For most federal workers, the question is whether they will get a 4.4 percent raise in January or a 4.8 percent raise. The White House says 4.4 percent. But Congress may give them the same 4.8 percent it plans for military personnel. Either way, they must wait.

But there are 201,000 federal workers out there who could give themselves the equivalent of a 4 percent tax-deferred raise right now. All the employees, who are in the Federal Employees Retirement System, need do is sign up for the federal 401(k) plan and start investing 5 percent of their income (also on a tax-deferred basis) in the stock, bond or treasury funds.

The open season, when federal workers can either join the thrift savings plan or reallocate future payroll contributions, runs through July 31.

Most FERS employees wised up long ago. About 86 percent of the total eligible FERS work force is putting something into the savings plan each payday. The minority (about 200,000 people) who aren't taking advantage of the savings plan's tax breaks and matching contributions are missing out on a very good thing.

FERS employees get a special break in their 401(k) plan. Uncle Sam contributes 1 percent of salary into their thrift savings plan accounts regardless. That's automatic. But FERS employees are allowed to contribute up to 10 percent of pay (to a maximum of $10,000 a year) into the savings program. Those who invest at least 5 percent get a government match that -- with the automatic 1 percent -- equals 5 percent of salary.

FERS investors who contribute the maximum are putting the equivalent of 15 percent of salary (10 from themselves and 5 from Uncle Sam) away on a tax-deferred basis. Investing 15 percent of salary that way, over an extended period of time, can add lots of zeroes to your final retirement account balance.

Many financial planners say that FERS employees who contribute the maximum amount, and do it for a career, could easily wind up with $1 million balances. That is over and above any civil service benefit, or Social Security benefit, employees earn while with Uncle Sam. Some experts predict that savings plan investments will provide half or more of all the spending money that future FERS retirees have available to them.

A growing number of FERS investors who have put the maximum amount into the C-fund (stock index) since the program started now have account balances that exceed $400,000. Many accounts have doubled in value over the past three years, thanks to 20 and 30 percent returns from the C-fund. The typical FERS contributor's balance today is about $40,000, vs. just over $5,000 for noncontributors.

That means the average regular FERS investor has eight times as much money set aside so far as the average noninvestor.

Workers who are still under the old Civil Service Retirement System are limited to contributing 5 percent of pay to the savings plan. That's because they get a much more generous federal annuity. Their 5 percent isn't matched. But the amount they can contribute, tax-deferred, is more generous than most private 401(k) plans.

The typical CSRS investor now has an account balance of just over $23,000. The typical CSRS noninvestor has a zero balance.

Again, you gotta play (as in invest) to win.

Next year, the savings plan will offer two new investment options: an international stock index fund and a U.S. small-cap fund.

Postal Wise Guys Although they aren't the best-paid federal workers, postal workers may be among the smartest. They are among the 401(k) plan's most enthusiastic groups of investors. That means that some of them will have more money in retirement than their higher-paid white-collar federal colleagues who aren't investing.

One reason postal participation is so high is that postal unions -- which most workers belong to -- are staunch backers of the tax-deferred investment program. Consider this advice from Joseph LaPlaca, director of retired members for the National Association of Letter Carriers:

"The TSP (Thrift Savings Plan) is a critical part of the total retirement package for FERS employees and it plays a supplemental role for those under CSRS. Regardless of which retirement system an employee is under, the TSP offers all participants tax-deferral on their contributions, a loan program, a choice of investment funds, portable benefits if the employee leaves government and a choice of withdrawal."

So if you are under FERS, don't wait for a pay raise. Go get yours right now!

Monday, May 31, 1999