Delivered on: Thursday, May 21, 2026

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The Playbook to $1 Million in the TSP

How to control the game—and not blow it when the stakes are high

• PLAYBOOK: Decisions available to you to put points on the board
• FOULS: Poor choices that stunt your gameday performance
• MINDSET: Channeling your thinking (and behavior) on the field

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Prefer to read instead? A Transcript of this Webinar is Below:

Welcome everyone to today's FedImpact webinar on the playbook to $1 million in the TSP. As you might imagine, this topic tends to draw out quite a number of federal employees regardless of where they are in their career. Those people who are really close to retirement are curious, do I still have a fighting chance to get to my goal in TSP?

And those younger people are thinking, wow, I've got my whole career ahead of me. What can I be doing to really set myself up right? Wherever you are on that spectrum, I welcome you today. And listen, a million might not be your number. I'm using this a little bit loosely to be able to give everyone an idea of what it looks like to be able to achieve financial goals inside the TSP and what it's going to take.

We're using a million because that is what is stuck in the head of so many employees. Yours may be higher to maintain the standard of living that you want in retirement. Yours may be lower as well based on other assets or just the goals that you have. Whatever your number is, this webinar is for you.

You guys know me real quick. I'm Chris Kowalik, the founder of ProFeds. I'm really lucky that I have the opportunity to be able to do sessions like this where we get to do a deeper dive into a topic that sometimes we just don't have the time to be able to do in our retirement workshops where we're in person.

And so I love the opportunity to be able to do the deeper dive with federal employees each month on these sessions. The playbook to $1 million in the TSP, How to Control the Game and Not Blow it when the stakes are high.

I'm going to guess for most of you, aside from perhaps your home, your TSP is likely your biggest asset that you are taking in retirement. It is critical that we do all the things necessary to build up and protect that thrift savings plan so that when you need money from it to live the retirement that you have in mind, the money is there for you.

The Playbook to $1 Million in the TSP

Today's session is going to talk about the buildup, not the preservation of the money, but the buildup of the money that you take into retirement. The other side of this game is how do you make sure that the money that you've saved doesn't get dwindled away too quickly in retirement?

That is not going to be covered in today's session. This is all about the buildup.

Agenda

For our agenda today, we've kind of got three different areas that we're going to focus on and we're not going to do this in a linear fashion.

This is all going to kind of be woven in together, but we're going to talk about the playbook. These are decisions that you have available to you inside the TSP to put points on the board. If we are trying to get the TSP to the level that we want, whether it's a million dollars or whatever your number might be, there are key things that need to happen to allow your money to get to that level.

We're going to put that in the framework of a playbook so that you can see how different decisions affect the outcome. Next are fouls. These are poor choices that stunt your game day performance. We of course can rattle off lots of fouls or penalties that you might get on your money, but we'll also sprinkle those throughout the slides where we're talking about the different decisions that are available to you as well of when those decisions might go awry.

And then lastly is mindset and that is channeling your thinking and more so your behavior on the field. For those sports fans out there, we're going to have a litle bit of fun with our sports analogy today. For those of you who aren't sports fans, I hope you'll pretend to be one for the next hour or so.

I'll try not to overdo it, but I think if we can have a little bit of a lighter conversation by using an analogy of sports, I think we can help soften the scariness of the TSP and all these decisions that we're making. I just want an opportunity to have a little bit of fun with you guys today.

Our Objective

Our objective in today's webinar is to help you to see the levers of control that you have in the Thrift Savings Plan. I think for a lot of employees, it feels as though you make a couple of decisions, but everything seems out of control for you and it's actually not true.

You have way more control than I think you probably can appreciate. We're going to be honing in on those levers and see what we can do to influence the plays along the way.

What this webinar will NOT cover

I would be remiss if I didn't talk about what this webinar will not cover. This is not your get rich quick on decision changes everything kind of webinar.

That's not the way any of this works and this certainly isn't a one size fits all. We're not going to be able to give advice on which funds you should be in. I would offer anyone who chooses to do that over a webinar setting, somebody who doesn't know you, doesn't know your full financial picture, should not be giving that kind of advice to you.

But I hope that you'll listen to what we have to share with you with open ears and an open mind so that you can really absorb the message that we're giving you today and not get hung up on some of the mechanics or the tactical elements of this, but really soaking in the bigger message.

Based on the questions that you all submitted when you registered for today's session, there are a number of, I'll say ancillary topics that you all were asking about that we are not going to cover in today's session.

But when I looked through all of the questions, there were some themes and I want to give you some resources that you can access after today's session. All of these are in your handouts.

Grab a copy of that handout. Of course, this is going to be in the replay as well. You're going to be able to get to these sessions. All of our webinar replays are open for you to go back and watch, but I've chosen these five because they align with a lot of questions that came in. You'll notice, of course, some of these have to do with, do I do traditional or Roth?

What happens in retirement? Those required minimum distributions? How do I get money out of my TSP? Should I be doing lifecycle funds? We'll talk a little bit about lifecycle funds today and then that mutual fund window. How does that thing work? Should I be doing that?

I wanted to give this framework of some of these replays so that you have easy access to these, but of course you can access all of our webinar replays on all of our topics by going to fedimpact.com/webinar.

Training Camp

Welcome to Training Camp. We have a lot to cover today.

I think it's important as we're thinking about how to get warmed up and get started in our season of developing this playbook and figuring out what we need to be doing on our retirement journey here, that we cover a couple of really important things right here upfront.

A Winning Ming Set

The first is how to show up with a winning mindset. I need you to know that what I'm about to share with you today is simple. It's just not easy. You're going to see some math problems, right? I'm not actually going to show you the equations because nobody wants to do that.

