My $1.9 Million TSP Investment Strategy in 2023 | Financial Independence with TSP

so I made several videos about the tsp back in April and I didn't think they were going to be one of the most viewed videos on my channel I've made my mistakes with TSP in the past that cost me over twenty thousand dollars when I was on active duty in the military and if I could go back in time I would have done things differently but I can't think about that now what I want to focus on is now and how I'm going to maximize my retirement savings to Achieve Financial Independence and retire early it is entirely possible to become a tsp millionaire like this person named silver owl thrifter who commented on one of my videos and she said happy to be a tsp millionaire she listened to her mom and dollar cost average 100 Cs and I mostly C funds until last year now she's getting close to retirement and she's going to move about 30 to the G fund she will let the rest sit and keep growing she maxed out her Investments for 20 years that's incredible and Congress congratulations to her and when I made this video 113 000 tsp investors were members of the tsp millionaire club and as of September 2022 there are 65 500 tsp millionaires which is a significant drop from 113 000 and this is according to the latest report from the federal retirement Thrift investment board or frtib this is due to pretty much all the funds being down for 2022. the C fund is down 13 year-to-date s fund is down 21 the iPhone is down 12 and F fund is down 12 the only one that is up is the G fund or the short-term U.S treasury uh Securities and I just call it government bonds because the US government guarantees the payments of principal and interest so if you had Cs and I funds you'd be down on average 15 year-to-date depending on your allocation if you had a million dollars and you had money evenly distributed across csni funds then you'd be down about 15 or your current balance will be about eight hundred and fifty thousand dollars so it makes sense that given the condition of the current stock market most of those seven figure tsp investors are no longer in the seven figure club and my plan is to max out my tsp every year regardless of what's going on in the stock market and starting in 2023 the maximum contribution limit is going to be twenty two thousand five hundred or thirty thousand dollars if you're 50 or older this is not counting the five percent employer match that I'm gonna get in the tsp and before I go any further in this video I want to make sure you understand that this is not in any form of financial advice and I'm never going to tell you what to do with your Investments you should never listen to any YouTubers to invest or not invest in something like putting money in FTX I gotta tell you that tsp is probably Way by far the best employer sponsored plan after comparing it to multiple 401ks in the private sector and I've been in both the private and public sectors for the last 20 years my stock allocation has been and always be the same and it'll be 100 stocks and zero percent bonds and I'm not looking to touch my tsp until I turn 59 and a half and this is not going to be the only investment account I'm going to have during my retirement and I'll have my Roth IRA traditional IRA HSA taxable investment accounts real estate and business for the last seven years I have been working on diversifying my income streams so I don't just rely on my 401k tsp or Roth IRA but if tsp were my only retirement account then I would use what's called a rule of 120. basically it'll be subtracting my age from 120 to allocate my stock portfolio properly and if I'm 30 years old then it would be 90 stocks and 10 bonds because 120 minus 30 is 90 right if I'm 35 years old then it will be 85 stocks and 15 bonds I'm not using the rule of 120 because I have enough liquidity to mitigate my risks and exposure to the equity Market my net worth statement is Diversified enough not to allow me to expose too much to the stock market and within my stock allocation at 100 I only invest in C and S funds again this is what I'm doing and you shouldn't do it just because I'm doing it the C fund is basically the S P 500 Index Fund like the Vanguard S P 500 Index Fund uh vfiax Fidelity 500 Index Fund FX AIX or the swap S P 500 Index Fund swppx the s-fun is a small cap stock index fund that matches the performance of the Dow Jones U.S completion total stock stock market index the S fund is much riskier than C fund because it tracks small and medium-sized U.S companies that are much more volatile than the large cap companies their top 10 Holdings are Blackstone snowflake Uber block Airbnb and snap which are down significantly this year Blackstone is down 38 snowflake is now 58 Uber is down 40 percent block is down 62 and snap is down almost 80 year to date higher the risks higher the Rewards or losses right at my age I'm very risk tolerant so I am okay with being exposed to the S fund if I'm close to my retirement age then I will be more comfortable with just putting my money in the C fund the C fund on the other hand also got hammered in 2022 but to me it's very unlikely to see companies like apple Microsoft Amazon Google and Tesla go bankrupt right if you ask me where apple is going to be be in the next 20 years I would say they're going to be making an iPhone that we can probably put inside our arms or something like that right I rather investing U.S companies for the long term and I don't invest