TSP in the Early Days

[Frixxxx]

Stoplight,

Close enough for government work.

You're right FERS was the new deal with TSP being one of the 3 legs. Us CSRS'ers didn't get matching funds. Some of the guys that switched realized too late that it was a bad deal but tried to make the best of it.

And when the government wants to offer you change, be afraid, be very afraid!

[Scout333]

And if its Hope and Change! Be really really afraid!

[uscfanhawaii]

You're right, FERS was the new deal with TSP being one of the 3 legs. Us CSRS'ers didn't get matching funds. Some of the guys that switched realized too late that it was a bad deal but tried to make the best of it.

Oh boy...this is a fun thread! Everyone having their own story. Well, as one who DID switch to FERS, I guess you might be interested in my take on this.
I started in 1982, as a CSRS employee. When FERS was introduced in 1984, the option to switch was given to existing CSRS'ers. As a bonus, if you had less than 5 years in, you got to convert your existing CSRS contributions to FERS, AND got interest on your contributions based on the 'going rates' at the time (which as NASA pointed out were pretty good then...8-10%!). 2 things I really liked about FERS. 1) It was portable. You could take your TSP with you if you left gov't service. CSRS'ers could only take out their contributions or defer taking anything until they were elegible to retire. 2) TSP was your money. You could invest as you saw fit, and it could not be taken away. Pensions are being taken away every day. Thank goodness that CSRS pensions have continued...some state and local ones have gone by the wayside.

The down side was, of course, that the CSRS pension was VERY generous....assuming you stayed in the gov't your whole career to get it. I had worked in private industry before my gov't job and had no idea if I would stay for 30 yrs or not. Portability seemed best. Plus, when I did the calcs based on what a CSRS pension would cost if you wanted to buy one (via an annuity), I came out with about $650,000. I made it my goal to get my TSP up to $1MM. Side benefits include that you could decide if you wanted an annuity or not at retirement, or could do a partial annuity. The thought of leaving some to heirs was also appealing. So the flexibility of the FERS was a real factor. I felt that if I could beat the $650K, I should be able to match the CSRS money, and still have all the other benefits.

So how to get the $650K? I figured equities was the only way. But the FERS switch was agonizingly SLOW. From 1984, it took 3 years for OPM to switch me. 1987. (More on that later.) But remember the 'special deal' for us less than 5 yr employees? That's right, they kept track all those years and when I finally switched, got all that 8-10% interest put on top of my original contributions. The interest was actually way more than the contributions part! From there, I put everything into equities as soon as they would let us. At first, only a portion of our contributions could go into C. ALL gov't matching had to go to G. Slowly they increased the % that could go into equities and then started also allowing matching funds to go into equities, as they were also increasing the kinds of equities they could go into. Every time they increased the allowable % for equities, I put in the max. Eventually, ~1992 or 93?, we had 100% control. I put all allocations and current balance into equities, 33C/34S/33I, and let it ride. And the 90's were very kind to equities! Even with the dotcom bubble burst at the end of the 90's, when my balance went from $300K to $150K, I still stayed 33/34/33 and rode the wave back up with dollar cost averaging. I again got whacked in 2008, and found TSPTalk shortly after. I decided to take more control of my balance distribution, since dollar cost averaging does not work as well when the amt going in is much less than the existing balance. So how have I done, now that I DID stay in gov't for 32 yrs after all?!? My TSP balance is $820K, and I still have a few years to go to make that $1MM. No outside funds were added to my TSP. It's all contributions and matching and growth. So it CAN be done. I am seeing all my colleagues retiring, still under CSRS, and I agree that they are definitely getting a very generous pension. I am happy for them. But I can't complain about my switch. If I drop dead tomorrow before even retiring and getting any of my pension, at least I know my heirs will still get the $820K, and it can be any heirs, not just my wife getting half of my pension. The additional flexibility is there.