But what I need you to understand is investing is math and the math problem itself is actually quite simple. It's just not easy to do in practice. The next winning mindset is to take full ownership over the end result.

This goes to the ProFeds planning principles that we released, gosh, several years ago and that is that no one should care more about your retirement than you do. You have to take ownership of what this is going to look like and what your role in it is so that you can control as much as possible.

The next is put in the reps, do the work. We can't show up for game day ill-prepared, right? We have to show up to practice. We have to listen to guidance. We have to do it and do it again and again and again. Those are the reps that need to happen and you're going to see some of that rep language referenced in the contributions to TSP.

How do we do things consistently to give ourselves a fighting chance to get to the goals that we want? Next is manage your reactions on the field. You know what? When it comes to the stock market or any financial matter for that perspective, you have to manage your reactions to when things don't go your way.

What's that look like? And I mentioned with respect to what we're not going to cover today in the webinar and that is this isn't a get rich quickly scheme or a plan, but I want you to be open-minded to the idea of being willing to get rich slowly and it's not quite as sexy as get rich quick, but this idea that we have an opportunity by doing the hard work over a long period of time to get the reward that we want.

And for some of you, that might be a relief. A relief that there isn't some magic formula, there's no lucky wand that you need to figure out how to find.

This is slow and steady wins the race. It's possible to be too slow in this race and we'll talk about that today too, but the idea that you have it in you step by step, little by little to grow this thing that you call your TSP, but it doesn't happen overnight and there is no magic sauce.

I want you to remember the harder you work, the luckier you get. You're going to work hard today as far as kind of flexing some of those muscles with respect to how you think about your thrift savings plan and the actions that you take inside this account.

Perspective of the Game

The next is perspective of the game. Here we're still in training camp. I need everybody on this call to realize that everyone's version of winning is different.

Some of you might be retiring in your early 50s. Some of you might be in your 70s when you decide to retire. Some of you need a million dollars in your TSP. Others need multimillions. Some a million is more than you could ever imagine having in this account and maybe you don't feel like you need that much.

Everybody's version of winning is different. But what we do know is when it comes to investing, sitting on the sidelines and specifically your money sitting on the sidelines won't win you the game. Your money needs to be in the fight and the way to do it is to get it inside investment programs like the Thrift Savings Plan.

Today we're going to talk about how to put your money to good use inside the game, get it off the sidelines and get it working for you. With respect to keeping score, players always glance at that scoreboard.

They know exactly what the score of the game is. All the elements, regardless whether it's football, baseball, hockey, we know that there is a score, but we can't spend the whole game staring at the scoreboard. Instead, we have to focus our attention on doing the actual work that puts the points on the board so we can't obsess over the scoreboard.

We want to keep an eye on it. Glance at it every once in a while and that's your TSP statement, guys. But what I want you to focus on is refocusing your energy to put the points on the board. Do the things that are going to allow your TSP account to grow in a way that feels right to you.

I don't want you relying on Hail Mary passes that come out of nowhere and win the game. Those don't happen too often and there's risk.

There's a lot of risk in relying on Hail Mary passes and I don't think that most of you want to be in that game. And here's the final thing that I'll leave you with with respect to the perspective of the game. Rookie mistakes or rookie moves can cost you the game.

You owe it to yourself to have a clear view of all the different levers in the TSP and what you can do to control each of those levers along the way. Rookies don't always know all of those levers, but you have an opportunity if you're in absorption mode today to be able to get that under your belt.

The 3 Offensive Moves of Investing

Let's jump into the three offensive moves of investing. For some of you, this may be a little bit of review, but we're going to dive a bit deeper into each of these, but wanted to lay a good foundation for today's session. The first is contributions. Like I mentioned, this is consistently putting points on the board.

Growth are the opportunities for the big plays and time is the game clock countdown. We have all three of these levers, these offensive moves, if you will, that we can control the outcome of this game.

Let's start with contributions. How much to contribute and when? For TSP, federal employees know that there is a limit to how much they're able to contribute to the TSP each year. That limit is set by the IRS and that's true for both TSP and other accounts like 401k style plans.

Regular contributions, all employees may contribute up to $24,500 per year. It does not matter how much you make, you are allowed to contribute 24,500. Certain employees are also eligible for catch-up contributions and it has to do with how old you are on December 31st of 2026.

If you will be between 50 and 59 years old or 64 or older, you are allowed to contribute an additional $8,000 on top of the 24,500 that every employee is able to contribute.

You're looking at a total of 32,500 per year. If you happen to be in that age window where on December 31st you are going to be aged 60 to 63 instead of that $8,000 a year, you're actually able to contribute $11,250 of extra contribution on top of the 24,500.

You're looking at a total of 35,750 per year. If you happen to be in that 60 to 63 range, make sure that in the year you turn 64, that you go in and reduce that back down to the 8,000 level so that you don't end up over contributing into the TSP.

How much to contribute and when?

When it comes to how much you can contribute, for some of you, you've been maxing out these numbers for a long time. For others of you, especially if you're earlier in your career and your pay may not quite be at that full capacity, you may not be able to get here yet.

We want you to have your eyes on these numbers so that you know what they are and what to aspire to, but it's not uncommon for employees to not be able to quite reach this level at various points in their career. In addition to the employee's contribution, we also have the agency's contribution.

This is just for FERS employees. If we have any CSRS who are listening today know that this is not part of your plan. Employees can receive a match from their agency based on the employee's contribution level.

No matter what, the agency is going to contribute 1% of your salary into your TSP account regardless of how much you decide to put into your account. For the other matching 4% that is available, you can only receive that full 4% if you also put in 5% of your salary.

A total of 5% from you and 5% from your agency. It looks like a dollar for dollar match, although part of it is automatic and the other gets matched when you make those contributions. That's a pretty amazing thing. You're going to see this play out in a couple of our examples today of the value of your agency's contribution into your TSP.

