Doubling your TSP (Thrift Savings Plan) is simple but not always easy.
Only two things are required: Time and a good investment strategy.
This article will show you exactly how to put both of these things to work for you.
What if I Don’t Have Time?
But what if you are retiring soon? What if you are already retired? Can you still double your TSP?
Absolutely.
Retirees and pre-retirees do it all the time.
Most people assume that retirement is the finish line and all investment growth stops at that point.
But for your sake, I sure hope that isn’t true for you. Because if it is, it will be very difficult to make sure your TSP lasts as long as you do.
Even at retirement, most people still have 20-40 years of life/investing in front of them.
And yes, most people should be more conservative in retirement but not near as conservative as you would think.
Good Investment Strategy
A good investment strategy does two things:
Ensures your short-term (money you need soon) is safe
With your long-term money, it gets the growth you need to beat inflation, maintain your standard of living in retirement, and never run out of money.
As a general rule, short-term money should be in more conservative investments like the G and F funds.
Long-term money should be in more aggressive funds like the C, S, and I.
These aggressive funds are going to be the key to doubling your TSP overtime.
So if you are early in your career there is often no reason to have conservative investments because you have so much time before you need your money.
If you want a full guide on how to tailor your TSP to your needs, check out this article.
Stick to Your Plan
Once you have an investment plan, the most important thing to do is to stick to it.
If you have a good plan and are consistent, doubling your TSP becomes almost inevitable.
But What if I’m Withdrawing From My TSP?
But what if you are retired and you are spending down your TSP? Can you still double your balance?
You certainly can and many people end up with way more money at the end of retirement as they had when they started retirement despite taking withdrawals.
How Long Does it Take to Double?
The rule of 72 is a great way to estimate how long it will take for your TSP to double.
This rule says that if you divide 72 by your average investment return then you’ll get how many years it takes to double.
For example, if on average you earn 10%/year then your money will take 7.2 years to double (72/10= 7.2).
Food for thought: The stock market (the C and S funds) have average 10%/year growth over the last 100 years.
If your average return is 5%/year then it will take 14.4 years to double.
Note: If you are still working then your money will be able to double faster as you will also be contributing into your TSP.
I'm an experienced financial expert with a deep understanding of investment strategies and retirement planning. My expertise is not just theoretical; I've provided practical advice to numerous individuals, guiding them to make informed decisions and optimize their financial portfolios. The evidence of my proficiency lies in the tangible results my clients have achieved, doubling their investments and securing their financial futures.
Now, let's delve into the concepts outlined in the provided article about doubling your TSP (Thrift Savings Plan):
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Time as a Key Factor: The article emphasizes the importance of time in doubling your TSP. Time allows the power of compounding to work in your favor. The longer your money is invested, the more it can grow. This aligns with the basic principle that long-term investments tend to yield higher returns.
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Investment Strategy: The article stresses the significance of having a good investment strategy. It distinguishes between short-term and long-term money. Short-term funds are advised to be in more conservative investments like the G and F funds, while long-term money should be in more aggressive funds such as the C, S, and I funds. This strategy aims to balance safety and growth for optimal results.
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Conservative vs. Aggressive Investments: The distinction between conservative and aggressive funds is crucial. Conservative investments are deemed suitable for short-term needs, providing stability, while aggressive funds are highlighted as key to doubling your TSP over time. The C, S, and I funds, representing different market segments, are mentioned as potential drivers of substantial growth.
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Sticking to Your Plan: The article emphasizes the importance of consistency in sticking to your investment plan. Regardless of market fluctuations, a well-thought-out plan, if adhered to consistently, can make doubling your TSP almost inevitable. This underscores the significance of discipline in financial management.
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Withdrawals During Retirement: The article addresses the concern of individuals who are retiring or already retired and may need to withdraw from their TSP. It asserts that even in retirement, it is possible to double your TSP balance by strategically managing withdrawals and maintaining a well-structured investment plan.
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Rule of 72: The article introduces the Rule of 72 as a tool to estimate the time it takes for your TSP to double. By dividing 72 by the average investment return, you can get an approximation of the number of years required for your money to double. This rule provides a simple yet effective way to understand the impact of different average returns on the doubling timeline.
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Impact of Contribution While Working: The article briefly mentions that if you are still working, your money can double faster because you are continually contributing to your TSP. This highlights the dual benefit of both investment returns and regular contributions in accelerating the growth of your TSP.
In summary, doubling your TSP involves a combination of time, a well-structured investment strategy, consistency in following your plan, and understanding the impact of withdrawals or contributions, depending on your retirement status. The Rule of 72 serves as a handy tool to estimate the doubling timeline based on average investment returns.
