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TSP contributions and investing should be top of mind when you begin your federal career in order to achieve big returns. Image: L.O.N Dslr Camera/Shutterstock.com
Federal employees who are members of the Thrift Savings Plan (TSP) have the potential of becoming a TSP millionaire, with a fat nest egg in addition to their CSRS or FERS annuity.
As of November 2022, there are 65,000 TSP millionaires. But why do they only makeup 1% of all federal employees and federal retirees? The reasons break down to two main habits: “Procrastination” and “Fear”. During my 36-year career, I have worked at four different federal agencies and I have heard the same thing over and over from co-workers.
Here are the examples of Procrastination (making excuses not to contribute): I want to pay off my school loans. I want to save for a house. I want to travel and I want to save for my wedding. Paying yourself first is the employee salary contribution. If you make a contribution to the TSP of at least 5%, you receive the 5% percent government employer matching contribution. The government basically gives you a 5% salary bonus that you can save for your retirement, but you need to make your 5% contribution to guarantee the receipt of it. This statement would always get my co-workers attention.
Here are examples of Fear (I will only invest in the G Fund): I do not want my balance to decrease even one dollar. The market will soon experience a recession. And the other TSP funds are too volatile. I completely understand their concerns, but many of my co-workers fully understood the power of investing and they still only chose the G fund. Investing your entire career in the G Fund will only provide you with a balance of approximately 250k. However, taking greater risk will generate bigger rewards.
TSP contributions and investing should be top of mind when you begin your federal career. An employee who earns 50,000 per year and contributes 2,500 dollars with a 2,500-dollar match from the government can reach the TSP millionaire dollar mark in 25-30 years by investing aggressively. If your salary is 75,000 dollars or 100,000 dollars per year, you can reach the TSP million-dollar mark in a shorter time span. And there are many TSP multi-millionaires, who continue to invest aggressively during the latter part of their careers and into retirement.
Employees need to be educated that if they invest during their federal careers, they have the opportunity to become a TSP millionaire. No one is educating their staff on this important benefit. Agencies bring in financial people during their annual conferences who are only trying to motivate employees to move their TSP to their company or purchase annuities. The government can bring a TSP expert to educate their employees and show them how important their TSP is for their retirement.
Abraham Grungold is a retired federal employee with 36 years of federal service, and through his company AG Financial Services he helps federal employees with their TSP and federal retirement planning and decisions. Mr. Grungold has written over 50 articles regarding the TSP and FERS retirement and been a guest on several podcasts with the Federal News Radio and Government Executive Magazine.
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