It's worth noting that the contribution that your agency is making to your Thrift Savings Plan account does not count towards the annual contribution limits that we reviewed on the previous slide.

That number that's set by the IRS as far as how much you're able to contribute is contributions directly from you. It does not include any of the match that your agency puts in. This is gravy for you on top of what the IRS has allowed.

Timing Your Contribution

Let's talk about timing your contributions. Trying to time the market is dangerous. Most of you have heard the phrase smart investing is more about time in the market than timing the market, and that's very true. Instead of trying to time the market to pick the perfect time to be able to invest, I encourage you to just invest regularly and consistently and use this concept called dollar cost averaging.

We'll talk more about this. I'll show you an example here in just a moment. But I first learned about dollar cost averaging with a financial planning firm that I worked with when I was in the military and I remember that the concept seemed so obvious, but it also seemed like magic.

Let me explain what it looks like. In the dollar cost averaging model, an investor invests the same amount regardless of market conditions. They're going to do that over and over and over again. And the idea is that you buy fewer shares when the prices are high and you buy more of them when the prices are low.

It's kind of like going to Costco, right? We're going to have some deals and able to buy shares at a cheaper price. And the overall objective, the long-term objective with dollar cost averaging is that you buy shares at an average cost below the average price and if that's making you scratch your head, you're not alone.

I remember having a hard time getting my brain wrapped around this until I saw an example that we'll cover here in a moment.

But this blue box down here at the bottom is important. Dollar cost averaging is not something you sign up for in the TSP. It's just something that automatically happens, right? You naturally benefit from dollar cost averaging in the TSP because you regularly contribute a consistent amount.

Sure, you can go in and modify the amount that you're contributing, but you're not dumping in $5,000 one pay period and then nothing the next pay period and another thousand the following pay period. You're setting your amount and for the most part it's pretty darn consistent until you go in and make a modification or your pay changes.

You already get to get this so you don't have to sign up for anything. There's no special setting in the TSP. This happens automatically.

Like I mentioned, the first time I heard about dollar cost averaging, I was in the Marine Corps and I had a friend of mine, we happened to be having lunch and he pulled out a cocktail napkin and he just drew a little thing on there and he tried to explain this and I thought, “Man, this seems so slick so I'm going to do my best to share this with you today.”

This is representative of the market going up, the market going down and the market returning to where it started.

Along the left-hand side, you'll see the price per share. We're just going to make this easy going from one to $5 a share. This is not representative of what's actually happening in the TSP, just an idea Your share price in TSP will be largely different than this, but the concept is still the same. Along the bottom, you're going to see the months of investing.

What we're going to do in this example is we are going to invest the same amount of money nine months in a row and as the market fluctuates, the market starts at one level, it goes up, it goes back down, falls below where we started and then returns back to the baseline. We're going to evaluate what's happening along the way and if we achieved our objective of dollar cost averaging of having a cost lower than the actual price.

Here's what this looks like. Let's say that you invest $300 a month for nine months, at this point we have in month number one, that $300 buys you 100 shares at $3 a piece. That's the going rate in month number one for the shares, $3 a share.

You've been able to amass a hundred shares. In the second month, the market goes up. We should be happy, but look to what happened to the number of shares that you could purchase. You could only purchase 75 of them because they're now $4 a piece.

And remember, we're going to consistently invest $300 a month and so that only goes so far. In month number three, we should be elated because look at how much the market has gone up. Not so.

We can now only purchase 60 shares with our $300 investment in month number three. You'll see in four and five we start to come back down to where we started. We're back down at the $3 baseline and then the market keeps going down.

And so in month number six, the share price falls to $2 a share. But look what happens. We're actually able to gobble up 150 shares that month, right? $300, $2 a share, 150 shares. That's amazing because eventually those shares are going to be worth more, but right now when we purchase them, their value's low.

In month number seven, at least in this example, we hit rock bottom, we're at a dollar a share. So the $300 that we contribute is able to buy us exactly 300 shares in the account. In month number eight and nine, we of course have rebounded back to the original share price of $3 a share.

Something I want to just appreciate here is over these nine months we have invested three times at exactly $3 a share. We have invested three times above $3 and three times below $3, all in equal increments. But when we add up the number of shares that we've been able to purchase over these nine months, we come up with 1,110 shares.

You see that illustrated in the upper right hand box. It costs us $2,700, that's how much we've invested and we've purchased 1,110 shares, but there's something important I want to just cover with everybody before we get into the analysis of whether we made a good deal or not.

And that is in month number three, when the market is high, at least in this example, we should feel really great, but in reality, we don't feel great because everything we just bought seemed inflated in price, right?

It was more expensive to buy in month number three and so instead of buying $100 a share, we could only buy 60 and the inverse is true in month number seven where it looks like the market tanked and in reality it did a little bit, but in month number seven, we were able to buy 300 shares because they were on sale.

I want you to appreciate how we're taught to think about the market when the market goes up, it's like, “Yes, this is great.” And when the market goes down, we're like, “Boo.” We actually need to flip the script on that. We need to appreciate that when we're buying shares, we don't mind when the market is suppressed because that means the shares are on sale and we can buy more of them at a cheaper price.

Of course, we need the market's ups and downs because people are at different stages in their career. They may not be in a position where they're buying more shares and continuing to invest.

Perhaps they're selling shares and they want the value to be high. And then of course at that point we want to rally for the big market highs because we want to sell when the value of the share is high, but it feels different based on where you are as an investor in this process. Let's do a little bit of an analysis on how we did based on our objective.

The average price per share that we had that we bought at was $3. If you take every one of these trades and you average them out, they're $3 a share.

