The Thrift Savings Plan is a crucial part of saving for a successful retirement. It allows federal employees to save a portion of their income each pay period which is then invested so it can grow and compound over the course of their federal careers. The government will also match up to 5% of the contributions that federal employees make to their TSP, further increasing the potential for future growth of money over time in one’s TSP account.
How much can your TSP grow over the course of your career? Some federal employees have over $1 million saved in their TSP accounts to use in their retirement. Some of these employees have written to us and said that the key to their success in accumulating such a large amount of money in their TSP accounts was by starting to contribute to the TSP early in their federal careers, taking full advantage of the match the government offers, and by investing in the stock funds inside of the TSP which earn, on average, a far better return over time than the G or F funds. They also told us they didn’t panic during the stock market’s inevitable declines over the years by pulling the money out of the stock funds and putting it into the G or F fund, thus selling when the market is at its lowest point and locking in losses in their accounts.
If investing in the TSP is so crucial for federal employees who want to one day have a successful retirement, why then do some not do it? One reason is a lack of understanding about the TSP and how it works.
The TSP recently released a series of short videos that provide an overview of each of the major funds inside of the TSP in which one can invest. These videos are designed to teach federal workers about the fund options available within the TSP and how each fund works as well as potential advantages and disadvantages offered by each fund.