- The Washington Times - Tuesday, March 4, 2003

Federal white-collar workers and active-duty military personnel will get a 4.1 percent raise this year. But people who are retired from the government or the military, or who get Social Security, got only 1.4 percent last month. How come?
The answer is simple, if not satisfactory.
Federal and military personnel get pay raises based on private-sector wage changes, and political and budgetary factors. President Bush started out offering federal workers a 2.6 percent raise this year, then raised the amount to 3.1 percent. Congress boosted it to 4.1 percent.
But retirees federal, military and Social Security are under a system that runs on automatic pilot. It gives them inflation-indexed raises each January. Those increases are big when inflation is high, and not so big when inflation is low.
Last year it was low so the January COLA (cost of living adjustment) for the retirees was only 1.4 percent. Unless living costs jump between now and September, the January 2004 COLA will be low, too.
The upside, if you can call it that, is that something is a lot better than nothing. Most private-sector retirees (those lucky enough to get company pensions) have never had an inflation adjustment. For them, a COLA is something they drink, not spend.
Half a dozen federal agencies have, or will, seek approval from the Office of Personnel Management to offer buyouts to a select group of workers.
Some are especially eager to thin the ranks of the Senior Executive Service (average salary $142,500) so they can realign the dominant white-male culture with more women and minorities, especially Hispanics.
Although buyouts will be authorized for more agencies (with the top amount still $25,000 before deductions) this year, the number of federal workers offered them could be less than 5,000 or 6,000 governmentwide, out of a work force of 1.2 million.
Thrift savings plan shares
Sometime later this year the federal 401(k) plan will express employee/retiree investor accounts in terms of shares.
That will apply to the C Fund (which tracks the S&P; 500 index), the S Fund (an index fund that tracks mid- and small-cap stocks) and the international stock-indexed I Fund.
One way for C Fund account holders to get a rough but good idea of the ups and downs of the S&P; 500 is to check the Vanguard S&P; 500 fund. Its administrative fees are the lowest in the business (although still higher than the TSP's charges) and it gives a sense of what your C Fund account is doing on a day-to-day basis.
Incidentally, most financial planners (as opposed to brokers who get commissions when you sell or trade stocks and mutual funds) recommend against tracking and acting on daily fluctuations in the market.
"When we were kids, we were told not to run with scissors in our hands," one planner said. "For adults in a 401(k) plan, my advice is to be a long term-investor, not a short-term speculator."
Right now, account balances are shown only in dollars. Once shares are assigned, it will be easier for investors to see if they are buying low and selling high.
The TSP is available only to active-duty federal and military personnel. Individuals can keep their TSP accounts when they retire, but they can't join the TSP or add money to their accounts once they have retired.

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