Fed Gov't Thrift Savings Plan

Investing Strategies Retirement Investing
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… is minting millionaires hand over fist. The TSP has long featured some of the lowest expense ratios available to retirement investors. Minimize the “skim” over 30 or 40 years, and good things happen.

Move over, crypto. A record number of workers are becoming millionaires with their boring 401(k)s and IRAs.
https://www.washingtonpost.com/business/2022/02/18/fidelity-…

No, many current millionaires are government workers, civil servants, educators, military service members (or retired military), managers or co-workers clocking in just like you, leaving at the end of a shift to run and pick up their kids from school. Many never earned six-figure salaries.

They’ve been investing for nearly three decades, taking every dollar offered by their employers in matching retirement plan contributions. They also don’t cash out their retirement savings when they change jobs.

And, most importantly, they didn’t let a pandemic or the related economic problems, or skittish investors, scare them away from the stock market.

intercst

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This might be more a function of how much gets invested and the generosity of public pension plans. In Western Pennsylvania, the two retired public school teacher couple are the new “millionaires”. And while their pension won’t get passed to heirs, they are generally inflation protected. They don’t have to worry about SWRs and market collapses. And a lot of the borrowed US government Covid money found it’s way to shoring up public pensions.

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And a lot of the borrowed US government Covid money found it’s way to shoring up public pensions.

Can you supply a link to a report that supports this? Thanks.

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And a lot of the borrowed US government Covid money found it’s way to shoring up public pensions.

https://www.nytimes.com/2021/03/07/business/dealbook/bailout…

But here is what happens if a pension fails.

https://money.usnews.com/money/blogs/planning-to-retire/2012…

Most people walk away with their full pension regardless.

Andy

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Public pension funds usually feature high fees and commissions that make Wall Street’s 2% per annum average seem like a bargain. If these pension funds had been invested in low-fee index funds for the past 30 or 40 years, they’d have twice as much in assets, and fewer of them would be underfunded.

Minimizing the “skim” cures a lot of ills.

intercst

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I’ve been in and out of a federal job multiple times and yeah we have a few people recently retired with $2M+ in their 401K plan simply due to maintaining a consistent contribution and leaving it in the stock fund. One of them wasn’t any kind of high level employee. I think he retired as a GS13.

Of course the last few decades have been good for the market, we’ll see how it is going forward.

I did a quick run at portfolio visualizer with a time frame running from 1985 to 2022. If you started with $1,000 in the market and contributed $5K per year ($2.5K by you and another $2.5K by your company) you would have ended up with $1.57M. That is assuming a constant contribution and not increasing it based on inflation, salary increases, etc.

The federal government pension and 401K contributions are solid but nothing exceptionally generous compared to well paid jobs in other companies.

401K
The government gives you 1% automatically.
Then matches the next 3%
Then matches 50 cents per dollar for the next 2%.
So they will give you 5% if you put in 5%.

Many places, especially tech jobs are more generous. I know even my somewhat stingy previous company gave us 6% regardless of what we put in and had no vesting time.

Pension
1% per year times years of service times average high 3 year salary.

So if someone retires with 35 years of service they get 35% of their salary in retirement.
Older folks like me only have to pay 0.85% towards the pension, newer hires have to contribute 4.4% of their pay. Many of the new hires view that as a big negative since they don’t anticipate retiring from the government.

(The old CSRS was phased out and I was not eligible for it even though I started way back in 1985. That one people didn’t pay nor received social security but did earn 2% per year for retirement so at 55 if they had 35 years of service would get 70% of their salary as a pension.)

There are differences if you have some kind of special government job like law enforcement/FBI/etc. I used to hear people saying to me “Well you can retire after 20 years”. No, that is the military or those in the other special occupations. Generally the federal retirement system allows you to retire w/o penalty at a minimum retirement age (for most it is between 56-57) and 30 years of service. Of at 60 and 20 years or 62 and 5 years.

For those who just contributed, ignored the ups/downs of the market, the last few decades rewarded them generously.

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Public pension funds usually feature high fees and commissions that make Wall Street’s 2% per annum average seem like a bargain. If these pension funds had been invested in low-fee index funds for the past 30 or 40 years, they’d have twice as much in assets, and fewer of them would be underfunded.

You seem to think that the primary purpose of public pension funds is for the benefit of the workers. Bet you think the same of, for example, the Teamsters Union pension fund.

That’s cute.

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According to the NYT article approx. 4.5% went to keeping multi-employer pension plans. The bailout seemed to be for pensions of companies. There was no mention in the article of public employee pensions. Maybe I misunderstood, but I thought it was being claimed that public employee pensions were being shored up.

https://www.nytimes.com/2021/03/07/business/dealbook/bailout…
Rather, the $86 billion is a taxpayer bailout for about 185 union pension plans that are so close to collapse that without the rescue, more than a million retired truck drivers, retail clerks, builders and others could be forced to forgo retirement income.

