James48843
01-14-2007, 08:21 AM
From the "Stars and Stripes" newspaper, January 3, 2007
http://stripes.com/article.asp?section=125&article=42573
Opinion: Help TSP shake its Rodney Dangerfield reputation
By Maj. Nicholas Bell
Stars and Stripes Mideast edition, Wednesday, January 3, 2007
Ever seen that sour face or hear the fleeting voice of contempt that you get as a response when you mention anything about the Thrift Savings Plan (TSP) to your peers? For whatever reason, it would appear that our own humble military version of a 401(k) continues to get a bad rap from within the ranks. Some satisfy themselves by claiming “it just isn’t cool to invest in the TSP.” Others believe they are too strapped to take the first step in funding it with even one dollar. Finally, and possibly constituting the largest group, are those who simply can’t stand wasting their time even considering the thing.
So, where did this dark cloud of disapproval come from? It wasn’t that long ago that we were finally presented with a retirement savings program sponsored by the U.S. government. Hallelujah! But when it hit the streets, our reaction was anything but reverent. The grossly immature program at the time sent out quarterly statements that looked like they had been masterminded by a team of fifth-graders who were more eager to head to recess rather than spend the time to try and calculate a single share price. I’ll be the first to admit that, at best, we were being asked to take a leap of faith.
Fast forward now just few years later, and a mosquito of an investment opportunity has now grown to become a pterodactyl. A $173 billion pterodactyl — among the largest in the nation. Along with this growth in stature and management, investor education has finally crept up to the plate as well. Those who understand equity investing, from the likes of Nobel laureates in economics to Warren Buffett hold that no-load, ultra-low-expense index funds are possibly the soundest investment that are available today.
But despite this backing and its empirelike stature, TSP’s reputation lacks for respect in true Rodney Dangerfield fashion.
Maybe, it’s because the investment makeup appears too simple: two domestic stock funds, one international and a couple of bonds. Add to that the whiny swoon of, “But it doesn’t match!”
Let us not lose the big picture here. We are now living in a time where company pension programs are all but vanished. The industries upon which our civilian counterparts have relied so heavily are now reverting to employee investment incentive programs such as 401(k) plans to fill the gap.
Keep focused, servicemembers: We are already positioned to profit from one of the nation’s longest standing pension programs. Add to this blessing the enormous advantage of a 401(k) and we have quickly become the envy of our fellow Americans (whiners and ingrates be gone).
In spite of the power behind the 401(k) punch, a disturbing statistic came out not too long ago (based on a 2005 Hewitt Associates study) indicating that nearly half of individuals in America who actually have built up 401(k) savings are opting for a cash distribution soon after leaving their companies. If true, then this means that possibly tens to hundreds of thousands of dollars — whether consciously or not — are being abandoned by former employees in the form of taxes, early-withdraw penalties and potential earnings.
Here is the plea: Avoid cashing out your TSP money right after separating from the military. By cashing out that account at your soonest opportunity, you will be missing out on countless sums of tax-advantaged compounding. The best thing you can do, given the opportunity, to get at that sweet cash is to roll it over into a traditional individual retirement account. This can be done without tax penalty and from there can be parlayed into your (hopefully already established) well-diversified portfolio.
It is, as it always has been, ultimately on you as an individual in the armed forces to identify what it means to create security for yourself and your family. So consider turning off the TV this weekend for a bit to take the time to re-evaluate your financial future with your loved ones. Could you benefit from adding a few more bucks a month to your tax-differed 401(k) program? If the TSP at one time lacked your respect (or your attention, for that matter), ask yourself why, and then seriously consider changing that point of view. It’s your choice whether or not to heed these words, but then again, it’s also your responsibility to know if you can afford not to.
Maj. Nicholas Bell is stationed at Andrews Air Force Base, Md.
http://stripes.com/article.asp?section=125&article=42573
Opinion: Help TSP shake its Rodney Dangerfield reputation
By Maj. Nicholas Bell
Stars and Stripes Mideast edition, Wednesday, January 3, 2007
Ever seen that sour face or hear the fleeting voice of contempt that you get as a response when you mention anything about the Thrift Savings Plan (TSP) to your peers? For whatever reason, it would appear that our own humble military version of a 401(k) continues to get a bad rap from within the ranks. Some satisfy themselves by claiming “it just isn’t cool to invest in the TSP.” Others believe they are too strapped to take the first step in funding it with even one dollar. Finally, and possibly constituting the largest group, are those who simply can’t stand wasting their time even considering the thing.
So, where did this dark cloud of disapproval come from? It wasn’t that long ago that we were finally presented with a retirement savings program sponsored by the U.S. government. Hallelujah! But when it hit the streets, our reaction was anything but reverent. The grossly immature program at the time sent out quarterly statements that looked like they had been masterminded by a team of fifth-graders who were more eager to head to recess rather than spend the time to try and calculate a single share price. I’ll be the first to admit that, at best, we were being asked to take a leap of faith.
Fast forward now just few years later, and a mosquito of an investment opportunity has now grown to become a pterodactyl. A $173 billion pterodactyl — among the largest in the nation. Along with this growth in stature and management, investor education has finally crept up to the plate as well. Those who understand equity investing, from the likes of Nobel laureates in economics to Warren Buffett hold that no-load, ultra-low-expense index funds are possibly the soundest investment that are available today.
But despite this backing and its empirelike stature, TSP’s reputation lacks for respect in true Rodney Dangerfield fashion.
Maybe, it’s because the investment makeup appears too simple: two domestic stock funds, one international and a couple of bonds. Add to that the whiny swoon of, “But it doesn’t match!”
Let us not lose the big picture here. We are now living in a time where company pension programs are all but vanished. The industries upon which our civilian counterparts have relied so heavily are now reverting to employee investment incentive programs such as 401(k) plans to fill the gap.
Keep focused, servicemembers: We are already positioned to profit from one of the nation’s longest standing pension programs. Add to this blessing the enormous advantage of a 401(k) and we have quickly become the envy of our fellow Americans (whiners and ingrates be gone).
In spite of the power behind the 401(k) punch, a disturbing statistic came out not too long ago (based on a 2005 Hewitt Associates study) indicating that nearly half of individuals in America who actually have built up 401(k) savings are opting for a cash distribution soon after leaving their companies. If true, then this means that possibly tens to hundreds of thousands of dollars — whether consciously or not — are being abandoned by former employees in the form of taxes, early-withdraw penalties and potential earnings.
Here is the plea: Avoid cashing out your TSP money right after separating from the military. By cashing out that account at your soonest opportunity, you will be missing out on countless sums of tax-advantaged compounding. The best thing you can do, given the opportunity, to get at that sweet cash is to roll it over into a traditional individual retirement account. This can be done without tax penalty and from there can be parlayed into your (hopefully already established) well-diversified portfolio.
It is, as it always has been, ultimately on you as an individual in the armed forces to identify what it means to create security for yourself and your family. So consider turning off the TV this weekend for a bit to take the time to re-evaluate your financial future with your loved ones. Could you benefit from adding a few more bucks a month to your tax-differed 401(k) program? If the TSP at one time lacked your respect (or your attention, for that matter), ask yourself why, and then seriously consider changing that point of view. It’s your choice whether or not to heed these words, but then again, it’s also your responsibility to know if you can afford not to.
Maj. Nicholas Bell is stationed at Andrews Air Force Base, Md.