Young workers hired since 1983 have the most to gain from investing in the federal thrift savings plan. Open enrollment for the plan, Uncle Sam's generous version of those tax-deferred 401(k) plans in the private sector, ends Jan. 31. This year, for the first time, federal investors can go into the stock, bond or Treasury options without restrictions.
People under the Federal Employees Retirement System, which includes most federal workers hired in the past eight years, can invest 10 percent of their pay into the savings plan. Those who put in at least 5 percent get a 5 percent contribution from their agency. Those who contribute less get matching contributions.
Nearly 1 million people are under FERS. It replaced the Civil Service Retirement System, which still has about 1.8 million members. CSRS employees can put 5 percent of their pay into the savings plan, but they do not get any government matching funds.
The thrift savings plan has three options: The G-fund (made up of short-term Treasury securities), the C-fund (stocks) and the F-fund (bonds). The G-fund rate changes monthly and has averaged more than 9 percent interest a year since it started. The C and F funds rise and fall with the markets.
Data from the Federal Retirement Thrift Investment Board show the value of investing early. Its example is a $26,000-a-year employee, under the FERS system, who invests 5 percent of pay and gets the 5 percent government match. It assumes three rates of return: 4 percent, 7 percent and 10 percent.
Taking the middle rate of return, 7 percent, an employee credited with $2,600 a year in investment would have $15,600 after five years; after 10 years, $37,440; 15 years, $68,900; 20 years, $113,100; 25 years, $175,760; and 30 years, $264,680. At 4 percent interest, the same employee after 20 years would have $79,500; and at 10 percent, the account would be worth $164,840 after 20 years.
Officials expect many new people to signup during the current open season. Tomorrow at noon on WNTR radio (1050 AM), Peter B. Mackey, director of investments for the thrift board, will talk about how the program works and the past performance of the various funds.
Moving to City Hall
H. Sandra Fiske, staff director of the Federal Government Service Task Force, will move over to be director of regional affairs for D.C. Mayor Sharon Pratt Dixon. Fiske has headed the bipartisan congressional civil service caucus for three years.
Free Pay, Leave Charts
Government Employees Insurance Co. (Geico) says it will send a free federal salary chart or federal annual leave card, to any interested worker. To get it call 301-986-2500 and press the 1 (for service) button on your touch-tone phone. Out-of-towners can call 800-841-3000.
Don't Mess With SES
Federal agencies planning to deny full pay raises to their senior executives have been warned by the Office of Personnel Management and Congress. For details check this space Sunday.