In response to a congressional concern that federal employees need more help planning for retirement, the Office of Personnel Management is developing a "retirement readiness index profile" for government workers.

The readiness profile, which will be rolled out in late spring, will give employees age-based profiles that diagnose their state of readiness on various factors, including finances, that they should consider when planning for retirement.

Too often, an OPM strategy paper says, federal employees receive retirement counseling that is "too little, too late."

Although the government continues to offer guaranteed pension benefits, it, like many companies, is requiring employees to take more responsibility for their retirement planning. People hired by the government after 1983 are covered by the Federal Employees Retirement System, and FERS-covered employees outnumber those in the older Civil Service Retirement System 2 to 1.

"Employees must now begin making decisions about their retirement goals as soon as they start their federal careers," the OPM paper said. Under FERS, retirement income will come from three primary streams: a modest pension, Social Security and investments in the Thrift Savings Plan, a 401(k)-type program.

"A significant -- and for many employees the largest -- portion of their retirement benefit will come from the TSP," the OPM paper said. Employees "need to understand the basic principles of investing in order to best utilize the TSP to help them achieve their retirement goals."

By creating a retirement readiness profile, OPM hopes to show employees how prepared they are for retirement compared with an age-based group of peers. For example, a 30-year-old who understands the basics of investing but has not looked into how he would draw down savings for retirement would be rated "on track." But a 60-year-old who did not understand the basics of drawing down investments would be a candidate for an educational effort.

OPM intends to develop the readiness profile in cooperation with the International Foundation for Retirement Education. OPM also plans to create a database of financial education resources for federal benefits officers, perhaps modeled after, the Web site sponsored by the Financial Literacy and Education Commission.

In addition, OPM hopes to launch a "savings goal worksheet" next year that can be used by federal employees to figure out investment goals. The worksheet would be similar to the Ballpark Estimate (, developed by the American Savings Education Council.

OPM has been working on its strategy for about two years. Sens. Daniel K. Akaka (D-Hawaii) and Susan Collins (R-Maine) and Rep. Ernest J. Istook Jr. (R-Okla.) championed legislation in 2004 to improve the financial literacy of federal employees.

"We must do all we can to make sure that federal employees and their families have the resources they need to make informed choices about their finances," Akaka said.

Until the planning tools become available, federal employees probably will want to spend some time at the TSP Web site,, looking at the new educational material on "lifecycle funds." The L Funds have been designed to help employees diversify and regularly rebalance their accounts as they make the long march to retirement.

The TSP site also has reminders that, starting next year, plan participants no longer will be subject to percentage-of-salary limits on their contributions. Instead, they will be limited by a dollar cap set out in the tax code.

TSP investors have been subject to percentage caps -- which in many cases set a lower dollar limit than the tax code -- since the program's inception, although both caps have been increasing in recent years.

The dollar cap next year will be $15,000, up from $14,000 this year. However, participants covered by FERS should structure their investments so they are contributing at least 5 percent of salary throughout the year to capture the maximum government matching contributions. That is not a consideration for CSRS employees because they get no government contributions.

Also next year, the maximum "catch-up" contributions for investors who are age 50 or older and who meet certain other conditions will increase to $5,000 from $4,000 this year.

Those investments, which are above the dollar cap, must be elected separately and are allowed only if employees have hit the dollar cap or if they are contributing at a rate that will cause them to hit that cap by the end of the year. The government does not match catch-up contributions for employees.

Health Insurance Forum

Rep. Thomas M. Davis III (R-Va.) will sponsor an "open season" symposium on the Federal Employees Health Benefits Program at 10 a.m. today at the Ernst Community Cultural Center at the Annandale campus of Northern Virginia Community College. For information, call 703-916-9610.

Diary associate Eric Yoder contributed to this column.