TSP Name Change: What's The Difference?

This article was originally published here

Shakespeare’s tragic play Romeo and Juliet features a line from Juliet Capulet asking, “What’s in a name?” (Act II, Scene II). What we refer to as a rose could just as quickly be called something else and still have the same pleasant aroma. In Act I of their new comedy show, “The Latest TSP Changes,” the TSP appeared to pose the same question more than once.

What exactly is meant by the term “contribution allocation”? Even though we call it an “investment election.”

Investment elections designate where your TSP contributions will go after you receive them. Your investment preference will apply to all future deposits your account makes. Your investment decision will not affect funds already in your account. Your investment decision will be valid until you create a new one. In some publications, the TSP refers to this action as a “contribution election,” which sounds like a combination of contribution allocation and investment election.

What exactly is meant by the term “interfund transfer?” Whatever we call “reallocation” or “fund transfer,” it will still be crystal clear what you want to do with the money already invested in your TSP.

Reallocation and transfer of fund

The difference between a reallocation and a transfer of funds might interest some people. With a fund transfer, you can move money within your account from one designated fund to another designated fund (or funds) without affecting any other funds. A fund transfer is a method for transferring money into or out of a mutual fund account. This does not affect the other funds in your account.

When you reallocate, the money in your account is moved between the TSP investment funds. When you reallocate, you decide how much of your money you want to put into each fund. You can’t transfer money between funds from one source to another. For example, if you have both traditional (including tax-free) and Roth money in your account, your reallocation will move a certain amount from each type of money into the funds you choose.

It tells us they’re the same thing, but the TSP seems to believe there’s enough difference to warrant two new terms. Why use one term (fund reallocation) when you can use both (fund transfer and interfund transfer)?

Even though they now go by different terms, reallocations and fund transfers are still bound by the same restrictions applied to interfund transfers. Each calendar month, you can use your first two reallocations or fund transfers to move money from one TSP fund to another. After the first two of either type, you can only move money into the G Fund for the rest of the month. Each account has its rules if you have both a civilian account and a uniformed services account.

You should download a copy of the Summary of the Thrift Savings Plan for yourself if you’re interested in understanding how the TSP functions in light of the most recent changes. It was updated in May 2022 and now contains information on the mutual fund window and other changes to the TSP.

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M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].