That's the price The cost is actually what we paid for them. That seems probably a little foreign to think about it that way, but the cost per share is $2.43. The reason this happened is because when the market went up, we restricted the number of shares we bought that were expensive and when the market went down, we gobbled up a lot more.

And so when we average it all out, we end up making a really good deal. Instead of paying $3 a share on average, we paid an average cost of $2.43. And we got that 243 by taking the $2,700 that we had invested and divided it by the number of shares that we purchased, 1,110 and that gives us $2.43 per share.

Kind of an interesting concept here. Remember as federal employees, you already get to participate in dollar cost averaging. There's no special setting, there's no election that you make.

This automatically happens, but it's what has allowed many of you who have been investing over a long period of time to amass a good amount of wealth in the TSP because of this very concept that was running behind the scenes.

Increasing Your Contributions

It's natural over time as your career progress to increase the contributions that you make to the Thrift Savings Plan and frankly other investments that you may have as well.

When employees get annual pay raises, maybe you get a step increase, you get promoted to a different pay grade. Perhaps your spouse gets a higher paying job or you're able to decrease household expenses. You've paid off a big loan that a bunch of money was going to.

Now that's freed up in your budget. Can you redirect that back to the TSP?

And so lots of ways that you can look to keep increasing those contributions to the TSP until you hit the right level for you. For many of you, that's maxing out the TSP. Others of you perhaps have other types of investments that you're contributing to as well.

The answer isn't for everyone to max out the TSP, but the TSP is a great vehicle to be able to amass a lot of wealth because of the allowances for how much you can contribute to that account.

And I would encourage you find the ways to fund the TSP and get more into this account or accounts like it because your future self will thank you for it, I promise.

How much can this grow?

Let's talk about how much this can grow. We talked about the contributions. We have to think of how quickly that money is going to be able to grow and then we'll talk about the time that we're going to need.

How Investors Handle Risk

In this section we're going to talk a little bit more about risk. There are kind of interesting relationships that people have with risk. Some are risk takers, thrill seekers, if you will. Others want to avoid risk at all cost. We're going to talk about both sides.

When it comes to how investors handle risk, there is a difference between risk tolerance and risk capacity and it's important that you understand the difference. Risk tolerance is all in your head. It is simply an investor's psychological willingness to endure the market's volatility in exchange for potentially higher returns. In other words, can you stomach the losses for the thrill of the gain?

That's what risk tolerance is. Risk capacity on the other hand is an investor's financial ability to absorb a loss without it affecting them in any kind of meaningful way. It's not going to derail their financial plan. It's not tying up all of their money. They're diversified. They have liquidity.

They have access to money if they need it and this account can be more risky. And this account, meaning whatever account we're talking about, not necessarily TSP, but whatever the investment is, perhaps the investor says, “I can choose to be way riskier with this because even if I lose it, even temporarily, it's just not going to affect me in any kind of crazy way.”

Most of the time when we're thinking about risk, we're thinking of that risk tolerance and that is that gut reaction. When the market goes down, are you cheering like, “Woo, look at all these shares I'm buying on sale.” Or are you like, “Oh my gosh, the world's coming down and I have to hurry up and sell.” Those are very different psychological reactions to the market's ups and downs.

These different appetites for taking risk is really inherent through various investors. Everyone's going to feel different when it comes to risk. And I think it's interesting the colors that we associate with risk because we always think of green is safe and red is risky, right?

Danger, danger over there. But the funny thing is that when you're a risky investor, it doesn't feel risky. It's just baked into your psychology of like, “Cool, this is where the opportunity is. ” It doesn't feel like this danger zone or if it is a danger zone and you recognize it as such, it's a thrilling danger zone and not a scary one.

It is kind of interesting how the viewpoint on risk is measured by different investors along the way. Just a little bit of a sidebar there, but I do find it incredibly fascinating how people handle risk.

Choose Your Funds

Let's talk about choosing your funds in the TSP. There are different funds available in the TSP and they all carry very different risks and rewards. We have the regular core funds in the TSP that include the GF, S&I. We're going to talk a little bit more about those as well as the lifecycle funds.

These lifecycle funds are a preset mixture of the regular funds that adjust as someone gets closer to retirement, a glide path if you will, that may be more aggressive when you're far away from retirement but starts to glide down into more of that safety zone as you get closer to needing the money.

It is very natural that as an investor gets closer to retirement, they tend to become more conservative in their fund choices. Not always.

There are plenty of people who still like to keep their foot on the gas as they are approaching that retirement window and even beyond, but for the most part, the average investor does start to get a little bit more panicked as they get close to needing the money because they're afraid that the market tanks right when they're going to need to access those funds, which makes sense.

Let's talk about the five funds. I'm not going to go into super great detail, but I want to make sure that everyone's familiar with what we're talking about here. The G Fund are our government securities fund. There is no quote index.

The word index refers to the market and so there's no index, it's just an interest rate based account and over time over the last 10 years, this is average 2.76%, roughly the same at that 20 year compound level as well. All these rates of return on the right hand side are there for you.

We're not going to go into great detail, but I am going to reference these in some of our case studies here in just a bit. The Fund is a mix of government and corporate bonds and it's indexed against Barclays Capital US Aggregate Bond Fund.

However that bond fund is performing, the Fund is going to mirror that largely. The C fund, the S fund and the I fund are the ones that are in the market. When we think of the stock market, CS&I is what we're talking about with respect to TSP. The C fund are large US companies and it's indexed against the S&P 500 index.

These are the 500 largest publicly traded companies in the United States stock market that are in the C fund. You don't have 500 companies split evenly throughout the S&P 500. There are ones that make up a bigger portion of the index, but it does represent the 500 largest publicly traded companies in the US stock market.

