Tax-deferred pay raise? No thanks!
Monday - 5/18/2015, 2:30am ET
Although better trained and better educated than the average American worker, federal employees outdo their private sector counterparts when it comes to wasting money.
Every two weeks, tens of thousands of federal/postal workers leave tens of millions of dollars on the table. The money not taken is the matching contributions Uncle Sam offers FERS employees. The vast majority of active federal workers are under the FERS retirement system.
Data from the Federal Thrift Investment Retirement Board shows that 27 percent of FERS employees are not contributing the full 5 percent amount of salary into the TSP. By putting in 5 percent of their own, FERS workers would get a 5 percent match from Uncle Sam. That amounts to a 5 percent tax-deferred pay increase, which goes up each time feds get a raise for life. A growing number of private sector firms have eliminated or downsized their employee 401(k) plan. And many that once offered some kind of match no longer do so.
By contrast, about 25 percent of all American workers who have 401(k) plans with an employer match don't take advantage of them. That estimate is based on a savings study of 553 companies with 4.4 million 401(k) participants. The study, by Financial Engines, estimated that the employees short-changed themselves an average of $1,336 per year, for a total of $2.4 billion annually.
That, like the money left on the table by feds who don't contribute enough to get the full-government match, is a ton of money. Free money that people have declined.
Studies show that TSP participation rates dropped during the recession but have been rebounding. Many lower-income workers feel they simply can't contribute the full 5 percent amount necessary to get the full amount.
Despite the large number of feds who are missing out on the full match, overall investors have done well. Slightly more than 1.4 million account holders now have TSP balances worth between $50,000 and $249,999. Imagine how much bigger they would be if an additional 5 percent match (from the government) was included.
There are also 21,486 (as of last month) with accounts in the $750,000 to $990,999 range. Plus 4,167 with account balances ranging from $1 million to $4 million.
For another look at key TSP numbers, click here.
And if you are a FERS employee and you are NOT contributing the full 5 percent, to qualify for the 5 percent match, you might want to have a talk with yourself about why not.
Posted by: sarah_oz@yahoo.com
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (1) |
Belum ada komentar untuk "[TSP_Strategy] Get Your Tax Deferred Pay Raise"
Post a Comment