Recently the TSP announced that of the 4.6 million TSP participants, that there are a whopping 1,600 TSP Millionaires- up from over 500 TSP Millionaires from last year.
How is this possible? The math is not that hard- It’s just continuous compounding.
Say you start out at :
- Age 25
- 50,000 annual salary
- 5% TSP salary deferrals (max out the TSP 5% total match)
- 1% annual wage/grade salary inflation
- 8% rate of return
… you end up with $1 Million in the TSP by age 60:
So, it’s not that hard to believe that there are TSP Millionaires running around. If you look at the attached spreadsheet, your investment in the TSP hits the ‘tipping point’ around year 11 (age 35 in this example). At this point, your TSP is returning more in earnings per year ($6,025) than you are contributing per year ($5523 including the TSP ‘Match’). This is what’s known as the ‘Miracle of Continuous Compounding’.
Sadly, the TSP director stated in recent interviews that many of the TSP millionares are not ‘Home Grown’. Rather, they are 50+ year-old Feds who have already had a successful privat sector career. Many spent most of their proffessional lives working for a private DC law firm and transferred their Qualified Retirement Plan assets in to the TSP- They were already Millionaires within their 401k/Qualified Plans and salivated at the TSP’s low fees and the uniqueness of the TSP G Fund.
You can do it! I recommend you grab a copy of the ‘Millionaire Wage Slave‘ if you need more motivation!
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