The S Fund is a mixture of small and medium size US companies and it's indexed against the Dow Jones, what we call the Total Stock Market Completion Index. That index looks at the entire US stock market minus the S&P 500.

It's everything else that's left that you're investing in with the S fund. And then lastly, we have the I fund, which are mostly large foreign stocks, foreign companies, it's indexed against Morgan Stanley's Capital International, all country world index.

Now by all country, we don't actually mean all countries because it excludes the US stock market, which is already represented in both the C and the S fund. It excludes China and Hong Kong. It's a pretty broad array and it's had a pretty killer year this year, but historically it has not.

If you're kind of curious how these funds have behaved over the last 10 years, I wish I could show you more. I just don't have any more room on the slide to be able to do it, but over the last 10 years we've got the rates of return for all five of the core funds.

In each year I have identified the fund that was the worst performing fund and put it in red and I've also identified the best performing fund in green. I'd like you to take a look at the G fund column. You'll notice that six of the last 10 years, the worst performing fund was the G fund.

In two of those years, it was the best performing fund, but not by much. We're not even breaking 3% for a rate of return when it was the front runner.

The Fund has never been in the last 10 years, it has not been the front runner on any of those years, but the C fund has been the front runner for four of the last 10 years. And when it's the front runner, it is the front runner, right? We've got some big returns happening in the C fund.

We also have some big losses. If we were to extend this table back to include 2008, 2009, you would see that the C fund suffered greatly during that time, which was no surprise to anyone who lived through that time as an investor.

But my point is the C fund really pulls out of the gate in a pretty remarkable way when it's the winner compared to the G fund who barely beats inflation. S fund and the I fund, similar story, any of those numbers that you see in parentheses are negative returns and so just to give you an idea of what you're looking at on this slide.

A lot of employees say, “Well, Chris, I don't know which one of these funds I should be invested in. Should there be like a mixture? How do I know what I'm supposed to do? ” I am the wrong person to ask that question of, but I can at least show you what the options are within the TSP that allow you to get more of a mixture than guessing.

Lifecycle Funds

So many years ago, the TSP created the lifecycle funds and I mentioned a few minutes ago that they are a mixture of the five regular funds that adjust automatically over a long period of time.

They used to be in 10 year increments and several years back they broke them into five year increments to get a little bit more dialed in and the objective of the life cycle funds is to strike an optimal balance between the expected risk and return of each fund.

As someone gets closer to the point that they're going to need the money, it's starting to get more and more conservative to preserve the asset and these were designed for you to put 100% of your TSP balance into one single lifecycle fund based on the year that you plan to begin taking the money from the TSP.

It doesn't mean you need all of the money at that time. Most people don't do a full withdrawal to spend it and it's also not necessarily based on the year in which you retire, although most of the time the year someone retires and the year someone begins taking money from the TSP are very closely aligned.

The lifecycle funds themselves do not actually have a rate of return, but we can create a rate of return based on the underlying performance of the GF, CS&I funds that the lifecycle funds are made from.

To give you an idea of what these look like, here are the 11 lifecycle funds that are currently active in the TSP.

Off to the far left hand side, you will notice something very bizarre. You might be thinking, “Chris, did you update your slide? Are you sure you're not missing something for those five lifecycle funds on the left? They all look identical.” And the answer is they are pretty much identical.

They don't start to diverge for many years, but eventually they're going to look just as different as the lifecycle funds that you see on the right hand side of the screen. We just need some time to pass for the changes to start happening in those lifecycle funds.

I want you to keep your eye at the very, very top of the 2075 fund. You'll notice it says 1%. If you look really closely, you can see that part of that is the G fund and part of that is the Fund and the rest of that portfolio is all in the market, C, S, and I, all the way.

If you keep your eye at the very top and go to the right hand side, you're going to see it continues to say 1% across the board until you get to the L2050 fund, you'll start to see the G fund and the F fund emerge and as those two get larger.

The portion of the account that's in the market, the C, S and I continue to shrink until eventually that fund looks like the L income fund where 67% of that portfolio is quote safe in the G Fund and we've got a little bit in bonds in the F fund and then the remainder of it being in the market still.

Even in the L income fund, participants can still lose money. Anytime there is money in the market, you have the opportunity to lose it just like you have the opportunity to gain on the other side.

The Rise and Fall of the TSP Funds

When it comes to the rise and fall of TSP funds, there are a couple things that I want to point out here because it's really easy to look at the high rates of return and say, “Yeah, put me in that one because I want to get a high return, but I want to give a little perspective here.

What I've done is I've taken $1 and I invested it in 2005 and I'm going to illustrate what this looks like if that $1 was in the G fund, what it would look like if that $1 were in the F fund and so on.

So $1 being put in the G fund in 2005, 20 years later would be worth a $1.75 It's barely kept pace with inflation so I don't know that we can call that a win. It's just bumped along. It's nice and safe.

You didn't quote lose any money out of the G fund, but you also didn't make any money on the G fund as far as what counts above and beyond inflation.

Compare and contrast that to the C fund, right? This is the S&P 500 fund. If that same dollar were invested in 2005 by 2025 it would have been worth $8.08 and then of course the other funds are operating somewhere in between.

I share this with you because I want you to see the power of compound interest by allowing that money to sit for a long period of time in an account that has a higher rate of return we can materialize a lot of great gains like you see in the C fund. But I want you to take a look at the line chart, all those colored lines that you see here and go between 2005 and 2010.

You see that dip? That was 2009, right? The market crashed nine, everything kind of all around that time was just a mess. So 2008, 2009 and then things start to recover, right?

Takes longer than we all had hoped for the market to recover, but finally it's back. And then you'll notice again in 2018 and again in 2022 where we have those downturns in the blue and green lines, the C and the S fund.

What you need to realize is that in order to get the big gains, you have to be willing to stomach the losses that happen in those types of accounts.

