Suze O on the TSP’s ‘free money’

If your long-time significant other says, “You can’t afford to pass up free money,” chances are you’d roll your eyes. What does he/she know?

If your know-it-all, lifetime-pain sibling says the same thing your reaction is “Duh!” Right? He/she hasn’t had an original thought since 1974.

But if financial planner Suze Orman said the same thing, you would listen up and probably heed her advice. So do it, because she did!

In a recent visit to D.C., the best-selling financial planner and TV host taped a show for WETA. That’s our hometown Public Broadcasting Station. Her audience was a typical Washington PBS crowd: Well informed, well spoken, grateful for advice. Many were federal workers (or retirees). I recognized two people in the audience as people I knew. One from the government, one from the media.


Because she was in a government town, Orman didn’t bat an eye when a questioner in the audience mentioned her TSP. In Omaha or Little Rock that might mean something else. But in a government town — like D.C., or Ogden, Utah; Huntsville, Ala.; or Warren, Mich., TSP stands for Thrift Savings Plan. The $400 billion federal 401(k) plan for civilian and military personnel.

Most TSP investors (those under the Federal Employees Retirement System) are eligible for a total 5 percent match from Uncle Sam. You put in 5 percent and your agency matches you dollar for dollar on the first 3 percent and 50 cents on the dollar for the remainder.

That’s what Orman meant by free money. Tax deferred free money.

She also said that in many cases feds would be smart to put some of their TSP money into a Roth IRA. Unlike regular TSP contributions, which are funded with pre-tax money, the Roth is funded with after-tax dollars. So, when you withdraw the money — all of it — your contributions plus earnings, are tax-free. For life.

So what about the TSP? The regular and Roth options — what’s in it for you? Today at 10 a.m., on our Your Turn radio program we’ll be talking with Arthur Stein. He’s a financial advisor, who helps active and retired feds manage their investments and prep for retirement. He’ll also discuss proposals to change the investment mix in the Lifecycle funds, and the possibility of an “emerging markets” fund and an “international small cap” fund

Later on in the show we’ll talk with Federal Times writers Nicole Blake Johnson and Andy Medici, about a possible major downsizing in the Postal Service, the White House security clearance review and new cybersecurity standards in acquisition.


Compiled by Jack Moore

In 2010, the most sophisticated supercomputer still performed about 83 times slower than a typical cat’s brain. So, we still have at least a few years before we need to be concerned about the computer overlords.

(Source: Mental Floss)


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