Now, if you are still with me, you remember that I promised to give add'l info on why it took 3 yrs for OPM to get me switched. You can imagine that once I decided to switch, I wanted to get on with it! I kept badgering HRO about why it was taking so long. The answer always was that they had to wait for OPM. I was especially antsy because I did not know at the time that they would continue to accrue interest on my interest until the switch was made. Finally I said, even if it WAS OPM, there must be a lot of people who were waiting all this time for their switch to be effective. After all, how many gov't workers are there? 4 million or so? Even a small % would be a lot of people. It was then that they told me that only approximately 400, yeah 4 hundred, not even a thousand, of the 4MM had switched nationwide! What is that.... 0.0001 or 1 hundredth of 1 percent?!? No wonder that OPM put it on the backburner. And what did my co-workers say at the time? 'If it was a good deal for the employee, why would the gov't make it mandatory that all new employees HAD to have FERS?!?'

Well, if you step back and look at all the plusses and minuses, I think you will see that FERS is a pretty good program, but only if you work it to the max. I have been happy with it....even tho I did stay for 30+ years and could have been getting a CSRS pension if I hadn't switched. I am very happy for my co-workers who are now getting a generous pension for their retirement. But FERS CAN be generous as well. TSPTALK can be a BIG help with all kinds of information. I always feel sad when I find some new employee who is only collecting the gov't 1% contribution. They will be hurt when they retire if they don't change their ways. You MUST get the whole 5% matching as a MINIMUM! DON'T leave everything in G! Set you goal HIGH, and keep after it! You CAN do it!

[Cactus]

That's a good point about survivor benefits. Has anyone else compared survivor benefits between CSRS & FERS? I wonder if your wife is a stay-at-home mom that never worked long enough to get her own social security if she wouldn't be better off under FERS? Under CSRS she would get 55% of your pension. Under FERS (todays rules) she would get 50% of your pension, 100% of your TSP, and all of your social security. Even without the TSP it seems she would come out ahead as long as social security survives in its present form. I wouldn't put too much stock in that last part. Any thoughts?

[alevin]

Oh boy...this is a fun thread! Everyone having their own story. Well, as one who DID switch to FERS, I guess you might be interested in my take on this.

But the FERS switch was agonizingly SLOW. From 1984, it took 3 years for OPM to switch me. 1987. (More on that later.) But remember the 'special deal' for us less than 5 yr employees? That's right, they kept track all those years and when I finally switched, got all that 8-10% interest put on top of my original contributions. The interest was actually way more than the contributions part!

At first, only a portion of our contributions could go into C. ALL gov't matching had to go to G. Slowly they increased the % that could go into equities and then started also allowing matching funds to go into equities, as they were also increasing the kinds of equities they could go into. Every time they increased the allowable % for equities, I put in the max. Eventually, ~1992 or 93?, we had 100% control.

Gosh, you're remembering things I hadn't remembered. started in mid86. I recall the 8-10% earnings in G, even have a couple ancient tsp reports documenting. didn't remember that we could only put a portion of tsp into C at first. did remember only C, F, G available for a lot of years. started putting 5% matching in as soon as I had enough to live on as fulltime GS-5 starting in 89. before that, I was still in school most of the year with no income, living off of savings. started putting in 10% as soon as got promo to GS9 the instant I went fulltime permanent, done with school (was still finishing degree on the side for first year fulltime as a 5 in 89. There is a document in my permanent files where I signed in Dec 87 (after I had gone back to school for the winter) saying I willing chose to go FERS vs csrs. even though I had been told I really didn't have a choice. had so little knowledge of pros and cons, and given that jobs were hard to come by in the 80s, and my dad faced a RIF in late 70s very late in his csrs career before he had 30 years in, I thought it safer to have portability due to being uncertain my fed career would last 30 years.

life experience up to major decision points will always influence the decisions one makes going forward. do I regret signing to go FERS? I made the best decision I could at the time, with the information I had available to me at the time. We all do. 27.5 years later, I just want to get the 30 in, and make a new decision at that point whether I want/need to stick around longer or not. My uncle continued working much longer than initially planned, private industry, due to his wife needing in-home care, consequence of 10 long years of progressive brain tumor surgeries during his later career.

[uscfanhawaii]

That's a good point about survivor benefits. Has anyone else compared survivor benefits between CSRS & FERS? I wonder if your wife is a stay-at-home mom that never worked long enough to get her own social security if she wouldn't be better off under FERS? Under CSRS she would get 55% of your pension. Under FERS (todays rules) she would get 50% of your pension, 100% of your TSP, and all of your social security. Even without the TSP it seems she would come out ahead as long as social security survives in its present form. I wouldn't put too much stock in that last part. Any thoughts?

