Do You Want to Know the Value of the TSP at Military Retirement and at Age 59 1/2?

MAJ Ken Landgren — Thu, 24 Dec 2015 18:04:43 -0500

I figured many folks will appreciate the number crunching:

The Defense Department said service members enrolled in the revised TSP would initially receive matching contributions of 1 percent of his or her basic pay. They would be fully vested after two years of service and eligible for additional matching contributions of up to 5 percent after four years of service. The maximum annual contribution is $1500/month. I will provide an analysis of its worth upon the age of 59 1/2 later. One has to crunch the numbers to see the limitations and benefits of this program.

The funds 10 years average rate of returns are G 3.19%, F 4.89%, C 7.72%, S 9.44%, I 4.58%.

Some assumptions recruit is 18 and retires at 38. He/she contributes full amount of $1500/month and stops adding money to the TSP at 38 for retirement. 7.72% will be used. The military matches 5% of the investment This is a traditional IRA and is subject to tax upon withdrawal. From the age of 38-60, there will be no more contributions.

At 38 the value of the fund is $563,332
At 60 the value of the fund is $1,375,056

I want to note the C, S, I funds lost almost 40% in 2008. Most of the burden of funding the TSP falls on the SM.

Response by LTC Yinon Weiss made Dec 24 at 2015 6:36 PM

LTC Yinon Weiss — Thu, 24 Dec 2015 18:36:36 -0500

That doesn't make any sense. If I put in $1500/month for 20 years, I'll have 360,000 even with no matching and no rate of return. Did you mean $1500/year?

Response by MAJ Ken Landgren made Dec 25 at 2015 1:16 PM

MAJ Ken Landgren — Fri, 25 Dec 2015 13:16:16 -0500

An unrealistic assumption is an enlisted SM starts investing $1500/month starting on the fifth year of the career.