I am in the military and I generally believe the TSP is a good deal and I'm glad to have access to this benefit. However, I am irritated with the delay between when money for TSP is deducted from my paycheck and when it is actually put into my account (and the "shares" are actually purchased).
For example, if I elect to have 10% of my pay put into TSP, then 10% of my midmonth pay is deducted and 10% of the money on the 1st is deducted. The midmonth pay deduction just sits with DFAS, though and is not sent to the TSP. So, for example, if someone has a base pay of $2,500, you would see $125 deducted from pay on the 15th and $125 deducted from pay on the 1st. The purchase isn't made until after the 1st, so you lose out on any interest earnings you could have benefited from that first $125 for two weeks. That obviously isn't a lot of lost potential interest, but what if you put aside more and lose out on two weeks interest every month for 20 years? That's significant.
Now, this isn't the TSP's fault. It's DFAS. And DFAS was supposed to solve it with DIMHRS, a program they spent years and billions of dollars developing and just threw in the trashcan. But that's the government for you.
What bothers me about TSP is that they get sent money by DFAS on the same day my bank gets it (I assume). And I believe that is the same day that EOM LESes are issued, which is between the 23rd and 25th of the month. So why does the TSP take that money and then wait until 2nd or 3rd to put it in the funds? Banks hold checks when they don't know if it's going to bounce, but the TSP knows that the US Treasury is good for this. Why does it take 9 or 10 days to buy the shares? Where does the money sit in the meantime? I understand this is a large program they're administering but they should be able to put the funds in on the 1st or the last business day before the 1st just like banks are required to do.
This bothers me months like this one where the closing price of the SP500 was much lower on the 1st than it will be when the TSP finally gets around to purchasing the shares. And when you're buying into an investment that you don't plan to draw on for another 40 years, missing out on a half a share a month can add up to a significant amount.
I understand that since prices fluctuate up and down, some months this hurts you and some months it helps, but in general I believe it hurts (since markets generally tend to appreciate over time). Certainly for G fund investors, it results in a marginal loss on potential earnings every month.
For example, if I elect to have 10% of my pay put into TSP, then 10% of my midmonth pay is deducted and 10% of the money on the 1st is deducted. The midmonth pay deduction just sits with DFAS, though and is not sent to the TSP. So, for example, if someone has a base pay of $2,500, you would see $125 deducted from pay on the 15th and $125 deducted from pay on the 1st. The purchase isn't made until after the 1st, so you lose out on any interest earnings you could have benefited from that first $125 for two weeks. That obviously isn't a lot of lost potential interest, but what if you put aside more and lose out on two weeks interest every month for 20 years? That's significant.
Now, this isn't the TSP's fault. It's DFAS. And DFAS was supposed to solve it with DIMHRS, a program they spent years and billions of dollars developing and just threw in the trashcan. But that's the government for you.
What bothers me about TSP is that they get sent money by DFAS on the same day my bank gets it (I assume). And I believe that is the same day that EOM LESes are issued, which is between the 23rd and 25th of the month. So why does the TSP take that money and then wait until 2nd or 3rd to put it in the funds? Banks hold checks when they don't know if it's going to bounce, but the TSP knows that the US Treasury is good for this. Why does it take 9 or 10 days to buy the shares? Where does the money sit in the meantime? I understand this is a large program they're administering but they should be able to put the funds in on the 1st or the last business day before the 1st just like banks are required to do.
This bothers me months like this one where the closing price of the SP500 was much lower on the 1st than it will be when the TSP finally gets around to purchasing the shares. And when you're buying into an investment that you don't plan to draw on for another 40 years, missing out on a half a share a month can add up to a significant amount.
I understand that since prices fluctuate up and down, some months this hurts you and some months it helps, but in general I believe it hurts (since markets generally tend to appreciate over time). Certainly for G fund investors, it results in a marginal loss on potential earnings every month.
