- The Washington Times - Tuesday, March 11, 2003

The first and probably last fed to (legally) earn a million bucks while working for Uncle Sam was an Internal Revenue Service employee. He did it the easy way: He was the first $1 million winner on a popular TV quiz show.
Your odds of making a million working for the government are not good. But there are ways you can be worth a million by the time you retire. It can be done by taking advantage of investment options and compounding.
The way to have a financially happy retirement, a wise man once said, is to have slightly more money than all your neighbors and friends. So how do you do that?
For federal employees 50 and older, the best thing to do this year is take advantage of the $2,000 catch-up contributions to the Thrift Savings Plan. Beginning in July, they can have extra tax deferred TSP contributions taken from their paycheck.
The more you invest, the more you will have later, especially if you let compounding work for you.
Dennis Gurtz, a financial planner with American Express Financial planners in Bethesda, loves the catch-up contributions feature.
"If you invest $2,000 at 8 percent at age 50 and withdraw it at age 70 that's $9,300, which is better than a kick in the head," Mr. Gurtz says.
"Next year the 50-plus crowd can invest another 50 percent more (up to $3,000 in catch-up contributions) … and they will be getting a tax break" because TSP contributions lower your taxable income," he notes.
Pay raises, even 1 percent, are not to be sniffed at, because of compounding and the federal retirement system.
Any pay raise boosts the value of a feds' eventual annuity, which is based on salary and length of service. And the annuity is a lifetime benefit (for you and spouse) that is protected from inflation.
Mr. Gurtz said for an employee earning $60,000 today that extra 1 percent will be worth tens of thousands of dollars thanks to compounding over a full career.
So how much will you need when you retire? The short answer is all you can get.
"I tell my clients there is good news and bad news … that they could live to be 80 or 90, and be retired for as long as they worked," Mr. Gurtz said.
So what kind of income will you need 20 or 30 years from the time you retire? Think back to what a car, house or gallon of gas cost when you started working. Then, start saving.

Future pay raises
Many feds are nervous about the White House proposal to implement a pay-for-performance system in government.
Under the plan, feds would get a flat 2 percent raise next year (with no locality adjustments) and be eligible for merit raises of up to 5 percent from their bosses. Within-grade raises would continue, at least for the time being.
Some things to remember: Presidents Carter, Reagan, Clinton and now Bush, proposed reforming the federal pay system. Nothing happened.
The only reform came when George H.W. Bush (the president's father) and a Democratic Congress enacted the landmark federal pay act of 1990. It was designed to close the "gap" between government and industry. It was due to go into effect in 1993, but President Clinton rejected the plan.
So, there has been only one federal pay-reform plan in the last 30 years. And it's never worked. There must be a message there.

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