Dayle Scheinman, AIF®

The TSP has very low investment expenses because it is utilizing index funds and the huge pool of dollars inside of the plan has allowed for the internal expenses to be extremely low. To give you an idea, the TSP offers index funds around 0.025% and these funds would cost most investors around 0.07% - 0.30%. The question to consider is the possibility of building a better portfolio outside of the TSP or utilizing other investment options to compliment the TSP.

The answer would depend on how well your crystal ball works. Both have the future potential to outperform the other, but they are two different types of investments. Most professionals would agree that since none of our crystal ball theories tend to work out, it is most prudent to build a portfolio utilizing proper diversification. This is where the argument for mutual funds comes into play. The idea, at a high level, is for people to buy a mutual fund that invest in several stocks rather than buying just a few stocks on their own. An ETF is a type of mutual fund that you can buy and sell like a stock but has several underline stock holdings inside of it. They have exchange traded funds for just about every possible stock market segment identified by man, so they are very useful tools in building a fully diversified portfolio. If you bought Exxon, Apple and IBM vs. an ETF investing in the entire S&P 500 Index one of three things would happen. Those 3 stocks collectively would outperform the 500 index, do about the same or under perform. I would suggest figuring out your correct mix of high risk vs. low risk investments, then consider low cost ETFs to build your portfolio. The average investor has substantially underperformed the S&P 500 index and to many investors surprise, the experts haven’t done much better. You would be better off trading in the hope for outperforming with not under performing, and utilizing a passive investment approach that can be achieved with exchange traded funds or other similar investment instruments.

I would always recommend comparing different types of providers rather than comparing two groups that are similar to each other. Both Great-West and Mass Mutual are insurance companies that offer bundled 401(k) services and neither company will take fiduciary responsibility for its recommendations with every motivation to maximize revenue off your 401(k) plan. Both providers will typically make money off of your 401(k) plan based on asset based fees, which may or may not be an advantage for your 401(k) plan. 401(k) providers in general do a very good job of only explaining to plan sponsor half of the truth to sell additional services to help them make money. Most 401(k) providers won’t explain the whole truth and you could be missing out on plan design, employee/employer services and other 401(k) opportunities to help employees accumulate more wealth for retirement. Most companies, including the largest in the world, hire experts in 401(k) plans to make sure that they don’t miss these opportunities for their employees and to help share in the liability that comes along with offering a retirement plan as a benefit to employees. Conversions are a great time to revamp the entire plan, but if done incorrectly can be very detrimental to employee accounts that will eventually be a burden for the plan sponsor to correct. My advice is to simply make sure you have all of you “i” dotted, “t” crossed and that you have documented how Great-West or Mass Mutual is in the best interest of all you plan participants.