And if you are not of the mindset to stomach those losses, what would likely happen is that when the market goes down, especially if it's a sharp decline, you are likely to panic and leave the account when the value of those shares is very low and you are losing money for real when you do that. It's not a paper loss.

It's not something you just see on the statement. When you sell shares to cash out or to move to a different fund, it is an actual loss that you are taking when the market is down.

Very, very important to see this and just appreciate that not everybody can stomach the opportunity for the big reward because they can't get past that loss that is very possible.

And at the same time, asking a bigger risk taker to sit in the G fund bumping along for their whole career is painful, right? Everyone's going to have a different appetite, but if we're talking about big gains in the TSP or any other type of investment, sitting in an account like the G Fund will not get you there.

Reacting to the Market

Let's talk about reacting to the market. How you react depends on your investment stage. If you were just hired and you have 30 years ahead of you, you probably could care less what the market is doing. You're not even paying attention to it, right? It goes up, it goes down, it goes sideways.

You maybe don't even open your statements, no big deal. The question is, can you emotionally tolerate the ride long enough to experience the long-term growth?

And that younger person that has a long time before they plan to need this money can do just that. Not every young person wants to tolerate risk, but the further you are from needing that money, or the more detached you are to that money.

I's kind of out there like make believe money, like monopoly money, that you're just waiting to be able to capture later. What you do when the market is up or down matters.

We know we are supposed to buy low and sell high. We have known that for a long time. Why are we so happy when the market's up?

Well, as investors, as people actively buying shares, we should not be happy when the market is up. Shares are costing us more and vice versa. When the market goes down, we should high five ourselves because we're getting some shares at a cheap price or at least cheaper than when the market was doing its thing.

The market feels different whether we're buying shares or selling them. When it comes to your mindset on TSP or investing in general, we need to appreciate that different people have different perspectives on winning this game and what is happening in the market at that given moment in time is going to be met with a different reaction from different people.

We're on to the time part of the equation. Contributions growth and now we're on time.

How much time does your money have to grow?

Is it five years? Is it 20? Do you have 40 years to grow? Good Lord. Do you have 60 years to let your money grow? Everybody's got a different timeline and so whatever yours might be, I want you to keep that in mind here.

Recognizing the Value of Time

I want to talk a little bit about the value of time as it relates to investing because putting time on your side allows you to take advantage of this beautiful thing called compound interest. It's been said that it is the eighth wonder of the world. It is ridiculous how compound interest works, but it requires time.

And here are the things that kill compound interest. When you take a loan from your investments, you take your dogs out of the fight, so to speak. You take a distribution from your account. You're buying or selling at inopportune times. You procrastinate and don't even put your dollars in the fight.

They're not even in the game because you're afraid of maybe making a mistake or you don't feel like you have enough money. Compound can't even start until you do. But here's the deal. When we do our retirement workshops, the underlying current in that room is, I sure wish I would have started sooner.

If I'd have known then what I know now, I would have found a way to dump more money in the TSP. I would have found a way not to take crazy loans or rack up bad credit card debt. We all have some financial regrets and that's part of just growing up. But when we recognize the value of time and what it can transform in our portfolio, it's pretty impressive. I want to give you some examples here.

The Price of Procrastination

I want to look at the price of procrastination. When we do our normal retirement workshops, we don't teach these slides because it feels like a litle bit of salt in the wound for people who are really close to retirement and here we're telling them, “Well, here's what you should have done.”.

But in this particular session, because we have such a wide variety of different investors on the call, I wanted to bring some awareness to this price of procrastination. Here are the two scenarios we are going to look at. Mary is going to invest $10,000 a year from the age of 25 to 34 and then she's going to stop investing.

Sam is going to invest the same $10,000 a year, but he's going to wait until 35 to get started. So 35 to 44 and then he stops investing as well. Most of you are not doing this kind of thing in the TSP, but I want to make some easy math for everybody to be able to pull out some good learning here.

For both Mary and Sam, they have both invested in the same funds. They got the same interest rate. I realize that they were investing at different times in the market, but for purposes of this illustration, we're going to say that they got the same interest rate.

We're going to assume a modest 6%, nothing crazy. And both Mary and Sam are the same age and want to begin retirement at the age of 65. That's the scenario that we are looking at. We're going to evaluate by asking three questions at the end.

How much have they each invested? At 65, what is the value of each account, both the principal side and the growth that's happened on the account? And at 65, what was the real cost of procrastination?

Let's get started. We're going to talk about Mary first. Just as a reminder, from 25 to 34, she's going to put in $10,000 a year for a total of 100,000. From 35 to 64, she's not going to invest anything.

At 65, Mary would have had $100,000 of principal that went into the account. That was her initial contribution and there would be $726,000 of growth on that $100,000. And this is a modest 6%. I'm not talking about a 20% gain or anything like that. I'm talking normal 6% rate of return.

We now have a total in this account of $826,000 for Mary. Sam, on the other hand, has waited to start investing from 35 to 44, same $10,000 a year total of 100,000 that Sam has contributed. And if you remember from 45 to 64, Sam's not going to contribute anything we fast forward to 65, Sam has the exact same principle that Mary did at 100,000, but look at his growth. It's 354,000.

That's a pretty big difference between him and Mary all because Sam delayed starting investing for 10 years. He only has $454,000 in his account. Listen, this is still a lot of money, but I bet if Sam had a choice, he would have gone back and traded spots with Mary and done some things differently.

And frankly, Mary would have traded spots with the person before her and started investing sooner too. We need to put some numbers to all of this and I wanted to give a little bit of a visual illustration.

We're going to start on the left-hand side. From 25 to 35, this is when Sam was not investing and he's thinking, “Yeah, yeah, I know I probably should have been investing during that time. I could have probably found a way to invest $10,000 a year, but I didn't.

