- The Washington Times - Monday, June 14, 2004

Eight of every 10 federal workers and a high percentage of military personnel are investing in the Thrift Savings Plan, the nation’s biggest employer-backed 401(k) plan.

For the majority of working feds, the TSP will provide one-third to one-half of the money they have to spend when they retire.

The other good news is that with the inception of share prices in the TSP’s five funds, more investors can see what the pros have said all along about long-term investments: Buy low, sell high and don’t panic when Wall Street reacts to some bit of news and the press blows it out of proportion.

Persuading people to buy when the market is down and live with a portfolio that loses paper value every day is tough. But now that TSP investors can track their share prices daily, they can take a long backward look and see how bad times have turned into good times.

When share prices ($10 for each share in each of the TSP’s five funds) were assigned, everybody started out with the same value, if not the same number of shares.

As of last week, the value of a share in the international I Fund was worth $13.23, the S Fund of small-cap stocks was worth $12.87, and the C Fund, a favorite of feds that tracks the S&P; 500 index, was worth $12.87 per share. The G Fund, supersafe because it is invested in special U.S. Treasury securities, was worth 42 cents more ($10.42) than its initial price. The F Fund, invested in a bond index, was down to $9.89.

During 2000, 2001 and 2002 when the stock market tanked, the S, I and C funds lost ground, anywhere from 9 percent for the S Fund in 2001 to 22 percent for the C Fund in 2002. The I Fund was down 21.9 percent in 2001.

Many feds moved money from those funds when their unit price was depressed. Most moved it into the G Fund, which never has a losing month or year but grows much slower and less dramatically.

Next year, TSP investors will have a system to help their investing strategies based on the data they input, such as when they will start withdrawing money from their accounts. Officials hope better information will keep feds on a long-term investment course and, with an eye on share prices, prevent them from selling when the value is down and waiting until prices rise to start buying.

Understanding buyouts

There is a lot of confusion about buyouts from feds who want them but don’t understand how they work and how to get them.

First off, Internet rumor notwithstanding, the value of buyouts hasn’t changed since 1993. The maximum payment is still $25,000. After deductions, that is reduced to $16,000 to $18,000.

There are different kinds of buyouts. Some require the agency to pay money into the retirement fund for each buyout taker, and to give up a job slot. Those are expensive and little used.

The so-called “reshaping” buyouts permit agencies to offer a payment (remember, $25,000 is the top gross amount), and to skip any payments to the retirement fund. They also allow the agency to backfill jobs with younger, high-tech and cheaper employees to meet the new needs of the agency. The Internal Revenue Service and Defense Department are using this type of buyout to reshape, rather than retrain, their work forces.

Anybody can ask for a buyout, but it is a management-only decision.

To get the maximum payment and immediate pension benefits, you must be at least age 55 with 30 years service, age 60 with 20 years, or age 62 with five years of federal-military service. If the agency offers you early retirement plus a buyout, then you can leave at any age with 25 years service, or if you are at least age 50 with at least 20 years service. Subtract 2 percent from your annuity for each year before age 55.

Also, don’t wait for Congress to increase the value of the buyout (it isn’t even thinking about it) or to give feds who are under the newer, less generous Federal Employees Retirement System to switch back into the old Civil Service Retirement System. The FERS to CSRS option is a favorite Internet myth. Some of the “news” stories have even used my byline. But they aren’t true. Never were.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]

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