Keep searching for better option than TSP?

Leaving Public Service? TSP = Red Tape You Might Not Cut

Government service is often thankless. I saw firsthand bouncing around the country from town-to-town as the son of a life-long USDA employee. But in comparing notes between my Dad’s Thrift Savings Plan (TSP) and what I know of 401ks, the TSP might be one area where the public sector got it right. How so?

If you’re a person with a 401k, we at blooom often start with a simple question. Know what you’re paying in investment fees? Generally, the answer is no. And the cost of what they’re invested in often surprises them. That’s where we come in to help 401k clients. For people in a TSP, the fee discussion is a little different – on the surface.

And that has more to do with predatory Wall Street practices than the plans themselves.

Investment selection, rebalancing and fiduciary services could help federal employees achieve a better retirement. So, let’s explore why current and former federal employees should consider those services before cutting that last bit of government red tape known as the TSP.

Thrift Savings Plans (TSP) Have Few Investment Fees

TSP participants have access to one of most inexpensive employer-sponsored retirement plans, but only 40% of military service members take advantage of this benefit.

A TSP is a lot like a 401k, but the investment expenses are generally better in the former. Say 20 times better. Compare the average expense ratio of 0.03% for a TSP to the median 401k expense ratio of 0.60% we see pre-blooom rebalance.

Millions of federal workers are in the plans. A 2014 CNN Money article surmised why many millions more are bypassing these low-fee plans (or opting out when they leave their federal job) and perhaps paying thousands more in fees in other retirement savings vehicles.

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A Penny And 401k Fees Both Overpriced

Penny for Your Thoughts: You Pay More For 401k Than You Think

The U.S. Government has recently engaged in serious talks to abandon the production of the penny. Why? Because each penny costs 1.4 cents to produce, resulting in a cost of more than $100 million per year to taxpayers. If you’re a 401k investor, does this sound familiar? How so, you ask? The answer lies in knowing how much you’re paying in the hidden investment fees associated with your 401k account. Based on NerdWallet research, nearly 92% of people have no idea what they’re paying in 401k fees.


Why Paying 401k Fees Can Be a Big Deal

Fees unnecessarily sap the potential long-term results of your 401k. The average American will pay $138,336 in 401k fees. That’s 2.5 years of earnings for the average U.S. household.

Want to see the fees you could strike from your life? Check out our hidden fee calculator to get an estimate. Or, evaluate your actual account for a truer picture.

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Beware the Bull in Retirement Yellow Brick Road

How to Travel Safely Down Retirement Yellow Brick Road

The past few years, we’ve seen a lot of people happily talking about the gains they have been seeing in their 401k accounts. They’re sharing return numbers with others online and in the grocery store. It would seem like the kind of talk you’d want to hear.

Please don’t get me wrong. It’s great to see so many people happy that their retirement accounts are increasing in value. But there is a very important message to convey concerning these high returns.

Like the Lollipop Guild in the Wizard of Oz – IT AIN’T ALWAYS GONNA BE THIS GOOD!

The Facts About Returns Since blooom’s launch

Blooom launched its 401k management service in late-September of 2014. Since that time, the stock market (as measured by the S&P 500*) has had a cumulative return of roughly 28% and has averaged almost 10% per year.  In addition, the Vanguard Total World Stock ETF – a better proxy for blooom clients given its allocation to global equities – is up over 15% year-to-date! The point here is that these past three years have been a good time to be a stock market investor. Hell, it has been a GREAT time to be a stock market investor since the Great Recession (stock market collapse) of 2008-2009.

With all of these happy people, we want to make sure everyone understands that this is not always how things will go. In reality, the market will go down periodically.  In fact – It NEEDS to go down periodically. That is precisely why investing in the market carries risk and this same risk is exactly why investors who have stayed in the market for long periods of time and weathered this risk have been rewarded with much higher returns than “risk-free” investments like CDs, Government Bonds, and money market funds have produced.

4 Key Characteristics of a blooom-managed 401k

If you’re a blooom client, your managed 401k has four key characteristics that other 401k investors may not receive:

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Thanks 1 Billion Clients

Blooom Reaches $1 Billion in Assets Under Management

“Wall Street has made a habit of running in the opposite direction of investors with small accounts…maybe we should build something and run towards them.”

This was written in email from Kevin Conard, my co-founder to me late one night back in January 2013. Four-and-a-half years later that idea has evolved into a company – blooom – and we are proud to announce that we have grown faster than virtually any other robo-advisor. Blooom now manages more than $1 billion of retirement accounts for our clients.

Specifically, thousands of people from all across this country have trusted blooom with what is likely their most important and potentially most valuable financial asset – their employer-sponsored retirement account, or 401ks/403bs, as they are so strangely named.

If you’re a blooom client, I want to thank you for believing in us and starting this journey of bettering your retirement and financial situation together. The entire blooom team works hard every day to help you reach your financial goals.

Every time we receive a message of gratitude from one of our clients, we share it with the team and … everyone gets to work the next day with a sense of pride that they are truly helping people and striving to achieve greatness. Thanks to everyone once again. We will continue to provide our helpful service to all of you — in good times and bad.

Speaking of pride. We also take pride that this Kansas-based company reached the milestone faster than both Betterment or Weathfront – while doing so on a fraction of the capital. They’re peers not so much from a comparable service offering but in that they’re a benchmark for other robo-advisors. In other words, out of the gates, we have grown faster on fewer resources, as one should expect from someone managing their money.

Blooom was started in 2013 to help the traditionally un-helped.

We felt – and continue to feel — that it isn’t fair that the people who needed the help from the financial services industry the most were the least likely segment of the population get it.

You’ve done the hard part: You started saving for you retirement. Thanks for letting us do the rest.

If you haven’t already read blooom’s manifesto — here’s WHY this is all so important to us:

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6 Pitfalls Why You Don't DIY Your 401k

6 Pitfalls of Going it Alone with Your 401k

In this day and age of DIY tutorials and life-hacks, you might be tempted to do your 401k all by yourself. But be wary, brave traveler! There are several pitfalls you could get into if you follow this path.

Pitfall #1: Being Too Conservative

The old rule of thumb was that if you subtract your age from 100, then that should be the percentage of stocks in your portfolio. For example, if you were 20, then 80% of your portfolio would be in stocks, and 20% in bonds.

With Americans living longer, and empirical evidence of higher long-term returns from stocks vs. bonds, this framework is a bit outdated. Instead, raise that number to 110, or even 120. So, your portfolio would have 90-100% of stocks.

To find out why, read some friendly tips from Investopedia, and a blog that our CEO wrote.

Pitfall #2: Being Too Aggressive

We know, we know. You literally just read not to play it too safely. But here’s why you shouldn’t be too reckless with your investments. Say you’re less than 5 years away from retirement. We recommend that around 40% of your 401k get invested in bonds, with the other 60% in stocks.

As folks start getting closer to retirement, their nest egg needs to be safer from a market crash or a decline in stock prices. That’s why blooom continually monitors and periodically rebalances our clients’ accounts as they get closer to retirement, bringing down the percentage of stocks and increasing bonds.

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