In 2022, the mutual fund window was introduced, giving TSP participants access to a wider range of investment options. Instead of restricting you to the five funds offered through the TSP (G, F, C, S, and I funds), the mutual fund window offers over 5,000 funds. Despite a large number of Feds having expressed interest in this option, only a few thousand eligible employees have signed up.
One factor that might limit participation in the mutual fund window is the requirements. Per the Mutual Fund Window Fact Sheet, “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.” This means you need to have saved at least $40,000 in your TSP before you’re eligible to take advantage of the mutual fund window.
Another drawback that might deter employees from investing funds via the mutual fund window is the cost. To cover the $55 administrative fee and $95 maintenance fee, your initial transfer will be deducted $150. This deduction will be taken proportionally across all funds in your TSP account. Going forward, annual fees will be deducted yearly on the last business day of the month of your initial transfer. And, of course, you’ll pay trade fees that will set you back $28.75 every time you buy or sell shares.
While the funds comprising the TSP are vetted by fiduciaries (professionals entrusted to manage assets while always putting their client’s needs first), you’ll need to do your research to verify the options available through the mutual fund window are a good fit for your investment strategy. A good start is to read the prospectus (a document outlining investment objectives, strategies, performance, fees, fund management, etc…) for each fund and make sure they align with your goals. Remember, DIY investing is risky; most financial professionals advise against it.
Finally, you can’t elect to have contributions go directly to your mutual fund window account, nor can you request loans, distributions, or withdrawals from that account. Should you need funds, you’ll need to sell your shares and transfer that money back to your TSP account for distribution. If you’re considering investing in the mutual fund window, reach out to an FRC® for more information.
