'Best' 401(k) plan is at hand

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Several national magazines and financial columnists have rated the "best" 401(k) plan around. Guess what it is? The TSP.

The Thrift Savings Plan is available only to government employees and uniformed military personnel. It was designed by Congress -- and includes members of Congress -- to ensure that federal and military personnel, who get inflation-indexed pensions for life, will have enough money to live well in retirement.

Analysts say that investments in the TSP over a career will provide one-third to one-half of a federal retiree's money.

So what makes the TSP so good? A couple of things:

• Contributions in the TSP, like other 401(k) plans, are not taxed until investors start making withdrawals.

• The government offers the majority of workers (post-1993 hires under the new Federal Employees Retirement System) an automatic 1 percent match, and will contribute another 4 percent to their account if they put in at least 5 percent of their own money. A total 5 percent match is rare in most private-sector 401(k) plans. And many don't offer any employer match.

• The TSP offers the G Fund, a super-safe, inflation-proof investment that is available only to federal and military investors. The G Fund invests in special Treasury securities whose rate is set monthly.

• A couple of years back, as first reported here, a federal worker transferred $1 million from a private-sector retirement plan into the TSP. That's faith.

• The TSP charges the lowest administrative fees -- the amount they charge you for handling your account -- in the business. The fees are about half the amount of the next lowest charge in the private sector. What that means is that at the end of the day you will have tens of thousands of extra dollars in your account because of what the TSP did not charge you.

• Senators, political appointees, CIA agents, astronauts, postal workers, generals, admirals and privates are part of the TSP. Active-duty personnel and federal and military retirees hold more than 3.7 million accounts.