan event, they are considering having two fund mangers for each fund.
The TSP should certainly make contingency plans in the event one of their fund managers are hit with a major cyber attack. This, again, sounds like a good move to me.