What if Uncle Sam offered you a 5% pay raise? Even better it’s tax-deferred! Better still you don’t have to rub anybody out, or do anything that illegal, immoral or fattening!

A done deal, a no brainer, right? And yet — every year, in some cases for decades, thousands of federal workers turn down an extra 1%, 2%, 3%, 4% or more contribution from the government to their Thrift Savings Plan account. Why? Because they need the money, or can’t afford it.

They can’t afford to do what it takes to make that incredibly generous offer — by private sector 401(k) standards — a reality. More money going into their TSP account which, thanks to the miracle of compounding, does tremendous things to your account worth and balance. The 5% government match is one reason so many feds earning modest salaries have become TSP millionaires.

So are you one of the smart ones? Consider this worth-its-weight-in gold tip from Abraham Grungold, a full-time fed and popular part-time financial coach. Here’s what he’s telling his clients about the incredible government matching contributions deal:

The TSP haves and the TSP have-nots 

It is hard to believe that there are federal employees who are contributing the maximum to the Thrift Savings Plan and there are federal employees who are not contributing to the TSP.

So, you are a TSP investor and you are contributing the maximum — what else could you be doing? Well if you want to invest beyond your TSP and you have a few extra dollars, Dividend Reinvestment Plans (“DRIP”) investing is a way to go. You contact a company directly and sign up for their Direct Reinvestment Program. You can invest a low as $25 and buy partial shares or full shares for stocks in companies that appeal to you. The fees associated with these investments are miniscule. You can participate in several DRIP programs with different companies such as Coca-Cola, Mobil and many others. You can have a company such as Computershare to handle your recordkeeping paperwork. You can use a broker and put all your investments in one account. Many of the reputable brokerage houses, such as Fidelity and Charles Schwab, are advertising slicing investing, which is a similar method.

Also, this way of investing can be attractive to federal employees who have low wages and just cannot make the dedicated payroll contribution to their TSP. Unfortunately, there are employees who earn $50,000 a year and live in high-cost areas such as New York and San Francisco. These employees who cannot commit to a steady contribution to their TSP can only invest a few dollars here and there and can do so in a DRIP.

Still, the best way to go for low income earners is the TSP. Even if you can only contribute 1%-5% of your salary you do not want to give up on the government matching to your TSP contribution. By not contributing 1%-5% to your TSP, it is like giving up on an annual government salary bonus.

Financial success can easily be achieved; it only takes a little effort. Any questions or comments please contact me on LinkedIn or my Facebook page.

Nearly Useless Factoid

By Amelia Brust

Finnish has what is believed to be three of the longest palindromic words: “Saippuakivikauppias,” which translates to a soapstone seller; “saippuakuppinippukauppias,” a soapstone trader; and “solutomaattimittaamotulos,” the result from a measurement laboratory for tomatoes.

Source: Buzzfeed

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