Opposite George Costanza

Opposite George Costanza

“If everything I’ve done is Wrong… then the Opposite must be Right”.


This is the time of year when people make (or break) New Years’ Resolutions.   For those who follow Tim Ferriss, there is an alternate implementation of the Resolution where you instead do a year-end review, tabulate what was Positive and Negative in the past year, then resolve to avoid the biggest Negatives in the coming year.

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Here’s an interesting retirement case study for you.

Let’s take a former active duty veteran who resigns after 7 years of service and  enters the civilian workforce in the year 2000.  This purely hypothetical employee in turn contributes to a Defined Contribution plan (401k or TSP)  during his years as a working stiff.  He or she contributes to the maximum ‘match’ amount of the employer’s plan-  That is, when the employer matches up to 50% of contributions on up to 10% of salary, he contributes 10%.  When he is a Federal Employee, he contributes 5% to get the most of the TSP automatic and matching contributions (5% of salary).  (Stop me if you’ve figured out who the hypothetical employee is by now).

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Thrift Savings Plan Guidance for Federal Furlough

Thrift Savings Plan Guidance for Federal Furlough

 

Recently the WSJ posted an article about all the bookkeeping, tax filing, legal, and administrative fees necessary to operate a company’s 401(k) program on behalf of its employees.  This, by the way, is on TOP of the expense ratios charged within the mutual fund investments available inside the Plan.
If you work for a small company, these administrivia fees add up (and NOT in your favor).  Vanguard – the low cost provider of all things investing- estimates these charges as totaling 0.25% in a very large company plan, and 0.58% for a smaller company plan.

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