Fred Harteis News Articles - The retirement plan Uncle Sam has right

Fred Harteis News Articles - Considering the mess that Social Security and Medicare are in, the federal government is probably the last place you'd look for insights about retirement planning.

But I've got to hand it to the feds: When it comes to investing their own money for retirement, they really know what they're doing. In fact, the Thrift Savings Plan - the equivalent of a 401(k) plan for members of Congress and other government employees - is one of the best retirement plans around.

Alas, to be in it you must work for the government. But that doesn't mean you can't do what the feds do to make your retirement plan better.

The Thrift Savings Plan doesn't try to dazzle participants with choices. There are just five core investment options:

Three stock index funds, which track large, small and international stocks, respectively;
A total bond market index fund;
And a government securities fund, which invests in short-term Treasuries.
By mixing and matching funds from this limited lineup, however, you can easily build a diversified portfolio appropriate for any stage of retirement planning.

If that's too much work, TSP also offers target-retirement funds that allow you to pick the fund with the date closest to when you plan to retire and bam! You get a premixed portfolio of the five core funds that gradually morphs more toward fixed income as you age.

The lesson here: Don't get distracted by all the funds your plan throws at you. Today the typical 401(k) plan has 19 investment options, and about one in 10 has more than 25. Employers may feel that they're doing you a favor by offering all that choice, but they're only making it harder for you to do the right thing since too much choice just leads to confusion.

Studies by researchers at Columbia University and the University of Chicago, for example, found that the more funds a 401(k) plan added to its lineup, the fewer employees signed up and the less money participants invested in stock funds.

The likely result: an account that's worth a whole lot less in the end.

The fact is, you'll find your retirement portfolio easier to manage, and probably a lot more effective, if you focus on just four core options: broadly diversified large- and small-cap domestic stock funds; an international fund that spreads its assets among major foreign markets; and a plain-vanilla bond fund.

Split your money among these basic building blocks, and you'll have all the diversification you really need. Plus, you'll have a much easier time keeping track of what you own.

Source: Cnn.com

About Fred Harteis: Fred Harteis leads Harteis International. Fred Harteis has a background in agriculture and has created many successful business ventures.