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Fortunate feds: Job stability, retirement and health benefits
Monday - 7/2/2012, 2:00am EDT
While he's on vacation, Senior Correspondent Mike Causey has turned over his column to a few regular readers to share their thoughts. After all, nobody knows the government better than the folks who work for it...
I regularly listen to federal employees comparing the salary and benefits they receive to those of the private sector ("Aren't we aggrieved!"). I am now wrapping-up my third or fourth or fifth (depending how you count) stint in federal employment. Having left federal employment several times and being employed in substantive positions in the private sector, I think I can compare federal vs. private sector employment with some experience.
We frequently hear of private-sector employees receiving enormous salaries and outlandish bonuses, and the stories we hear are true, but they are the exception; that's why they are newsworthy. Also, we've got to keep in mind that all private- sector companies are not the same. Certain industries, companies and occupations do pay more, but there are a myriad of small companies that are struggling to make ends meet and they do not pay as much as Morgan Stanley or Bain Capital! And, I don't believe that Donald Trump could afford his hairdresser's annual tab on a GS salary. In my experience, federal salaries and benefits reflect an average of what is paid in the private sector.
As for benefits, here's what I consider some of the most important:
- Feds have a solid retirement plan! Both CRS and FERS employees
contribute to their retirement "accounts." FERS employees do receive a lesser
annuity, but this is partly offset by Social Security income. FERS employees
also receive a federal match to their TSP contributions and herein lies a kicker
— you've got to contribute the maximum in order to get the full federal
match. This has the upside potential of great growth however, this is also common
in private sector plans.
- Feds have the best investment plan going — the TSP! It is
wonderfully designed to be simple (KISS - Keep It Simple Stupid) and has the
lowest fees in the financial world. At 2.5 basis points (25 cents per $1,000),
it's the least expensive in the industry. It is based on Index Funds which track
the equity and bond markets and are not subject to speculative choices by either
fund managers or financial trends. Remember several years ago when folks were
clamoring for a Real Estate Fund in the TSP? Well, the bubble has burst, as
demonstrated in Las Vegas, Phoenix and Florida. When you consider that most
active fund managers fail to consistently beat the indexes but charge higher fees,
you are better off with simple low cost index funds.
Some have called for letting them invest TSP deductions in individual stocks. Besides increasing the costs, individual stock picks require careful analysis and decision-making. Think you are smarter than the average investor? Consider those folks who were Bernie Madoff and Facebook investors! In 1966, I bought six shares of a small company for $21 per share. I sold it nine months later for $29 per share figuring it had made its run. The company was Berkshire Hathaway which now sells for $120,000 per share! Don't follow my financial advice.
- Feds have a magnificent health benefits plan! Some private employers
offer company-paid health insurance, but this can be limited to the employee and
not the family. Also, in many cases, the employee cannot take these benefits into
retirement. We have a number of health plan options to choose from, can take the
plan into retirement, can change the plan each year and, the government
pays 72% of the cost.
- Feds enjoy greater employment stability than private sector employees! Layoffs due to economic downturns rarely, if ever, happen. RIFs are infrequent, even with the periodic re-organizations that we go through. You can't get fired just because a new boss comes in and decides to reorganize or, doesn't like you or, thinks you're not a good match for the future. If you think a higher salary is worth some of that uncertainty, just wait until you spend 1 or 2 years unemployed following a company re-organization. Hopefully you saved that higher salary and bonuses because the bank and grocery store don't care how smart you are - they just want the monthly mortgage check!