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TSP account averages nudge 6-figure mark
Monday - 10/28/2013, 5:59am EDT
When it comes to investing and saving for retirement, federal and postal workers don't need any lessons.
Currently 77,948 federal civil servants have Thrift Savings Plan (401k) accounts that are worth $500,000 or more. That's 1.67 percent of the total TSP account holders. As we reported on Sept. 18, there are 929 TSP participants whose account balances exceed $1 million. To find out how one of them did it, click here.
During the economic downturn many, if not most, feds continued to invest some or all of their TSP contributions in the higher-risk, higher-reward C, S and I stock funds. The C and S funds cover most of the U.S. stock market. The I-fund is invested in international stocks. When the stock markets tanked, a lot of people switched into the super-safe (aka super-dull) Treasury securities G- fund. But those who continued to buy shares in the stock funds during the recession got them at sale prices.
Currently, the average TSP account balance for workers under the FERS program is $99,056, with $3,090 in Roth accounts. In June of 2011 that FERS average was $81,144.40.
The current average for CSRS workers is $98,416 with $5,236 in a Roth. In mid-2011 that average was $81,875.95.
For members of the uniformed military, the current average balance is $25,604 (Roth $1,684). Two years ago that average account was worth $12,685.42. That's a tribute to the various services who have generally done an excellent job explaining to their generally very young, modestly paid ranks the value of investing. Especially in the Roth option.
FERS employees who invest at least 5 percent in the TSP get a matching 5 percent (the equivalent of a tax-deferred pay raise) from Uncle Sam. CSRS employees and military personnel do not get any matching contributions.
Many of the TSP millionaires are people who built successful careers in the law, medicine or in the private sector. When they joined the federal government — as judges, political appointees or elected officials — many transferred their 401k or retirement plans into the TSP. In addition to the option of the super-safe G-fund, the TSP has the lowest administrative fees in the mutual fund business. Meaning you get to keep more of what you invest and earn.
There are, however, a growing number of TSP millionaires who did it the hard way. Through steady investing, taking advantage of any available contributions match. Most also stayed the course during the ups and downs of the stock market, considering the downturns as a buying opportunity rather than a loss in value. For the true story of one of the 939, check out the Federal TSP Millionaire Tells How To Join The Club report. Some people say that it helps to hum the tune to " I Did It My Way" as you read.
Either way, Good Luck!
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