Perspectives

TSP: Another Reason to Stick with TSP in Retirement

There is a legal battle going on in the courts over the Department of Labor’s new fiduciary rule for financial advisers.  Fiduciary by definition is about trust and confidence.  The battle is over whether, drum roll please…

…whether financial advisers have to put their customers’ interests first, instead of steering them towards more expensive retirement products that offer the advisers higher commissions.

Folks, the financial industry lives on skimming profits off of your savings and they do not want any rule to get in their way.  If they merely skim 2% of your returns for 35 years they end up with half of your total returns – half of your retirement!  That is why they own the yachts and you get a small fishing boat.

A senior writer for Yahoo Finance wrote that “previously, the long-standing suitability standard required a broker or retirement adviser to sell something that was merely “suitable” to a consumer. A White House study from 2015 had found $17 billion was lost by retirees due to conflicts of interest.”

And that “the argument against a fiduciary rule is that it would make investment advice too expensive for some people.”

Too expensive?  I don’t think so. Just the opposite.  Commissions and fees are too expensive today.

The real issue is that this new rule would require every adviser to only recommend a low-fee mutual funds that does not provide kick-backs to the adviser.  This means the adviser would have to charge an upfront fee for his investment advice and people balk at paying thousands of dollars for investment advice when they know the cost.

But the real point of my article is that currently financial advisers are only required to provide you with “suitable” investments.  And frankly that is scary.  Some advisers that charge commissions are good but if you have accumulated enough wealth I do recommend seeing a certified financial planner who charges an upfront fee.

But don’t let any adviser tell you that you need to move your funds out of TSP so they can “manage” them for you to make it easier on you.  No real fiduciary would tell you to move your funds out of TSP in retirement.  Period.

The Yahoo Finance article was good overall until the last paragraph where they lost me with…

The fiduciary opponents, however, do have a point about the utility of advisers. It’s not about telling what consumers should buy but more about telling them not to panic and sell — a feature that’s often hard to remember in a bull market.

Excuse me. Are they saying advisers should never tell you to sell?

The SP500 has lost over 50% twice in the last 18 years and wall street never provides a clear warning.  Partially because wall street needs someone to sell to as they bail.  This is why I posted an old Market Watch article titled Wall Street ‘experts’ have missed every stock market crash in 20 years on the front page of our website.  It is worth a read.

It has something to do with adviser’s loss of fees when you are in cash and their current lack of fiduciary requirements.  So stick with TSP in retirement.  Again and again, it is the lowest-cost well-managed retirement account available and you can not beat that TSP G fund that you need it most in retirement.

And please panic and sell before everyone else does.

We can help with that if you need it.

 


 

TSP & Vanguard Smart Investor

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