I guess I've lost out on that $10,000 that I could have put in there and the growth that happened on that money in that first 10 years.” And that growth over that period of time was $37,000 and that's what Sam thinks he's going Diving up, what he's missed out on by delaying his contributions to this investment program by 10 years.

But on the right-hand side, in the upper right-hand corner, looking at Mary's situation, Mary's account balance is 826,000 compared to Sam's 454,000. What we need Sam to understand is what he really missed out on was not the first 10 years of growth.

It was the last 10 years of growth because that's when that account blows up. We now have growth that he's lost out on in the last 10 years of his timeline. That growth equaled $372,000. I share this with you because Sam is way ahead of the game for the guy who wants to wait until 45 to start investing.

I'm not picking on Sam. Mary's not better than Sam. She just started sooner. And so we allowed the power of compound interest to happen whereas Little soldiers, his money was on the sidelines not playing in the game.

Hopefully this is helpful to you to get an idea of the real cost of procrastination. A couple of observations, both Mary and Sam invested the exact same amount of money, but it's that compound interest over that long period of time that made a significant difference.

If you wait to invest, compare what you might have given up in the first 10 years of contributions compared to what you really give up, which is the last 10 years of growth.

Case Studies

And I would offer to you between contributions, growth and time, time isn't just helpful. It is the multiplier on everything else. And remember, we want to help you realize how to get rich slowly. It happens over a long period of time and that's intended because of the power of compound interest.

At this point we're going to take a look at a couple of case studies, just a few examples to help illustrate some important points. We're going to do a little math here for everybody and so buckle up because there's a lot of numbers coming your way.

Case study #1

If an employee was to start from scratch, what would they need to do to reach $1 million in the TSP?

We're going to answer two questions. How much must they contribute each month and what average rate of return is required? You might have some numbers in mind.

Maybe you were 20, 25, 30 when you started working for the federal government. Depending on how old you are right now, you might be kind of gauging where you're at, but let's take a look at what the math tells us.

I just want to orient you here. How much must I invest each month to get to $1 million by the age of 65? On the left hand side, we answer the question, “What age am I starting at? I'm starting my investment journey. What age am I beginning that process?”

And then off to the right, you're going to see the different rates of return that you might choose. And I know you're not choosing the rate of return, you're choosing the investment that has a rate of return that while isn't guaranteed, could probably be expected based on historical performance.

Between two and 12% we have illustrated here. At 20 years old, if someone is going with a fund that does not have much of a rate of return, in fact, right around that inflation number of 2%, for them to reach a million dollars by 65, they have to invest 11.49 per month because they don't have the growth factor there.

They don't have the big returns that can happen. But what happens if they go to the 6%? That was the illustration that we gave for Mary and Sam. At that point, at a 6% rate of return, this 20 year old needs to put only $381 a month into that account.

If they really want to be risk takers and go out to that 10 or 12% level and really let it fly, they may be looking somewhere between 50 and $100 that they're having to put into that account each month because again, time is going to be on their side with a larger compounding interest with that higher rate of return.

You are naturally going to fall somewhere on this chart based on where you're starting from. I realize most of you have already started your investment journey, but many of you are curious like, what's the very best that I could do in this if I wanted to do it right from the beginning?

This is the table that you would follow. I'm not suggesting that you go out and pick one of these different rates of return and just go through it willy-nilly.

You need to be looking at the whole financial picture, but from a pure math standpoint, if we were to consistently get these rates of return over that 20-year period, that 40-year period, whatever it might be, between the time you start investing and the time you turn 65 in this example, that would get you to $1 million.

But again, most of you aren't starting over, but you may be looking at some other scenarios to kind of compare yourself against.

Case study #2

What if an employee contributed only 5% of their salary, so just enough to get the agency match over their whole career? What's that look like? Well, their starting salary in 2006 would have been about $67,000.

Their current salary is 100,000 again in our example here. They had a 20 year career and they've had historically 2% pay raises from 100,000 back to 67,000.

And I realize promotions and step increases and all that kind of muddy this math, but bear with me so that you can pick up on the learning here. If someone were to only contribute 5% over a 20 year career, this is what things would look like.

There's kind of a lot going on here. Let's follow kind of the G fund line here. If all of that money was invested in the G Fund, it has a rate of return over that 20 year period of 2.85%. The employe would have contributed $81,760 and that's true in all of these examples, GFCS and I.

The agency also contributed that amount. The employee put in 5%, the agency puts in 5%. Those two things combined grew to a growth number of 59,481 for a total of about $223,000.

That's pretty flat line, right? As far as the G Fund keeping up with inflation, so we've not really beat inflation by much. The C fund, on the other hand, I'm going to kind of go to the extreme here.

The C fund, all the normal things are true as far as how much the employee and the agency contributed, but we're going to put rocket fuel on this thing and put it in the C fund at 11% growth.

We now have the total growth in that account of 471,000 for a total of 635,000 as an ending balance and that's just for putting in 5% over a 20 year career. Many of you are looking to do way more and so I kind of want to look to the other extreme.

Case study #3

What if an employee contributed the maximum amount allowable by the IRS throughout their whole career?

Honestly, most employees can't do this. They don't make enough based on what the IRS is allowing them to contribute. They can't do without that much money, but we're going to pretend for this example that in fact this person was able to contribute the full amount right from the get go.

Same scenario in 2006, they had a salary of about 67,000 and by now they have a salary of 100,000. They had a 20 year career, same historical pay raises that we talked about before.

If they were to max out the TSP over a 20 year career, here's what we're looking at. Again, we're going to look at the G Fund first. The G Fund still has that 20 year rate of return of 2.85%. The employee has contributed $363,500 into that account. The agency still put in their 5%, so we're still looking at that 81,760.

