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Federal TSP millionaire tells how to join the club
Friday - 9/20/2013, 2:00am EDT
The secret of success is often not in the tips themselves — buy low, sell high, dollar-cost-average, yadda yada yadda — but on publicity. Catch the eye of Oprah or Dr. Oz, or get the gang on The Talk on afternoon TV to chat it up. Bingo, you are an instant celebrity. Then possibly very rich. Or...
You can do it the old-fashioned way. If you are a federal or postal worker you can join the TSP, max your contributions, take advantage of the 5 percent government match for FERS employees and settle in for the long haul.
Wednesday's column noted that there are currently 929 federal workers with TSP accounts worth $1 million or more. As noted, some of them were rich when they came into government. They transferred their 401(k) plan funds into the TSP.
Some of the TSP millionaires are members of Congress or lawyers-turned- federal judges. They either did well in the private sector or married well. They had the good fortune to fall in love with someone who happened to have the good fortune to have a fortune. But a few did it the hard way. Here's one who tells how it can be done:
"...I am one of the 929 TSP millionaires mentioned in your column. Not born with a silver spoon in my mouth either, for growing up, my family never even had a car. I'm 58 years old and have over $1 million in the TSP, beginning with contributions 25 years ago. Attached is a plot showing how it happened, by putting the maximum amount available (although past 50, due to other financial obligations I did not even add the catch-up available for 50+). I did make sound investments with timing, for I made double-digit growth extraordinaire during the booms, and was fortunate to avoid the busts by moving it temporarily to the G fund. I have some advice that I think you should offer the young bloods out there joining the federal government and that they must contribute their maximum amount to the TSP. That is rule #1.Few people go into the federal civil service in hopes of making big bucks. Much less acquiring a million-dollar nest egg. For that, you need to get elected to Congress. But it can be done.
"Here is rule #2: No one right now should have money in the F Fund. I am hoping that perhaps the TSP board will actually develop separate F Funds for short/moderate term bonds (less than 5-7 years) and another separate one for long term bonds. That is because more than half of the holdings in the F fund are for more than five years' duration. It is a mathematical fact that for every 1 percent increase in interest rates (and interest rates must go up at some point, since they are basically zero and cannot go lower), there is a 7 percent reduction in the value of the bond fund. So, Mike Causey of Federal News Radio fame, you should get on your soapbox and save all the federal employees who have money in the F fund and tell them to move it out. It is ridiculous to have a fund like the F fund, where half the money will guaranteed lose money and the other half will gain. All it takes is for the TSP board to create two separate funds and really help the federal employees. It is a shame.
"See this link for how the distribution for maturity falls out here.
"One more thing for those federal employees who had other jobs. They should undoubtedly move their other IRAs into the TSP using form TSP-30. They should do this electronically and never, ever touch the money themselves. Tax consequences would incur if for some reason they did not move the money within 60 days of taking it out of the IRA. Only do a rollover IRA from one institution to another." — One of the 929
Good luck! And write if you get lucky.
NEARLY USELESS FACTOID
Compiled by Jack Moore
Dung beetles are able to transport their dung balls along straight paths in a sky lit by stars but apparently lose this ability when night skies are cloudy, according to a South African entomologist Marcus Byrne.
(Source: Improbable Research)
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