Final WordsĪ large TSP balance before retirement is within reach for everyone, regardless of their salary, as long as equity markets continue to perform adequately. The highest TSP balance in the federal government is over $4 million. However, if an employee starts at $60k or more in a highly-paid profession, lives frugally and contributes a large portion of his or her salary to the TSP, and quickly works up to a salary of $100k, and then reaches $130k or possibly far more at the apex of her career, all while maxing out her TSP contributions, it begins to approximate this level of contribution. If an employee makes $120,000 per year, contributes the maximum $18,000 per year, and receives 5% agency matching, it comes to $2,000 per month in combined contributions.Īnd here’s how his or her inflation-adjusted TSP wealth could grow: Annual Rate of ReturnĪt this rate, hitting a million dollars is not just within reach it’s likely.Īdmittedly, this example is less realistic than the other two, because nobody starts at $120,000 per year. Many engineers, scientists, lawyers, and other highly-paid occupations in the federal government can achieve a six-figure salary quite early in their careers, potentially allowing for decades of savings at this rate or higher. A 7% annual return compounded over decades from a balanced portfolio focused primarily on equities is possible, but not guaranteed. Now, assuming an employee makes $100,000 per year, contributes 7% of their gross salary to the TSP, and receives 5% agency matching, here’s how his or her TSP wealth would grow based on different rates of return: Annual Rate of ReturnĪt this rate, hitting a million dollars in today’s purchasing power is just within reach. If their salary increases over time and they’re able to contribute more, they can bump their final total up quite a bit. Combined with a FERS pension, social security, and a mortgage-free home, that’s a solid place to be. This would be the equivalent of someone making $60,000 per year, contributing 5% into the TSP, and receiving 5% agency matching.Īt that level, reaching $1 million in terms of today’s purchasing power is unlikely, but reaching half a million is possible. If, through a combination of your monthly contribution and your agency matching you contribute only $500/month, adjusted for inflation over time, this is how much inflation-adjusted wealth you can accumulate before retirement based on different average rates of return: Annual Rate of Return Here are three examples for how a TSP account may grow over a federal career: Example 1: $500/Month Contributions
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