- The Washington Times - Tuesday, November 14, 2006

Do you realize that nearly 300,000 federal workers refuse a 4 percent tax-deferred pay raise annually?

The feds — mostly in their 20s and 30s — failed to enroll in the government’s 401(k), the Thrift Savings Plan.

Participants in the Federal Employees Retirement System who invest at least 5 percent of pay qualify for a 4 percent tax-deferred match from the government, plus the automatic 1 percent match they get whether they sign up and invest or not.

The 265,000 non-investors are doing two things wrong:

• They are rejecting what amounts to a guaranteed 100 percent first-year return on an investment.

• They are losing a career lifetime of investing the maximum, and getting a total match of up to 5 percent from their employer, by doing nothing.

Between July and September, the value of the TSP grew from $186 billion to $194 billion. That includes increased contributions but also the big jump in the stock market during that period.

Investors have $70 billion each in the S&P; 500 stock indexed C Fund and another $70 billion in the safe G Fund, which is made up of guaranteed U.S. Treasury securities not available to the general public.

The C Fund represents the 500 largest publicly traded U.S. companies. The S Fund, with $14 billion in TSP investments, represents most of the rest of the U.S. stock market. The indexed I Fund, invested in 21 nations, has $16 billion. The F Fund, which tracks the bond market, has $10 billion in TSP investments.

A growing number of investors are choosing one of the L (life cycle) Funds, which are targeted portfolios with a mix based on when you, the investor, say you intend to start withdrawing your TSP account money.

Bottom line: If you know somebody who isn’t taking full advantage of the TSP — either out of ignorance, indifference or because they think they can’t afford it — give them the financial facts of life. They will thank you someday.

Mike Causey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or mcausey @federalnewsradio.com.

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