Weekly Newsletter: TSP
Weekly Newsletter: Imagine you had the opportunity to accumulate a half million dollars or more towards your retirement future and you passed it up. Who doesn’t dream of winning a lottery and suddenly having all the money you will ever need and more to take care of yourself and your family. So if someone handed you a jackpot lottery ticket with no strings attached, would you take it or leave it?
You’d gladly take it and smile all the way to the bank. Well when you fail to take advantage of the benefits of your TSP it’s like turning down a winning lottery ticket. The difference being, however, that your chances of getting a winning lottery ticket are pretty slim, but you are guaranteed to win when you take full advantage of the benefits of your TSP.
Some of our readers will say – hold on a minute, what about the money I lost in the TSP during the economic crisis. If most of your money was invested in vehicles dependent on the market which carries a degree of risk, then you faced a period of uncertainty as you watched your money decrease as opposed to increasing.
The TSP on the other hand has a vehicle in the G Fund that is pretty much guaranteed not to lose money for those individuals who are absolutely adverse to risk. But back to the drawing board, all things being equal, participating in the TSP is one of the best decisions you will ever make.
You have a partner who will deposit money at 1% automatically into your account even if you don’t invest one dime. You are only obligated to stay the course for 3 years and then the money is yours. Additionally, if you contribute up to the maximum IRC allowed limit, $17,500 for 2014, then your agency will match dollar-for-dollar for the first 3% of your base earnings each biweekly pay period and then $.50 on the dollar for the remaining 2% of your base earnings.
Where else are you going to find a partner in the world of high finance who will grant you such a marvelous deal towards living in comfort and security in retirement?
*The $17,500 you contribute during 26 pay periods in a year could easily morph into an estimated $22,000 per year with the agency’s contributions. In other words, the agency could theoretically add an additional $4,000 to your annual contribution of $17,500. Without even considering the extra cushion from earnings and the change in the IRC limits, you could based on this very-loosely drawn scenario, amass more than a half-million dollars over the life-time of your career (20-30 year work history).
You’ve hit the jackpot and you have not even accounted for interest earnings. In addition, you didn’t have to buy lottery tickets and hope you would win, counting odds of about a million to one or more. You need only to fully participate in your TSP and reap the rewards. You can live like a millionaire without having lottery odds stacked against you.
Think about it – the odds of you winning are always in your favor when you choose TSP as your ticket to retiring well. This concludes our weekly newsletter.
P.S. Always Remember to Share What you Know
Dianna Tafazoli
*The figures used in the scenario are used only for illustrative purposes.
