What it takes to be a TSP millionaire at any age

hey super feds Let's Play Who Wants To Be A Millionaire this week specifically Who Wants To Be A tsp millionaire or someone with a million dollars in their tsp account while that number might seem impossible I'm going to show you how you can become a tsp millionaire no matter what age you start at but before we do that let's start by asking ourselves why would someone even want to become a tsp millionaire it's true that federal employees have generous benefits including a first pension and social security but having a solid tsp balance is going to give you a lot of flexibility to be able to retire on your own terms especially at your minimum retirement age when your retirement might last 30 or potentially even 40 years if you're going to become a centenarian if you've seen my other video on tsp millionaires you'll know that only about one percent of people with a tsp have a million dollars in their tsp so I'm gonna break it down and show you how you can join that one percent Club compound interest is amazing so the younger you are when you're watching this video the easier it's going to be for you to become a tsp millionaire if you're 25 now because of inflation and other stuff of a million dollars probably won't even be that much money when you retire comparing it to a million dollars today but being young right now is going to help you become a tsp millionaire two ways first of all you're gonna have lots of time for your money to compound and secondly since a million dollars is a million dollars and is going to be a million dollars no matter what happens to inflation as we go through inflation that million dollars is going to be a lot smaller when you compare it to your salary or the cost of goods in the future but for now let's just ignore the inflationary part of it and look at what you need to save each year or each pay period to reach that million dollar Mark all right before we jump into these calculations of what it takes to be a tsp millionaire I need to go through what I'm assuming obviously compound interest is going to help you become a tsp millionaire but the tsp funds you choose are going to have a big impact on whether or not you're going to be a tsp millionaire as you can see the G fund has returned on average since Inception 4.6 whereas the C fund over 10 in the calculations I'm going to show in the remainder of the video I'm going to assume a rate of return of eight percent per year which is less than what the C phone has returned historically since the Inception however it's important to note that if you're putting all your tsp money in the G fund it's going to be hard to achieve the tsp millionaire status if you're 25 and you save 6875 dollars a year in your Thrift Savings Plan you'll become a millionaire by the time you reach age 57 and your minimum retirement age to make that a little bit more granular that's only 265 dollars a pay period without including the government match I don't know what grade you are that's probably going to vary between a lot of stuff just assuming you're a gs9 step one in the rest of the United States pay ban a five percent match would be 2855 which is almost a third of the amount of money you'd need to put away each year to reach your tsp millionaire so the five percent match on the gs9 step one salary is 109.84 cents a pay period so with that government contribution the net you'd need to contribute each pay period to reach a million dollars by the time you're age 57 in is 154.58 all right let's say you're age 30 instead you spent your 20s going to college going to grad school partying whatever weren't really thinking about retirement you reach age 30 you get your first federal job you have nothing safe for retirement in that case you're going to have to contribute about ten thousand five hundred dollars a year to reach a million dollars by the time you turn age 57. all right I made this Google sheet to look at how much you'd need to save at other ages as well so at age 30 you need to contribute 10 500 per year at age 35 16 500 per year and if you started at age 40 you need to contribute the maximum of 22 500 a year and then switch up to 30 000 per year when you reach age 50 and can do catch-up contributions even still if you start at age 40 and contribute the maximum amount to your tsp you're going to be a little short of that million dollars but assuming you're at least a gs9 step one in the rest of the United States pay table once you add in that government contribution to the maximum tsp contribution you can see that you'd reach million dollars by the time you retire on this tab here it shows how much you need to contribute with your government match each pay period to get a million dollars by the time you're 57. if you start at age 30 you need to contribute 294 dollars a pay period if you start at age 35 you'd need to contribute 524.77 per pay period and at age 40 you need to contribute 865 38 plus your government match to get you to a million dollars I put a link to this Google sheet in the video description so you can play around with it in this box here you can put how much money you already have in your tsp and then just make sure that this adjusts it for the contribution that you can contribute every year and with this spreadsheet you can play around and see what you need to contribute to reach tsp millionaire status by your minimum retirement age I hope it's a very helpful tool for you I just ask that you go to file and make a copy when you access the spreadsheet that way you're not writing over data that other people use when they visit the spreadsheet and I'm going to lock it to make sure that nobody else can do it I hope you find this tool helpful and if you want to know more about tsp millionaires I put a whole video together on all the statistics from the tsp millionaire report

Channel: GovernmentWorker FI

Views: 8,537

Keywords: benefits, federal employee, federal jobs, millionaire, retire at 57

Id: 2G6dmQfqqY4

Length: 5min 8sec (308 seconds)

Published: Fri May 12 2023