So you want to be a TSP millionaire? Here’s how!

Even in today’s inflationary times, the word millionaire has a certain cachet. With a little self discipline and the power of compound interest, millionaire status is available to federal employees who make wise use of the Thrift Savings Plan. For some advice on how to get there, the Federal Drive with Tom Temin talked with retired federal manager Abe Grungold.

Interview transcript:

Tom Temin Abe, let me ask you the million dollar question. Did you retire as a top millionaire?

Age Grungold I was very, very lucky in my federal career, and I hit the $3 million mark during my federal career. I was blessed to have achieved that goal.

Tom Temin Wow. All right. So you know how to do it. And let’s say someone is simply trying to get to the $1 million level anyhow. How do you do it? What should the basic practices be to get there?

Age Grungold So if you are a young federal employee and you want to be in the elite TSP Millionaires club, it’s basically a double edged sword to blaze the path to get there. First of all, you have to contribute as much as you can afford and at a minimum, the 5% employee contribution where you get the 5% match from the government. And the other side of the sword is to invest as aggressively as you can tolerate. And everyone has a different level of risk, but you have to invest somewhat aggressively in order to get there. And that’s basically it. It would be also ideal if you could reach out to someone in your organization who has achieved the million dollar status and get some pointers from that person.

Tom Temin I suppose it’s possible, but if you stick with the G Fund, is it possible to get there? But maybe even if you can, it means you have a greater upside potential, sounds like.

Age Grungold Well, you can achieve million dollar status solely investing in the G Fund, but you would have to maximize your contribution to the maximum allowed by the Internal Revenue Service. And you would have to put in a very long career, probably 35 to 40 years in order to get to that level. It’s very difficult solely investing in the G Fund. I had many coworkers of mine who solely invested in the G Fund during their career and they did not achieve the million dollar status.

Tom Temin Yeah, okay. So if you want to not work forever, then you have to be a little bit aggressive. And over the years, the non-G funds, they’ve fluctuated more, but they’ve ratcheted up way greater returns long term, fair to say?

Age Grungold Yes. Certainly the stock market historically has always had its upward and downward turns for many different types of reasons. And over a long federal career, if you’re going to put in 30 years as a federal employee, you’re going to receive the upside of the stock market over your career and you will benefit from those high returns as your balance keeps growing year after year. I saw it during my career and I was just amazed.

Tom Temin Maybe discuss the implications of reaching that million dollar or $2 million, or in your case, 3 million. You’re definitely a 1% or a 10th of 1% or in terms of TSP savers. But what does that mean in terms of what you can do financially when you do retire? There’s a meaning to the million.

Age Grungold Well, that is a very big question for every federal employee: What to do with their TSP when they do retire. It can supplement your income. You can go on some nice vacations, you can do some charitable donations, you could do any number of things. But for me, I saw it as a treasure chest. In the event that I have to go to a long term care facility, both for me and my spouse, in the event that day happens, we would have enough resources to handle that type of situation. So yes, I do enjoy my TSP withdrawals, but I want to make sure that I have sufficient funds in the event it’s needed for long term care.

Tom Temin Got it. Yeah. So that insurance is a great feeling to have because you know what long term care costs these days. We’re speaking with Abe Grungold. He’s a retired federal manager and owner of AG Financial Services. What are some mistakes people make that retard their ability to get to that million dollar level, would you say?

Age Grungold Well, certainly you do not want to panic when there are some downward trends in the market. And every time you panic, you sell your shares. And when you sell your shares, you recognize a loss. That is just not the right thing to do. The best thing to do is just to weather out the downward trends in the market. And I have done that my entire federal career. And I had just waited six months to a year, and I found that it had bounced back. Now, another thing that people really need to be watchful of are these investment forums like on Facebook where there are people out there giving financial advice. You don’t know who they are. They could be complete strangers. You don’t know what they’ve accomplished in their TSP. And it’s very dangerous to take advice from those types of sources. I would recommend to avoid those.

Tom Temin The other thing is, too, as you age, to beware of the scammers, because that’s an increasing problem for people at all economic scales, all socioeconomic scales.

Age Grungold Yes, I’ve had many friends and clients who are approached by financial people in all avenues of the financial industry from ‘let me manage your TSP’ to selling you gold coins to selling you annuities. You have to be very, very careful with these solicitations. And look, there’s someone out there that’s trying to scam someone on any level of your life, and you have to be watchful of that always.

Tom Temin Yeah, ‘this is Amazon reaching out; you need to update your payment methods.’ This type of thing. Just, it’s incessant. And now they’re doing it by text and by email.

Age Grungold I get 3 to 4 scam emails a day and my business account gets dozens of scam emails a day. It’s just part of life. You have to tolerate it. You need to be watchful and the best thing to do is to delete them.

Tom Temin And the TSP and federal agencies offer resources to help people maximize and optimize their savings. And a lot of employees maybe overlook those services.

Age Grungold Yes, the TSP website has 35 years of historical information on the TSP and there are many webinars and resources and articles and newsletters on the TSP. It’s there for every federal employee and every federal retiree to take advantage of that resource. And yes, employees should just spend a little bit of time each week reviewing as much information from the TSP website. Very important.

Tom Temin And it’s apparently important to TSP reflecting what employees worry about because they publish the numbers of people that have reached that million dollar mark. And that’s kind of incentive to join the club.

Age Grungold It’s an elite club. It welcomes new members. There’s always something that causes the market to have a little bit of a blip, but right now it’s coming back pretty strong through the end of this year. So you’re going to see a lot more TSP millionaires.

Tom Temin Well, in honor of the late Charlie Munger of Berkshire Hathaway, who passed away just a few days ago, let’s say don’t ever lose faith in the power of compounding, right?

Age Grungold Yes. He was a big fan of the TSP. I heard him speak about it in several interviews. He saw it as a great opportunity for federal employees to take advantage of it.

 

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