The Millionaire in Your Carpool

Is there a millionaire in your carpool? Probably not because odds are millionaires don't carpool.

Still...

A growing number of TSP investors now have accounts that are worth well over one million dollars! But if you don't, don't feel bad about it. You haven't done anything wrong and you didn't miss any good investment bets.

The TSP millionaires are all people who transferred money - from outside IRAs and 401(k) plans - into the federal 401(k) plan. In fact at least one person moved $1 million into his account shortly after joining the government. Reason: The safety of the G-fund and the low administrative fees of the federal TSP.

While nobody has yet earned (as opposed to transferred in) $1 million within the TSP, a growing number of federal investors now have accounts worth more than $500,000.

In fact consider this e-mail I got yesterday morning:

Hey, Mike, Didn't you sometimes mention, in your Washington Post column, the TSP balances of people you knew in the Federal Government? That always encouraged me to max out my own contributions. Now, after 17 years with HUD, my own balance is approaching $400,000 in the L 2040 fund. Not bad for a Government worker! Thanks.

Not bad indeed. In fact great! Imagine if the HUD employee had been investing the max from day one of the startup of TSP. Which he couldn't because he joined the government three years after the TSP was launched. Obviously he maxed out, and invested in stocks as opposed to the safer but more conservative alternatives.

The TSP will celebrate its 20th birthday this month. When it started it had only three funds (C, F, and G) and the rules as set by Congress encouraged most people to put most of their money into the super-safe G-fund. For years it took anywhere from two to six weeks to make fund-to-fund transfer. It made day trading tough.

Now the TSP has been liberalized and expanded. New funds (the S and I) were added, along with the Lifecycle L-funds. For a look at how they work, click here.

If there is someone in your office who isn't investing in the TSP (several hundred thousand people fit in to that category,) you may want to send them this column. If they are FERS employees who are not investing, remind them they are refusing a tax-deferred pay raise (the government contribution) of 4 percent.

Postal Buyouts

Our column on rumors-making-the-rounds prompted two readers to say they have heard through the grapevine that the U.S. Postal Service is set to offer buyouts to employees under the CSRS system. Not true says the USPS and the American Postal Workers Union.

Back in the 1990s when the USPS did offer a buyout it turned out to be a disaster. Many skilled employees left and had to be replaced. In effect USPS lured people into retirement (on lifetime pensions) and then had to back-fill their jobs. Bottom line: It is unlikely the USPS will ever again be allowed to offer buyouts. Early retirements, yes. But buyouts: Not likely!