Federal workers who invested in their 401(k) plans' high-risk stock fund after its miserable 1994 performance have tripled their original investment. A dollar invested in the C-fund in January 1995 has grown to more than $3 today.

The C-fund's success is the reason a small but growing number of feds--who stuck with it through good and bad times--have Thrift Savings Plan account balances of well over $400,000. That is despite losses in the past three months.

Most of the TSP's $85 billion is in the C-fund. But the super-safe G-fund (treasury securities) and F-fund (bond index) have also kept well ahead of inflation.

Some nervous investors bailed out of the C-fund in 1994 after it returned only 1.33 percent. The Standard & Poor's 500 that year was up 1.32 percent.

But investors who ignored short-term market movements figured that the weak performance of the C-fund in 1994 meant it was a good time to--"buy low." They were correct.

The next year, 1995, the C-fund bounced back big time, returning 37.41 percent. Then in 1996, it returned 22.85 percent. In 1997, the C-fund returned 33.17 percent. And last year, it returned 28.44 percent.

For the 12 months ending in September (despite three months of negative returns), the C-fund return was 27.74 percent, according to the Federal Retirement Thrift Investment Board, which runs the giant tax-deferred employee investment program.

Dennis Gurtz, a financial planner with American Express in Bethesda, cautions TSP investors "not to expect anything like" the returns of the past four years. Over the life of the S&P 500, the C-fund annual performance--counting good years and bad years--have averaged 11 percent.

"Returns of 37, 22, 33 and 28 percent are surrealistic," Gurtz says. "But the fact that the market has been doing so well for the past few years doesn't mean that there will be offsetting losing years."

Gurtz advocates a long-term investing approach, heavily weighted to the stock market. But he says investors should apply the "sleep at night" rule to their investments: If the ups and downs of the stock market cause you to worry and lose sleep, invest more conservatively in such funds as the G-fund or the F-fund.

In May, TSP investors will have two more funds to choose from. Like the C-fund, they fall into the potentially high-risk/high-reward category. The new S-fund (small capitalization stock index investment fund) will be managed by Barclays Global Investors. It will track the Wilshire 4500 stock index. At the same time, the TSP will offer another investment option, an international stock index fund.

Prescription Drugs

Starting in January, everyone enrolled in six of the seven national fee-for-service plans will be charged a co-payment--of $5 to $20--for prescription drugs ordered by mail. Feds--and many retirees--already pay for drugs by mail. But Medicare-eligible federal retirees haven't had to make the payments in the fee-for-service plans or in some health maintenance organizations.

In January, Alliance, Blue Cross, GEHA (the Government Employees Hospital Association), the American Postal Workers Union, Letter Carriers and Mail Handlers health plans will charge those retirees a co-payment for drugs by mail. The Postmasters health plan will not. But while it is an excellent plan, its relatively high premiums (listed here Sept. 30) have prevented most retirees from joining it.

Workers and retirees will have an open season--Nov. 8 to Dec. 13--when they can switch plans. People in the Washington area can choose from seven fee-for-service plans and at least seven HMOs. No eligible employee or retiree can be turned down because of age, health or preexisting condition.

Married With(out) Kids

Lots of married couples don't have children. Yet these families of two pay the same premiums--in the same health plans--as married couples with large families. For many of the two-person families, the question is: Why are we paying the same rates as group-families, which are almost certain to use their health plan more?

The explanation--that the federal health program is a "group plan"--doesn't cut it with many couples. They want the "group" redefined.

But there is a way that two-person families can save money on health insurance premiums, which are going up an "average" of 9.3 percent next year.

To find out how a two-person family can save on health premiums, check this space tomorrow.

Mike Causey's e-mail address is causeym@washpost.com

Sunday, Oct. 17, 1999