TSP millionaire's guide
Mike Causey
September 26, 2017
What sort of investment advice do you give a career civil servant who became a millionaire the hard way, by steadily investing in his optional 401(k) plan, the Thrift Savings Plan?
Short answer: Not much.
In the beginning, all of the people who had million-dollar TSP accounts were millionaires before they came into government. Some were high-paid lawyers who were appointed federal judges. They brought their outside retirement nest egg into the TSP because of its fees (the lowest in the business) and the federal oversight of the plan. Others were millionaires elected to Congress. Some made their fortunes before getting into national politics. Others married well. Some made big bucks after serving in the House or Senate, which raises other questions.
But now, thanks to steady-as-she-goes-investing — and an 8-year hot streak in the stock market — the number of TSP millionaires is pushing (or maybe has passed) 20,000 investors. There are now almost 50,000 people with account balances between $750,000 and $999,999. On average, the millionaires have been investing just over 28 years, while the average for the millionaires club is almost 29 years.
In talks with a number of self-made millionaires, a common theme emerges. They continued to invest in good times and bad, they did not pull out of the stock market during the Great Recession, nor did they trade in their stock shares — the C, S and I funds — and put them in the Treasury securities G fund to wait until a "good" time to go back into the market. Most had most, nearly all or all of their money in the U.S. stock market-indexed C and S funds. Some bold investors also rode out the topsy-turvy international stock fund, which currently is on a hot streak. They continued to invest the same amount of money each payday, whether the markets were booming or tanking. When share prices were down, they bought more. When they were up, they bought fewer shares but continued to invest the same amount. It's called dollar-cost averaging.
A few feds have said they wished we would not talk about TSP millionaires. They think their political enemies will use it to prove that bureaucrats are overpaid. But except for the political appointees, all the millionaires are truly self-made. They took part of their salary (and if they were smart, the 5 percent government match) and invested over decades. It should be a tribute to all federal workers that so many have set up their own retirement nest egg and done so well by smart, no-panic investing.
From time to time, we hear from one of the millionaires. Their stories are similar, but always interesting. Start early, max out, stay the course. Last week, we heard from a Florida-based fed who explained how he did it:
"Mike,
I am a homegrown TSP member.
After 30 years of aggressive investing, primarily in the C fund, I have reached my goal.
I am lucky and proud that aggressive investing has given me a balance over $1.5 million. Today, I am putting my 80 percent C fund and 20 percent S fund directly into the G fund, 100 percent.
My tentative plan is to retire in 2018 after 32 years, and I think that I have taken enough risk for now.
I think my TSP balance is among the elite Seal Team TSP, who are homegrown investors.
My personal Roth IRA has another $500K in Fidelity Mutual funds, which I plan to keep as is.
In addition, my wife has two IRAs, which have done very well.
The key to success is maximum contributions and aggressive investing during a 30-year career.
I enjoy your column and especially your show on Federal News Radio." — Anon Please
Hardly the portrait, or portfolio, of clock-watching, time-serving bureaucrats!
Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.
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