in any of the iPhone because it has severely underperformed for the last 10 years with just a 5.56 average annual return it's performed a 2.63 average annual return for the last five years which is barely above the performance of G fund I know some of you will tell me in the comment section down below that I should diversify with an international Index Fund still I just don't see any upside for the next 10 to 20 years so I'm going to keep my tsp allocation to just 50 c fund and 50 as fun for the year 2023 and if you need help with your personal finances like creating a budget or savings to achieve your financial Independence you can schedule a free one-on-one 20 minute Financial coaching session by visiting processor.com coaching and now I want to show you you my GSP calculator with the balance that I have so far and I started investing in my tsp in January 2022 and before that it was all in my 401K with a private company before I quit that job I'm going to show you two separate tabs one is in traditional and the other one is in Roth because I contribute at least five percent to my tsp my employer contributes five percent of my salary whatever my employer contributes will go to the traditional portion of my tsp because I dollar cost average my contributions every two weeks I have actually gained about three percent in earnings this year if you've been holding on to your tsp for a while then your total fund is most likely down by eight to ten percent at the minimum I guess you could say that I got lucky right and this is from 50 c fund and 50 s fund so let's say the contribution limit increases by 500 every year starting in 2024 at twenty three thousand dollars by age 45 I should have pretty close to 428 thousand dollars in the year 2032 with an eight percent average annual return the C fund has performed 13 in annualized return for the last 10 years then I would have about 481 000 at age 45 and when I retire early at age 45 and I just leave the money where it is in the tsp with a 10 average annual return I'm looking at 1.8 million dollars by the time I turn 59 and a half and if for some reason I choose to work until age 50. I could retire with 966 000 in the year 2037 and that money will grow to 2.2 million dollars by the time I turn 59 half and I can withdraw all of this money completely tax free because it's a Roth contribution which means I'm paying taxes now so I can enjoy tax-free earnings later on and you can also get my financial Independence resources including these spreadsheets were absolutely free by visiting firestitcher.com contact you can also check out my Fireside chess shop if you're looking to start your own YouTube channel and I have all of my books and equipment at 57.com shopping now take a look at the traditional portion of my tsp which is all employer contributions with a 10 annualized return I should have over 120 000 by the time I retire early at age 45 my early retirement strategy is to gain access to this portion of my tsp because it's in pre-tax dollars I'm gonna do what's called a five-year conversion ladder at forty five thousand dollars a year because I'm not gonna be making any active income after 2032. so my marginal tax rate is going to be at 10 or 12 right so when I convert 45 000 a year from traditional tsp to my Roth IRA I'm gonna owe either 10 to 12 of 45 000 to the IRS well that's not exactly the effective tax rate but we'll just call it five thousand dollars so the net conversion will be around forty thousand dollars this money that I convert to my Roth IRA has a five-year waiting period because uh or before I can make any withdrawals that's why it's called a five-year conversion ladder so in the year 2037 I have access to the net conversion of forty thousand dollars completely tax free and penalty free you can check out this video about how I'm gonna tap into my tsp early tax free Link in the description below so based on my calculations it will take me 15 years to maximize my tsp contributions to become a tsp millionaire however my early retirement age of 45 means that I only have nine years remaining in the workforce since I'm not looking to touch my raw tsp until I turn 59 and a half I'll be completely fine with just leaving the money where it is at almost half a million dollars in nine years because that compound earnings every year will eventually allow me to reach 1.8 million dollars at 59 half my wife and I are debt free except for our mortgage and we're going to stay debt free for the rest of our lives while we're maximizing our retirement contributions we're going to continue to enjoy our lives by traveling around the world and if you want to know more about how to invest in a tsp and retire early be sure to check out these two videos so as I said I appreciate you watching my video don't forget to subscribe I hope to see you in the next video have a good one [Music]

Channel: FIRE Psy Chat

Views: 47,188

Keywords: fire movement, tsp strategy, thrift savings plan, thrift savings plan help, thrift savings plan military, thrift savings plan explained, thrift savings plan funds, tsp military savings plan, how does tsp work for military, tsp savings plan, tsp c fund, tsp investing strategy, thrift savings plan match, the thrift savings plan for beginners, TSP allocation strategy, TSP investment strategy, financial independence with TSP, Retire early with TSP, TSP employer match, Roth TSP

Id: OamnGAR4XM0

Length: 11min 43sec (703 seconds)

Published: Fri Dec 16 2022