Tom Temin Commentary

The ranks of TSP millionaires is growing fast

With the markets going stong, more TSP millionaires emerge. Here's how you can join their ranks.

Tom Temin@tteminWFED

December 14, 2023 3:28 pm

3 min read

The number of Thrift Savings Plan account holders with more than a million dollars saved notched up this past year. As of September, about 95,000 of you had a TSP account with no less than $1 million. A year ago, only 65,500 did. Published by the Federal Retirement Thrift Investment Board, the millionaires’ club roster fluctuates quarterly, but the trend is way up for the past year.

One reason, probably the main reason, is performance of the stock market itself. A couple of days ago the Dow Jones Industrial Average hit its all-time high of 36, 805. The analysts said this was prompted by promises of interest rate cuts by the Federal Reserve. The DJIA is just one indicator, but the TSP funds do well when markets generally do well. So expect the number to rise further.

The market will give any investor the dizzies, but always think long-term. For years, I kept a newspaper with a banner headline proclaiming the 10,000 Dow. That was in March 1999. It reached 1,000 in late 1972.

In general, if you have a solid million in your TSP, that plus your pension annuity plus your Social Security can get you to about age 95 while maintaining your pre-retirement life style. Health failures or other expensive setbacks, like driving a Tesla on autopilot, retain the potential to spoil the best-laid plans.

That’s why my eyebrows went to the top of my head when Federal Drive regular and financial advisor Abe Grungold, a retired Postal Service manager, told me he retired with not one, but rather three million dollars in his TSP! Abe is a generally modest guy, not one for extravagances. He has a basic motivation for saving so diligently: precisely to have the means to self-insure himself and his wife for long term care should the need arise.

Diligence is the key. His advice is deceptively simple and yet proven. Contribute as much as you can afford, stick to your contributions above all other temptations, and trust the long term returns of the funds that are more aggressive than the G-Fund.

Grungold and other advisers, like Art Stein, a certified financial planner and also a regular, caution that too much caution itself will inhibit wealth growth. Investments may not slide backwards as they do with the more aggressive funds that ratchet up over the long term. But over time the super-safe G-Fund costs investors buying power. Grungold said you can reach TSP millionaire status with the G-Fund, but you might have to work a decade longer than you’d like.

Although it’s worth noting, maybe don’t have zero G-Fund dollars as part of your portfolio. Thanks to the Federal Research actions on interest rates, for the 12 months ended October 31st, the G-Fund had a return of 4.1%. The other funds ranged from -1.23% (S-Fund) to +15.5% (I-Fund). Lordy don’t try to time the market, but rather aim for a balance within your risk tolerance, the experts say.

People also need to enjoy life while en route to retirement. Since Plato, the smart thinkers have advised avoiding the extremes of lavishness and asceticism. Save but live a little.

Personally, I’m a hare, married to a tortoise. On average we’re okay. I’d been drooling over a new motorcycle at my dealer with a custom paint job and a limited edition plaque from the manufacturer. I was calculating the cash outlay if I traded in my trusty, and like-new, current bike. Not that my wife would have allowed such a crazy impulse buy, but in an email, a friend admonished: “As for the motorcycle, beware of passing fads!” That was David Berteau, now CEO of the Professional Services Council, was an assistant secretary of Defense. And, apparently, also a tortoise.

I’ve been watching the TSP millionaire statistic more lately. Not quite on the final approach to retirement myself, I will just say I’m looking at my fuel levels — my own 401K plan — and tuning into destination frequencies. If it was 10 years ago, I’d have bought the bike on the spot. But when retirement looms, the mental calculi change.