Good point! Or what if you died at the same time, or around the same time, as your spouse. The kids, if any, would be out of luck! The CSRS generous pension is only good if you stay in gov't service a long time, AND you live a long time after retiring. For me, I still like to have the 'bird in the hand'.

[PessOptimist]

Good post uscfanhawaii. In 17 years I have never met anyone who would admit they swtched to FERS back in that day. I do know a couple who left govt service under CSRS but got their retirement contributions refunded so when they came back they were FERS. (I may not have that exactly right but they worked for the govt many years the second time and are under FERS)


Thanks for sharing your story and thanks all others for the inputs.


PO

[Scout333]

PO, If they had over five years service before returning they probably would have been CSRS Offset employees with the option to elect FERS. I was in those circumstances and kept the CSRS Offset plan which is a hybrid plan which has good features from both the CSRS and the FERS plans. Does not receive TSP matching contributions however.

[uscfanhawaii]

Good post uscfanhawaii. In 17 years I have never met anyone who would admit they swtched to FERS back in that day. I do know a couple who left govt service under CSRS but got their retirement contributions refunded so when they came back they were FERS. (I may not have that exactly right but they worked for the govt many years the second time and are under FERS)
PO

Stoplight also said he never heard of anyone who voluntarily switched back when FERS first came out! And I have only met one other. So I guess the 1 hundredth of a percent estimate is about right! I still get ribbed about it from my co-workers who never switched, but my TSP balance is WAY bigger than theirs. Difference is that it is gravy for the CSRS'ers, but for me it's my bread and butter!!

[Stoplight]

Stoplight also said he never heard of anyone who voluntarily switched back when FERS first came out! And I have only met one other. So I guess the 1 hundredth of a percent estimate is about right! I still get ribbed about it from my co-workers who never switched, but my TSP balance is WAY bigger than theirs. Difference is that it is gravy for the CSRS'ers, but for me it's my bread and butter!!

USCFan,

Your posts are excellent ! It sounds like you did all the right things, and things have worked out for you. I honestly never thought about the whole survivor/heirs issue differences, but for those with kids, that makes a difference !

I'm surprised none of the CSRSers have answered my question about paying in to Social Security. I guess most people worked their 40 quarters or whatever to qualify for SS anyway, before or after working for the Feds, but I would assume (and you know what they say about that !) that their earnings history, and thus, SS payment, would be lower.

Although I had no choice, I certainly think FERS ain't a bad deal ! Like you, I always contributed the max (except for the last few years), including catch-up. It scares me to death when I read about folks now who don't contribute to even get the match, and only take the 1% automatic...WAKE UP, PEOPLE ! It's FREE MONEY !!!
Of course, they are not reading a site like this anyway...

When I was crunching the numbers, trying to decide if I could "afford" to retire at age 57, I was curious to see how things stacked up between if I had been CSRS, vs. FERS....glutton for punishment, I guess Anyway, I came up with the following :

- My monthly FERS pension is approximately 55% of what my CSRS pension would've been.
- Add in the SS "Supplement" (until I reach age 62) and SS after I reach 62, and my monthly income is ~ 82% of my CSRS pension
- I had a little over $500K in the TSP when I retired, so withdrawal from that can easily make up the 18% difference, and then some !

I guess we've wandered from the OP's original topic, but the discussions have been interesting to me !


Stoplight...

[nnuut]

Don't forget that CSRS folks also have TSP, no matching but it should be counted as retirement income. I do get Social Security but it was cut 60% because I had less that 30 years, it's prorated starting at 20 years I only had 18.

[Stoplight]

Don't forget that CSRS folks also have TSP, no matching but it should be counted as retirement income. I do get Social Security but it was cut 60% because I had less that 30 years, it's prorated starting at 20 years I only had 18.

Nut,

Agree...

TSP, IF y'all chose to participate, right ? Sounds like a sweet deal to me !!!

All...I posted a continuation of this discussion over in the "Retirement" thread, for those inclined to continue following the discussion !


Stoplight...