TSP Millionaires & Record Rollovers

Federal workers are rolling outside money into their Thrift Savings Plan at a record pace, says Senior Correspondent Mike Causey, and that includes 75 people wh...

Participants in the federal Thrift Savings Plan last month rolled over a record $66.4 million of their outside, pre-tax retirement nest eggs into the government’s in-house 401(k) plan. That is they took money from retirement accounts they had outside of the TSP and moved them into the government program which is considered the best of its kind in the nation.

The Federal Retirement Thrift Investment Board in March processed 2,700 rollover checks and $66.4 million. For the first three months of 2010 it averaged 2,200 checks and $52.8 million in rollovers.

Last year during the January, February, March time period the TSP averaged 1,678 checks worth $33 million.

Why the surge in rollovers?

“Because it’s the best freaking deal in town,” said a financial planner (and former fed) who had monitored the TSP since it was created. He did not want to be identified because his firm sells mutual funds, and many of its clients are federal workers or retirees.

“But you can’t beat it (the TSP) with the proverbial stick,” he said. “It charges the lowest fees in the business, meaning the investor gets to keep more of his money. And it’s got the G-fund” which is guaranteed by the U.S. Treasury and never, ever has a bad day.

“The G-fund is safe and is perceived as being safe,” he said, “and during tough times many people retreat to it to preserve assets.” He said he recommends that investors, even after retirement, have money in the stock market “to keep ahead of inflation.” But he said it is hard to convince panicked investors (whose panic may be justified) not to try to time the market. “When you do that you have to be right twice. You have to jump out at or near the top…so you are selling high…and then you have to come back in when the market is at or near rock bottom so you can buy low.” He said not many people do that.

TSP Millionaires

If you are a typical TSP investor, as in “average,” you had about $68,000 in your retirement nest egg as of December, 2009. Most of that money was in the G-fund where nervous investors fled when the stock market started its 2008 nose-dive.

But would you believe that 75 of your colleagues have TSP accounts that are worth $1 million or more? You better believe it, because it’s true.

TSP watchers say that the millionaire accounts are the result of rollovers by people coming into government from very, very high paying jobs. In those jobs they amassed 7-figure retirement accounts which, after comparing them to the government program, convinced them to switch to the TSP.

So who are these people? In many instances they were very rich lawyers who’ve come into government as federal judges.

For more on TSP account balances and the difference between FERS and CSRS investors, click here.

NSPS, What Next?

So how is the rollback from the National Security Personnel System to the GS program going? Many of the people who got top raises under NSPS were managers. What’s the timetable, what the goal? And will people “lose” part of future pay raises? Today at 10 a.m. on our Your Turn with Mike Causey radio show, Jessica Klement from the Federal Managers will talk about the NSPS and also the new National Labor-Management Relations Council.

Medicare & FEHBP

At 10:30 am on Your Turn (today) Dan Adcock and Dave Snell from the National Active and Retired Federal Employees will talk about medicare charges for federal retirees, and NARFE legislative agenda. Listen if you can on www.federalnewsradio.com on your computer or at WFED 1500 AM in the DC area.

To reach me: mcausey@federalnewsradio.com

Nearly Useless Factoid
by Suzanne Kubota

The zipper was invented in Hoboken, New Jersey, the hometown of Frank Sinatra.


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