We have a total amount of growth of $138,000. That's still respectable. Even though the G Fund hasn't performed all that well, it's still done something. We have a proximate ending balance of $583,000. But if we go to the C fund, that fund that performs 11% over the last 20 years, the employee put in the exact same dollar amount.

The agency put in the exact same dollar amount, but the growth on it by itself was over a million dollars, a total of $1.47 million in the C fund.

Listen, your salary might not be this high, it might be higher, you've probably not stuck in one fund for your whole career, but I wanted to give some perspective about what this can really look like and where some of the opportunities are if you can stomach the volatility.

Defensive Risks

We have to think of some of the defensive risks, the fouls, if you will, the penalties that we experience in the investment world. And by penalties, I'm not talking about the IRS penalties that you might be thinking about, but just the mismovements, the wrong steps that we might take that influence the final dollar amount.

A couple of things can keep you from reaching your TSP goals. The first that we've already covered was waiting too long to get started. We know Sam wishes he could trade places with Mary because the growth on that money being in the market for 10 more years was really quite phenomenal.

The second thing on this list is sitting in the G Fund too long. When someone has a long way to go before they plan to retire, sitting in the G Fund for a long period of time is really detrimental because we're not putting our dollars in the game for long term growth.

We're bumping it along in the G Fund for that flat growth that's happening that's not really moving the needle when in fact that is the point in our lifetime where we're far away from needing this money that most investors can stand to be way more risky and let that money fly.

Next is missing out on agency match. Man, whatever you have to do to be sure that you are contributing 5% of your salary every single pay period to ensure that you get free money from your agency, please do that.

That is a 100% return on your initial investment. No market will be able to beat that long term, make sure you're getting that free money from your agency.

Next setback is fear or panic in a volatile market. If the market tanks and that causes you to sell your shares because you're worried, you're panicked that the world is coming down on top of you, you are probably in the wrong fund to begin with.

Please don't let fear or panic scare you into making bad financial decisions.

Next is trying to time the market. We talked about this a little bit. It's more important to have time in the market than timing the market. That concept is a matter of how long you put your money in the game to do the important work it needs to do for you, which is to grow, to compound, to grow on top of itself.

That's what the compounding means. The money and the growth just keeps growing and growing and growing, but with it comes the opportunity for the market downturn, which is what you need to be careful about.

The next defensive risk or penalty, if you will, are taking loans because all your money is tied up in TSP. If you are pretty far away from retirement and the only savings or investment vehicle that you have is the thrift savings plan, we need to change something up.

We need to have an emergency fund so that when things come up in life that you have the ability to cover those without fearing that you are going to need to take money from your TSP.

You also need to appreciate that you may have short and medium range goals that don't take you into your 60s and beyond. Maybe you have some goals in your 40s and 50s that you need to plan for.

And so those are likely dollars that need to be outside of accounts like the TSP, maybe a brokerage account or something of that nature where you have more direct access to that money.

And then the last bullet on here, we actually haven't talked about this at all today and that is not realizing that the IRS owns some of your traditional TSP.

If you tell me you have a million dollars in your traditional TSP, I'm going to say, “Great, how much of that is yours?” And you're going to say, “What do you mean?

All of it's mine.” No, the IRS owns 20, 30, maybe 40% of that account, depends how you take it out, but we need to appreciate that when you've put your money in the game, you're actually scoring some points for the other team, right?

The IRS is going to get some of that gain too and that's just the name of the game with accounts like traditional TSP and traditional IRAs.

Wrap-Up & Next Steps

Millionaire outcomes don't come from comfort. People who amass a million dollars in the TSP or any other kind of investment do so from a consistent, regular basis.

Yeah, sure there may be some risk, there may be a lot of risks taken, but it's typically not the Hail Mary It's being able to grow slowly here and whether you like it or not, the scoreboard is always running. It doesn't stop.

Even when we have a man down on the field, the scoreboard's still going because time is going to keep ticking away and we want to make sure that our money, our players are in the game and becoming a TSP millionaire isn't about one lucky play, right?

It's not the Hail Mary that we talked about. It's controlling the clock, right? Putting time on your side, put points on the board that's contributing consistently over time and then let momentum build over time.

That's the growth part of this account. Most people focus on one lever, but wealthy federal employees learn to control all three of them, not letting procrastination get in the way, finding ways to contribute more to their investments, again, whether it's TSP or otherwise, and then letting time be on their side to make all of this work.

I am so delighted that you all have joined us today.You know we do retirement planning and retirement training all over the country.

These are in- person retirement sessions. A good number of you, I checked a good number of you have not come to one of our retirement workshops yet.

Now is the time because if you think you want time on your side for the TSP, you're really going to want time on your side for financial planning discussions to make the very most of your federal career. These in- person sessions happen at no cost to you as the employee.

These are sponsored sessions so the fee has already been paid to have the session in your local community and we're going to cover all of the federal benefits topics and those decisions that are going to need to be made as you approach that retirement window.

One of my favorite parts of the retirement workshop is following the class, you are going to have an opportunity for some one-on-one help if you'd like that help.

You're going to get a benefits report that's going to illustrate how your numbers are going to behave over time that you can begin using to open up that conversation about the planning needs that you really have.

You can see all of the details of those retirement workshops by going to fedimpact.com/attend. Thank you so very much for joining us. I hope that you found this topic to be helpful.

I had a lot of fun putting this together and bringing these case studies together to help you understand where the math in the TSP can get you to that million dollar point.

Remember you can find a workshop by going to fedimpact.com/attend and to attend the next webinar or to see all of the replays of past webinars, you can go to fedimpact.com/webinar. Thank you so much. We'll see you next time.

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