The Thrift Savings Plan has been very good to investors over the past several years, at least for those who have money invested in the various TSP stock funds. As we noted in an article last month, just in 2013, the C fund has had a return of more than 29%. 2013 will be the fifth straight year that C fund investors have enjoyed significant positive returns.
It is not surprising that this bull market has had a positive impact on TSP balances. In fact, according to Kim Weaver, Director, Office of External Affairs for the Federal Retirement Thrift Investment Board, there were 1,656 TSP millionaires as of December 2, 2013.
To put this into perspective, back in January 2012, we published an article entitled 208 TSP Millionaires Enjoy a Big Return in January. There was one TSP investor who had $4,041,671.71 in a TSP account as of January 18, 2012. At that time, the average TSP investor had been in the program for 9.6 years and the average TSP balance was $64,671.71. ($89,311 was the average TSP balance for FERS employees in December of 2012. The average balance for FERS employees as of November 2013 was $103,996.)
We received a few email responses and comments to that article from people who said it was not possible for a federal employee to accumulate a million dollars in a TSP account working for the federal government. For example, one person wrote: “My guess is well over 90% of these TSP millionaires moved the bulk of that money into TSP from their private sector 401ks upon entering federal service. The TSP just hasn’t been around long enough for most career fed employees to max out the contributions needed for that kind of balance.”
Another reader commented: “Every one of these 208 millionaires is no doubt a congressman or politician, they are the only federal employees who make enough money too have amassed that amount and truly the ones who get paid too much for doing nothing.”
Last March, we published another article about TSP millionaires (all 562 of them). (See A Bullish Stock Market: Number of TSP Millionaires Up Significantly) The comments on that article were often different as several were from people who had accumulated over a million dollars. Several of these people had been federal employees for a number of years and invested in the TSP during their career. No doubt, most of them had money in the TSP stock funds and not just in the G fund and some people apparently moved money around successfully as the market moved up or down. One of these readers wrote: “I’ve never invested in the G, F or L funds. I’ve always invested only in the C, I, and S funds. Slow and steady wins the race. I have never panicked when my account balance has dropped, no matter how far and fast. I simply keep making my investments and re-allocate my balance among my three funds as they deviate from where I want them to be.”
The negative comments also changed from “it isn’t possible” to those that commented there is such a small number of millionaires that the number is not significant: “562 millionaires out of ~2.5M participants? That is what the top 0.023% of participants? That is fine by me. Look at any major company and I bet their percentage is higher.” (About 0.2% of 401(k) participants had at least one million in their accounts and the median balance in 401(k) plans was about $60,000.)
So, as the stock market has continued to go up, the number of TSP millionaires has gone from 208 to 1,656 in less than three years. Perhaps Henry Ford was right when he said that “Whether you think you can or whether you think you can’t, you’re right.”
The average TSP millionaire has been investing in the TSP for 25.7 years. Obviously, most have been investing their money in the TSP for most of the time that the program has been in place. 112 TSP participants with accounts valued at $one million or more are invested solely in the L Funds and 1,212 participants with account valued at $one million or more are invested solely in the TSP’s core funds. The remainder are invested in a combination of L Funds and core funds.
In contrast to the TSP millionaire, most TSP investors have been investing for 10.5 years (this average includes current federal employees and retirees). As of November 2013, the average TSP balance for FERS employees was $103,996. This means that the many current TSP investors have also done very well. Uniformed personnel have smaller TSP balances ($16,489 was the average for uniformed personnel as of November 2013 according to the TSP).
Here is the current breakdown of TSP balances by amount:
- Under $50,000: 2,798,820
- $50,000 – $249,999: 1,424,190
- $250,000 – $499,999: 335,638
- $500,000 – $749,999: 71,272
- $750,000 – $999,999: 11,063
Fidelity Investments recently analyzed the savings habits of roughly 1,100 401(k) investors who earned less than $150,000 a year and had accumulated more than $1 million in 401(k) savings to determine how they reached the million-dollar mark. There is a formula for reaching that significant number and the “secret” is similar to what those in the TSP who wrote to us and had accumulated more than a million in their TSP account had used. “Start young, take advantage of the company match, save a big chunk of your pay.”
So, for those TSP investors who want to become one of those who reaches a million or more in your retirement account, the same principles apply.
Our congratulations to those federal employees who have accumulated at least $1,000,000 in the TSP. We hope it will inspire other TSP investors to think positively and to take advantage of this valuable benefit available to all federal employees.