TSP’s low expense ratios saw a significant uptick starting in 2018. Now the net expense ratio is at its lowest point since before 2020, but still well above 2019 levels.
Since its inception in the late 1980s, the Thrift Savings Plan (TSP) has earned the reputation for being cheap compared to similar index funds available outside of the TSP. Starting in 2011, the net expense ratio of the TSP’s five core funds (C, S, I, F, and G) has been 2.0 basis points or higher (meaning investors pay 0.02% of the amount invested). In 2020, in order to fund modernization efforts, there was a 30% increase. The net average expense ratio of TSP funds for the five funds went from 4.2 basis points to 5.8 in 2020 and then jumped to its highest point ever, 7.6. These cost increases were diminishing the TSP’s competitiveness, but now that the TSP has updated its website, has the mobile app up and running, and opened the mutual fund window, the fund’s expense ratios have experienced a welcomed downward trend.
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While still well above the 0.042% average net expense ratio of TSP funds from 2019, the fund costs for the TSP in 2023 was the lowest it has been since, going from 6.9 basis points in 2022 to 5.6 the following year. The S fund, which tracks the Whilshire 4500 completion Index, saw its net expense ratio go up from 0.068% in 2021 to 0.09% in 2022 and then drop to 0.079% last year. The C fund, which invests in the S&P 500, went from 5.1 basis points in 2021 to 5.9 the next year and then down to 4.8 in 2023. The G fund, the return for which is tied to treasury yields, had a net expense ratio of 0.049% in both 2021 and 2023 with 0.057% in the year in between.
Covering the administrative and investment management costs, the expense ratio of TSP funds are standard with index funds. One of the best features of the Thrift Savings Plan has always been that these fees are low. While the TSP can no longer claim that its fund options have the absolute lowest costs amongst similar investment funds, the recent decrease in cost is a signal that the TSP is moving in the right direction.
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Benjamin Derge, ChFEBC℠
"Benefits Ben," a ChFEBC℠ designated Financial Planner with an English degree, specializes in guiding federal employees, retirees, and their families towards optimal retirement. His expertise encompasses digital marketing, benefits assistance, annuity management, and trading activities, ensuring clients receive superior service and reliable advice.
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you're eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.
Investors should carefully consider the investment objectives, risks, charges and expenses of mutual funds before investing. The prospectus and summary prospectus contains this and other information about mutual funds. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.
