Everybody Into the TSP!

The consensus is that the federal Thrift Savings Plan is an exemplary model of a retirement investment system. So why not let all Americans in on it? That's the question Christian E. Weller raises in a new report from the Center for American Progress. The report addresses the issue of the comparatively high fees small employeers and their workers pay to 401(k) managers, and suggests the following solution:

A more promising approach for small employers and their employees is for the U.S. government to set up a large, but very basic 401(k) plan so that these businesses and their workers can take advantage of these economies of scale, too. Our nation’s small business community could then also offer their employees a low-cost option to save for retirement.

How would such a system work? The easiest solution would allow private sector employees to join existing 401(k) programs run by state governments and the federal government for their own employees. The underlying model here is the Thrift Savings Plan, or TSP, which offers federal employees a limited range of investment options and services in exchange for low fees.

(Thanks to FedSmith for the tip.)