Let lower fees aid accounts’ progress

My husband and I are both 43. He is a federal employee. I’m self-employed in real estate and other consulting gigs. He has $283,000 in the Thrift Savings Plan. He has the money in the C Fund right now, but can easily move it around online when the markets get shaky. The C Fund is the one that invests in the S&P 500, all stocks. He stays on top of it and follows the financial news.

We also have around $164,000 with a large brokerage firm — $50,000 in my husband’s Roth, $67,000 in my Roth and $47,000 in a traditional IRA.

We are putting the max in the TSP — 15 percent. It comes out to around $13,700 a year. We occasionally put money into our brokerage Roth accounts. For 2014, I think we contributed $2,400 each. Not much. The traditional IRA gets no contributions. I have been self-employed for a decade, so that IRA is just rollovers from earlier jobs, including some in my 20s.

We are considering moving all of our brokerage accounts over to the TSP. Putting all of our eggs in one basket makes me very nervous, so we want your input.

Our brokerage people are lovely, but they aren’t on top of our account at all. My parents have a huge amount of money with them, so their adult children are given some sort of “family plan” discount. I think our account is “free,” but it also means they don’t monitor it or service us very well. — C.O., Austin

The major brokerage firms have encouraged their brokers to focus on large accounts, generally at least $250,000 and usually $500,000 and up, so your brokers are playing “the main event,” which is your parents’ account. In any case, there is no reason not to move the accounts that can be moved to the TSP to the TSP. By doing so, you’ll reduce costs to the lowest possible level — 2.9 basis points, or 2.9 one-hundredths of 1 percent.

But you can’t move your accounts there, only your husband’s. The alternative is to move your accounts to lowcost accounts at discount brokerage firms.

Without knowing what your brokerage accounts are invested in, I can’t tell you how much you’ll save every year, but it will most likely be 1 to 1.5 percent a year, perhaps more.

There is no reason to be concerned about consolidating accounts for your husband. Nor should you have any concern about moving your accounts to one of the major low-cost platforms, such as Vanguard, Fidelity or Schwab. At each of those firms, you can find a way to virtually duplicate asset class offerings of the Thrift Savings Plan, but at a slightly higher expense, about 7 to 10 basis points.

But don’t worry about the higher cost. As I see it, the big journey is the one from losing 2 percent a year (200 basis points) in fees to about 20 basis points. Paying attention to cutting the big cost will change your retirement for the better. Obsessing over getting from 20 basis points to the 3 basis points of the TSP won’t be very productive.

Scott Burns is a nationally syndicated columnist who has been writing about personal finance since 1977. Send questions to scott@scottburns.com.