When Small Savings Add Up to a Lot of Money

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Sometimes a little adds up to a lot. I recently met a CSRS employee who told me he chose not to participate in the Thrift Savings Plan in 1987 because he was only allowed to contribute 5% of his salary, got no government match and was restricted to investing in the G fund. About 20% of CSRS employees do not participate in the TSP; roughly 10% of FERS employees also choose not to participate.

How much in potential savings did this employee pass up? I made several assumptions in calculating the amount he would have today. The first assumption was that he began contributing at 5% and never raised the percentage. The second assumption was that he was making $30,000 in 1987 and $60,000 today. The third assumption was that he remained in the G fund, which gave him an annual return of 5.93% between 1987 and 2011 (this return was taken from the G fund fact sheet on the TSP website).

He would have just a little short of $120,000 today if he had begun in 1987 and stayed the course for 24 years. At a relatively safe 5% rate of withdrawal, that would result in an annual income of $6,000 that could be adjusted annually for inflation and would likely last him for his lifetime.

He could have had more in the TSP if:

  • His salary grew more quickly than I assumed.
  • He increased the percentage he saved once CSRS employees were allowed to contribute more than 5%.
  • He had diversified his holdings to other funds. The other two “original” funds grew as follows:
    • The F fund returned 7.34 in the same period
    • The C fund returned 9.78 in the same period.

Before you pass up investing for your retirement and financial future, focus on the long-term. What seems like a small amount today can grow into a much larger amount over time.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

© 2020 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.

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