A new employee might find it hard to scrape up the 5%, but if they do, they’ll thank themselves once they reach the age of retirement. Image: Shoaib_Mughal/Shutterstock.com
By: John GrobeWouldn’t it be nice to get money just for the act of showing up? Well, all FERS employees get just that! This money is called the agency automatic 1% contribution and is made whether or not the employee is contributing to the Thrift Savings Plan. Think of it – 1% of your salary put in your TSP just because.
There is a three-year vesting requirement for the agency automatic 1% contribution. That is, an employee must remain a federal employee for at least three years before the money actually belongs to them. Those who leave prior to three years forfeit the contribution, and the forfeited money (and any earnings attributable to them) is used to reduce the already low TSP expenses.
Interestingly enough, an employee who dies before having served for three years is automatically considered vested in all the money in their account, including the agency automatic 1%.
Slightly north of 90% of FERS employees contribute their own money to the TSP and they can receive even more government contributions up to an additional 4% of their pay. For the first 3% of pay that they contribute, they receive a dollar-for-dollar match from Uncle Sam. For the next 2%, the match is fifty cents on the dollar.
So if a FERS employee (or member of the uniformed services covered by the Blended Retirement System (BRS)) is contributing 5% of their pay, so is their agency or branch of service. There is no reason why a TSP participant should not be contributing 5%.
A new employee might find it hard to scrape up the 5%, but if they do, they’ll thank themselves once they reach the age of retirement. Two of the most common comments that I hear from participants in my pre-retirement seminars are: 1) “I wish I had known about this at the beginning of my career”; and 2) “I wish I had started saving earlier”.
Don’t be the person who says the above things. Start right now and “strive for five” in your TSP contributions.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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