What’s your million-dollar-TSP ETA?

In the beginning (April 1987) there were only a few, a handful of the financially fortunate.

They were the first people with million-dollar Thrift Savings Plan accounts. All of the money was brought in to start the federal in-house 401k which would, over time, be the biggest kid on the block.  And over the years, especially for those who kept investing during the Great Recession of 2008-2009, the once tight-club has expanded.

As of June 28 of this year, they had prospered and multiplied to 73,612. Thanks to the up and downs of the stock market the number may be less today, or it could be more as thousands move from the $900,000 bracket into 7-figure territory.

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The first TSP millionaires were all alike: Mostly male, all either wealthy politicians, political appointees or highly-successful attorneys who became federal judges and brought their outside 401ks and retirement accounts into the TSP where 5.7 million active, retired or former feds have accounts.

Now, nearly all of the actual or potential TSP millionaires have a lot in common. The vast majority have been investing the maximum for 29-plus years. And they’ve invested in the stock indexed C and S funds almost exclusively through good and especially bad times, when some shares lost 50% of their value on paper.

As recently as 2010 there were only a couple hundred TSP millionaires. But despite some losing years the number of TSP millionaires have doubled, and sometimes tripled from one year to the next.  The Federal Retirement Thrift investment Board reported 562 in 2012; 4,167 in 2014; and 9,599 in 2016 after the number dropped the year before. Last year the board reported 21,432; with 37,612 as of the end of June.

What about the end of the decade-long bull market? How long can it last, how low can it go? We all know, based on past performance, the market is way overdue for a correction of 20%-30% or more. What we do know is that on “average” the stock market has a major correction of 20% or more every three-and-a-half years. We came close just before Christmas but it didn’t happen. In fact the current bull market is more than 10 years old and the longest in history.

The 10-ton elephant in the room is the potential for a next recession, the next 2008-2009 that messed up a lot of people. Will there be a major correction? Almost certainly, but is it imminent? Who knows?

Should you get out of the stock indexed C, S and I funds and retreat to the safety of the treasury-backed G or F bond funds, then come back when the market is better? Note that some investors who left the stock funds in 2008-2009 still remain in them. They missed out on the biggest increase in history. The problem with long haul investing is that you are moving forward but looking backward.

Many believe the lesson is from modest, long-term investors like this ordinary fed we heard from in March. He’s a TSP millionaire and this is how he did it:

“I know you get lots of these stories, but I thought I’d toss mine in. I started at ‘zero,’ about age 35, having endured the Reagan cuts, extensive unemployment, and a return to school. Totally broke, I was fortunate enough to get a decent job with the federal government. It was right after [the Federal Employees Retirement System] became mandatory for all new hires, and I took full advantage.

“I put the lion’s share into the C fund as soon as it became available, and added the S and I funds when they became available. I put in the maximum contribution in every paycheck, and when the ‘catch up’ rules allowed older workers to add more, I did.

“My account dropped quite a bit in 2008 and early 2009. A coworker said, ‘You should get your money out [of the C fund] while you still have any left.’ I said, ‘I rode it down and I’ll ride it back up’ and stayed the course, continuing to invest in C, S and I funds.

“In 2014, at age 62, after 27 years of service, I retired. The ongoing budget and political fights had rendered my work unsatisfying and I had family issues to attend to. Thanks to good savings habits and frugality I have not had to withdraw anything from my TSP yet. I checked my balance yesterday  (March 2019), and it was about $1,225,000.

“So, even a late start can lead to success with the right approach.” — Steve

Just imagine where he’d be if he didn’t have that late start!

Nearly Useless Factoid

By Amelia Brust

The world’s oldest analog computer sat in a shipwreck off the coast of a Greek island for nearly two millennia. The Antikythera Mechanism is believed to be a clockwork device that tracks the Solar System, and dates from around the end of the 2nd century B.C. Sponge divers found the mechanism in 1900, and researchers are still working to figure out its complex design and function.

Source: Antikythera Mechanism Research Project

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