TSP millionaires and the G Fund

The number of federal/postal workers with Thrift Savings Plan accounts worth at least $1 million jumped from 3,272 to 23,098 between April 2016 and April 2018. The value of the biggest account went from $4.7 million to $6.1 million in that time.

During the same two year period the number of near-millionaires — those with account balances ranging from $750,000-$999,999 — jumped from 19,000 in 2016 to 53,730 as of April 2018.

The TSP millionaires live and work, or are retired all over the nation. They range from the State Department to the US Forest Service. Some are postal employees and many started out near the bottom.

The one thing nearly all have in common is that they maxed out their contributions, in the case of Federal Employees Retirement System workers making sure they qualified for the generous maximum 5 percent match which Uncle Sam offers. That match, the equivalent of a tax-deferred pay raise each year, and the low administrative fees charged by the TSP mean more money stays in the investors account. The other common traits were time investing and where the workers or retirees invested.

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The average TSP investor in the million-dollar bracket has been at it for 29 years. Those at the $750,000-$999,999 tier have been in for 27 years, while those at the $500,000-$749,999 level have been investing on average less than 25 years.

The final factor is which funds they chose and how they reacted to bear markets or the Great Recession. Millions left the stock-indexed large cap C Fund and small cap stocks S Fund, and moved into the super-safe, low-yield treasury securities G Fund. The idea was to wait until the market got better, which so far always has and did.

But at the time, nobody knew when and how low the bottom would go. Now we can say it was March 9, 2009, but then again hindsight is 20/20.

Financial specialists say the problem with pulling out of the market when it is heading down is that some people often end up selling low. And if they wait until the market improves when they return they are buying shares at prices that are higher, in some cases much higher, than during the meltdown.

The real problem, some of the pros say, is that some people never come back to the stock market. Many are still waiting in the G Fund and they are not among the TSP’s millionaires.

But the G Fund definitely has its fans, including this reader who responded to yesterday’s column :

“Good morning Mike,

“Well, I’m gonna have to take an opposing position to your statement in this morning’s column in which you state ‘What all of them [TSP millionaires] have in common is that they invested heavily, or in some cases exclusively in the C and S funds, and stuck with them through thick and thin.’

“I am a 31-year fed who started as a GS-7 and rose gradually through the ranks of my agency, investing as much as possible, but rarely at the maximum amounts allowed, until the last couple of years. As such, I could not reap the reward of building my TSP balance through the strength of my contributions, but by using the funds I had to invest and strategize my positions according to market conditions.

“When big dips in the market take place, I suffer like everybody in the early phase, but when I recognize the signs of a major pull-back, as was the case in 2008 and 2009, I did take refuge in the G Fund and it saved me in a major way.

“I waited things out and even missed capitalization opportunities when the markets showed signs of recovery. But once things were really on the upswing, I jumped back in, [taking a] 100 percent position in the C Fund and rode the wave up to levels that far exceeded where I had been a year earlier.

“In my case, staying the course under all conditions just does not seem like the key to success. It can be a long road through mediocre gains over the long run.” — Mark from Odenton, Maryland

Nearly Useless Factoid

By Amelia Brust

As people age they lose muscle mass, their mucous membranes thin to become drier and they lose some of the coordination they had when they were younger. The larynx is a part of that. Vocal cord atrophy or bowing, presbyphonia, or presbylaryngis are changes to the larynx that can happen as people age. This causes their voices to change with common conditions such as higher pitched voices in men and lower pitched voices in women, reduced projection for a “thinner” voice, and a tremor or shaky quality.

Sources: American Academy of Otolaryngology–Head and Neck Surgery