There is no such thing as too much money in the Thrift Savings Plan. Image: Andrii Yalanskyi/Shutterstock.com
By: John GrobeI’ve heard lots of questions over the many years I’ve worked in the area of retirement and financial education and the most common one is – How much money should I have in my TSP?
There’s a one-word answer to that question: More!
There is no such thing as too much money in the Thrift Savings Plan.
If you want your TSP balance to be able to generate an inflation-indexed annual income of $10,000, most financial planners will suggest that you have a $250,000 balance at the time you retire.
If you extrapolate this number, you can see that if you want to get $40,00 a year, you’re shooting for a $1,000,000 balance.
These numbers are based on the “4% rule”. Financial planners using calculators that give the odds of running out of money in 30 years (called “Monte Carlo Simulators”), have found that 90% of the scenarios generated by the calculator will result in an individual still having money remaining at the end of 30 years if they begin their withdrawals at a 4% rate and make annual inflation adjustments.
During the last decade of low returns on many investments, some advisors even suggested lower rates of withdrawal.
There’s no reason to throw up your hands and say, “I’ll never reach a million-dollar balance in the TSP, so why should I try?” If you start now and contribute as much as you can to the Thrift Savings Plan, you’ll end up further ahead than if you give up. Remember, time is on your side.
Speaking of time being on your side, I recently ran across a clip of the Rolling Stones performing this early hit on the Ed Sullivan show in 1964. If you had invested $100 in the Standard and Poor’s 500 (the index tracked by the TSP’s C Fund) in 1964 and never invested another penny you would have $27,993.51 today assuming that you had re-invested all dividends. Time truly is on your side.
Did you know that roughly 70 percent of the United States Gross Domestic Product (GDP) is due to consumer spending? It’s you and I who keep the economy humming along; we are the “job creators”.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
How Not to Lose Your Federal Insurance at Retirement
Report Describes Background, Impact of ‘Offset’ and ‘Windfall’ Provisions
TSP Funds Surge Higher in February
What TSP Millionaires Do That Others Don’t
Biggest Social Security Myths That Federal Employees Fall For
The 1st Year of Retirement Can be Rough; Do These 3 Things to Prepare
Federal Retirement Red Flags to Avoid
Best States to Retire for Federal Retirees
FERS Retirement Guide 2024
FAQs
There's a one-word answer to that question: More! There is no such thing as too much money in the Thrift Savings Plan. If you want your TSP balance to be able to generate an inflation-indexed annual income of $10,000, most financial planners will suggest that you have a $250,000 balance at the time you retire.
What is a good amount to have in TSP? ›
Therefore, 5% of your basic pay is the absolute minimum you should contribute to collect the full agency matching contributions. If you are contributing less than 5% of your basic pay, you are missing out on free money.
How much should you have in your TSP by age? ›
For example, if your salary is $50,000 per year, you should target to save $50,000 by age 30, $150,000 by age 40, $300,000 by age 50, $400,000 by age 60, and $500,000 by age 67.
What should my TSP allocation be? ›
Here's the ratio we recommend for your portfolio: 80% in the C Fund, which is tied to the performance of the S&P 500. 10% in the S Fund, which includes stocks from small- to mid-sized companies that offer high risk and high return. 10% in the I Fund, an international fund that invests in stocks from overseas companies.
What is the average TSP balance for military members? ›
To compare more accurately, at the end of 2022, the average TSP balance for a FERS employee was $157,325. The rate of participants taking advantage of the full match reached another record for 2023: 86.8% for FERS. This is up from 79.4% in 2019.
How much should I have in my TSP by age 35? ›
So to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target. By age 50, you would be considered on track if you have three-and-a-half to six times your preretirement gross income saved.
What is the highest TSP balance ever recorded? ›
The largest TSP account balance is now $8,007,210. This is up from $7,226,814.30 at the end of September and from $7,170,226.61 at the end of March. The average years of contributions to the TSP among the $1 million and up account balances is 28.91 years.
How much should I have in my TSP by age 50? ›
Age 40—three times annual salary. Age 45—four times annual salary. Age 50—five times annual salary. Age 55—six times annual salary.
Can I retire at 60 with 300k? ›
£300k in a pension isn't a huge amount to retire on at the fairly young age of 60, but it's possible for certain lifestyles depending on how your pension fund performs while you're retired and how much you need to live on.
What does Dave Ramsey recommend for TSP? ›
Dave Ramsey's advice is to save 5% into the TSP to get the full match, then max out a Roth IRA, and then put more into the TSP if you are able to save more after that.
Strong gains in the stock-based TSP funds in 2023 pushed the average account for federal employees and retirees back to roughly the levels before the losses of 2022, with the average $175,700 for those under FERS and $197,300 for those under CSRS at year-end 2023, according to figures released at the January meeting of ...
What is the most aggressive fund for TSP? ›
The conservative funds are the G and F funds and the aggressive funds are the C, S, and I funds.
How much should I have in my TSP by 40? ›
The following savings guidelines can be a starting point for evaluating your progress toward a fully funded retirement. These rules of thumb say you should have saved ... 2 to 3 times your income by age 40. 3 to 4 times your income by age 45.
Do I need to report my TSP on my taxes? ›
With traditional TSP, your contributions go into the TSP before tax withholding, which can potentially lower your current income tax rate. But when you take money from your traditional TSP, you'll pay taxes on both your contributions and earnings at the income tax rate of the year you make the withdrawal.
Is TSP good or bad? ›
The TSP is not all bad in retirement. The TSP certainly does lack some flexibility in retirement but its greatest strength is SIMPLICITY. Fewer options often means fewer ways to make a mistake. You'll have to decide if you value simplicity or flexibility when choosing where to keep your retirement money.
Can you put in too much money in TSP? ›
If you work for more than one employer in the same calendar year, it's possible to contribute too much and exceed the IRS limits. If you over contribute, you may request a refund of the excess amount from the TSP. For a limited in January each year, we make the Refund Request Form available.
What percentage of people are TSP millionaires? ›
Currently, about 1.4% of TSP participants have portfolios worth a million dollars or more.
Should you max out your TSP? ›
For example, if you don't have an emergency fund in place, you'll want to get that built up (6-12 months of expenses) before you max out the TSP. Note: You will always want to contribute at least 5% of your salary into the TSP to get the match even when you are doing things like building your emergency fund.
There is no such thing as too much money in the Thrift Savings Plan. Image: Andrii Yalanskyi/Shutterstock.com