The bailout targets multiemployer pension plans, which bring groups of companies together with a union to provide guaranteed benefits.

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According to the NYT article approx. 4.5% went to keeping multi-employer pension plans. The bailout seemed to be for pensions of companies. There was no mention in the article of public employee pensions. Maybe I misunderstood, but I thought it was being claimed that public employee pensions were being shored up.

Oh, but you forget that the private employer pensions that were bailed out would have become “public pensions” if the PBGC had to take them over, right? So, in this world of alternative facts, that means that those private employer pensions must currently be public pensions, at least in the minds of people who believe in alternative facts.

AJ

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:rofl:

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PucksFool,

The bailout seemed to be for pensions of companies. There was no mention in the article of public employee pensions.

That’s true. It didn’t go to public pension funds. That’s right-wing disinformation.

intercst

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That was why I asked Daryll44 for a citation for their claim.

They have not provided one. I am beginning to think that they won’t.

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I would be interested to see a breakdown of TSP millionaires who reached 7 figures entirely inside the TSP vs those who retired from civil service/military, started a second career with a salary bump & a generous 401K and later did a rollover of their civilian 401k into the TSP.

Military retirees typically leave active duty in their 40s & most work another 20-25 years in a second career.
Civil service retirement is about a decade later, mid-50s, which still leaves about 10+ years of maxing out a 401k prior to ‘normal’ retirement age.

The TSP is well known for allowing retired participants to continue to roll 401k money into the TSP after leaving government service.

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That was why I asked Daryll44 for a citation for their claim.

They have not provided one. I am beginning to think that they won’t.</>

My preferred pronoun is “he”. That being said, I fully fess that I cannot find said citation of direct Covid funds used for public pensions. But all of this money flowing into state coffers makes it easier for states to deal with pension funding issues. Money is fungible. All of this borrowing, frankly since Bush2 doubled the debt, Obama doubled it again and Trump-Biden continuing the party, is unsustainable free money borrowed from our grandkids and/or paid for via inflation. It greased the system, temporarily. But now the Piper is showing up in the form of a rock (need to raise rates to contain inflation) and a hard place (can’t raise rates because it raises the cost of servicing the $30T federal debt that’s now 100% debt to GDP).

So I fess that I can’t find what you want but stand by my “big picture” observation about all this printing and borrowing.

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Thanks for getting back on this.

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Thanks for getting back on this.

I think that part of an honest intellectual discussion is not just disappearing when proven wrong. So here I am!

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I think you guys are misunderstanding the article.

According to the NYT article approx. 4.5% went to keeping multi-employer pension plans. The bailout seemed to be for pensions of companies. There was no mention in the article of public employee pensions. Maybe I misunderstood, but I thought it was being claimed that public employee pensions were being shored up.

Multi-employer pension plans are actually run by the unions. That would be like the Carpenters or the Teamsters who have multi-employers and multi-employees all under the same contract putting into a Union Pension fund.

There is basically two pension funds that union employees can have. One that is run by the company or the company employs a insurance company to run. Then you have the Multi-employer pension plans which are run by the unions. Usually large Corporations run their own and company’s that are small will be grouped into one group by the unions.

Than you have public employees who have their pensions negotiated by unions and then the pension is run by the state or Federal entity.

Andy

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I don’t think you have been proven wrong Daryll.

Andy

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buynholdisdead writes,

Multi-employer pension plans are actually run by the unions. That would be like the Carpenters or the Teamsters who have multi-employers and multi-employees all under the same contract putting into a Union Pension fund.

Multi-employer pension plans are still private pension plans, not taxpayer funded public employee plans.

Daryll’s assertion was that the COVID money was going to shore up public school teachers’ pensions in Western Pennsylvania, which is incorrect.

This might be more a function of how much gets invested and the generosity of public pension plans. In Western Pennsylvania, the two retired public school teacher couple are the new “millionaires”. And while their pension won’t get passed to heirs, they are generally inflation protected. They don’t have to worry about SWRs and market collapses. And a lot of the borrowed US government Covid money found it’s way to shoring up public pensions.

intercst

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I think you guys are misunderstanding the article.

Nope. Understood from the article that the plans that were bailed out were the multi-employer plans that were run by unions.

Not sure why you seem to think that just giving your understanding of what different types of pension plans are available to union employees supports your assertion that public pension plans were bailed out. As you point out, the plans for public employees are run by the state or Federal entity. They are not multi-employer plans run by the unions, which are the plans that were bailed out.

AJ

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