In spite of, or maybe because of, the ups and downs of the stock market, a record number of federal-postal-military personnel are investing in the federal Thrift Savings Plan. The TSP, the government version of a 401(k) plan, now has 3.9 million account holders. Last year it picked up 130,000 new investors.

The figure includes people who are currently investing via payroll deduction as well as several hundred thousand former feds, both retirees and people now working in the private sector, who left their money in the TSP.

Many outside groups, from giant IRAs to companies offering IRA mutual funds, are anxious to get retirees and ex-feds to rollover their TSP accounts into their funds. In some cases that might be a good move. It would allow investors more fund options, and give them somewhat easier access to their money should they want to cash in.

But the TSP has two features that no private investment option can offer:

1. The never-has-a-bad-day G-fund. The G-fund is made up of special U.S. Treasury securities that are not available to the general public. In the 20-year history of the TSP, it has never posted a loss. Its rate of return is set monthly by the government, which also guarantees the funds in that account.
2. The lowest administrative fees in the mutual fund business. Lower by a long shot. Many financial planners say the low-fees mean more money stays in the accounts of individual investors rather than going to fund-managers. John Bogle, father of the index-fund concept and founder of Vanguard, told FederalNewsRadio that the TSPs fees can’t be beat.

When it comes to age, the federal government tends to hire older first-time employees than the private sector. The average age of a new hire in government today is about 32. That’s true, in part, because of the professional, administrative (as opposed to clerical) nature of the federal government. It doesn’t operate fast-food franchises or retail operations that take people right out of high school.

Many, if not most, newly hired feds have had previous jobs in the private sector. That means many of them are aware how 401(k) plans work, and presumably they recognize the generous match (the equivalent of 5 percent of salary) the government makes available to most investors. Workers under the FERS system automatically get a 1 percent match, and that can rise to 5 percent if they put in at least 5 percent of salary.

As of May, just over 85 percent of all FERS employees (who make up the bulk of the workforce) were contributing to the TSP.

A Washington-based financial planner, who sells his own mutual fund family said “I would turn that 85 percent participation rate figure around. It’s good, of course, but my question would be what’s with the 15 percent who aren’t in the TSP? Don’t they like free money?”

Nearly Useless Factoid

“By the end of July lemons will have almost completely run out.” Why this is a nearly useless factoid: in Europe. Not here.

To reach me: mcausey@federalnewsradio.com

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