Getting Rich with the TSP

 

At the very minimum, you should contribute 5% of your pay to get the free matching money.

However, to get rich using the TSP, you want to max it out each year. In 2022, that maximum is now $20,500 per year. This is the same 2022 limit as a traditional 401K for all people who have one through their job. For 2022, the IRS increased this amount by $1,000.

The employer contributions don't count against your maximum contribution.

For most young servicemembers, ROTH is more advantageous, because at a lower income level this is better. All money you put into a ROTH is completely tax free when you hit retirement. All of the growth your money sees over the decades is tax free. Only ROTHs offer this.

The matching contribution from the government will always go towards traditional.

Ever even year, you'll get a pay raise. If you got a 4% pay raise, maybe you put a little bit of that and increase the percentage being contributed to your TSP. You were living without this money anyway.

If you're not going to do any of your own research, the L-funds (life cycle funds), this will set you up for retirement. Can leave that in the year that you turn 60. The L-funds will automnatically adjust as you age, so you don't have to tweak your investments.

However, if you're younger, you can leverage the C and S funds that will grow a lot more during your career.

The C fund is large cap stocks (similar to the S&P 500).

The S funds is small cap stocks.

If you want to be a little more aggressive, you could put into the Life cycle fund for 10 years after you hit 60.

Read the book Simple Path to Wealth. They cover the TSP and explain index funds.

Suggested ratio:

75% C fund / 25% S Fund.