The stock market continues to defy logic, which seems to be what it does best. Currently, approximately 117,000 federal employees and retirees have savings savings plan accounts with a value of $1 million or more. There must be many others. At least that’s what Abe Grangold, a retired federal government financial advisor, says. He joined us for further discussion.
Abe Grangold Yes, Tom, that’s less than 2% of the total active participants in TSP. That number should be between 3 and 5%. Considering the salaries federal employees earn, there’s no reason this number can’t be much higher. And I believe the cause of this massive failure is due to two common personality traits among federal employees. One is fear. And the second thing is procrastination.
Tom Temin Well, let’s start with fear. It sounds like FUD, fear, uncertainty, and doubt. What do you think they are afraid of?
Abe Grangold Dear Federal Employees, Unfortunately, I have worked for four different federal agencies and heard the same thing over and over again. I’m always told to invest in the G Fund because I don’t want to lose even a single dollar of my balance. They think the market will soon go into recession. And they believe other TSP funds are too volatile. But when I was in government, I had a lot of smart friends, including CPAs and finance people. They did not take the risk of investing in TSP funds other than the G Fund. And if you’re a federal employee and you’re investing strictly in the G Fund. You will not become a TSP millionaire.
Tom Temin In other words, you won’t be able to save enough to put away $1 million on your own. You just have to put in enough money to grow it to $1 million, $2 million, or $3 million.
Abe Grangold Yes. It takes about a 50-year career to accumulate $1 million in TSP. And very few federal employees have ever achieved that level of federal career.
Tom Temin Yes. That’s kind of the basic understanding. People probably lack knowledge and may have fear and procrastination saying, “No, you can’t save normally.” Secure $1 million naturally. You have to put some of it aside and let the rest grow.
Abe Grangold Yes. Tom, I first attended a TSP meeting in 1987. and had a background in finance and accounting. And during that presentation, a light bulb went off in my head. I knew I could reach my $1 million goal during my career in the federal government. This isn’t rocket science. It’s compound interest, it’s about investing aggressively, and most importantly, it’s about contributing the maximum amount you can afford.
Tom Temin So, have you received any advice like this? People who start working at a young age often feel that its importance is not drilled into them enough.
Abe Grangold Unfortunately, when I was introduced to TSP as a new federal employee, there were materials handed out to me by the Office of Personnel Management. But I had to read the literature. They didn’t spoon-feed that information to you. I mean, we didn’t have a website back then. I had to sit down and read the TSP handbook. And unfortunately, many employees don’t have time for such things.
Tom Temin Yes. It reminds young people of other things they should know before it’s too late. At our age, we go to the dermatologist once a year, and we always find something as a result of our sun worship in our youth. The price will be paid later in life. And when I went there the other day, for some reason there were a few teenagers in the office outside. And I wanted to tell them, but I kept my mouth shut, that whatever you do, stop worshiping the sun now, because someday you’ll regret it. That’s what I wanted to say. If you come here, they will find something for you. It’s similar to how TSP tells people, “Don’t procrastinate.”
Abe Grangold Yes. Indeed, when I was a federal employee, for 20 years, I would sit down with young employees and explain to them the importance of contributing to the TSP. And this is the personality trait of procrastination found in many employees. They wanted to save money on their wedding, so they postponed it and donated it to TSP. They wanted to pay off school debt and buy a house. They always had an excuse to contribute to the TSP. And I always tell them at lunch, “Save your money.” Contribute to TSP and actively invest. You too could become a TSP millionaire. It’s not that difficult.
Tom Temin We’re talking to Abe Grangold. He is a former federal administrator and owner of AG Financial Services. And what strategy did you use in terms of finances?
Abe Grangold Well, I experimented with all the funds as they came out, Tom. There was no historical data for the fund. Therefore, I must admit that I have tried them all. C, S, I, F funds. And after 20 years as a TSP participant, I find myself more or less stuck with the C and S funds. And toward the end of my career in the federal government, I chose the C Fund because it had less volatility. But I have a funny story to tell you, Tom. I always proactively tell my clients to invest aggressively. And fear has gripped me this year because the stock market tends to be very volatile in October. And I was worried that that volatility would cause problems with my TSP balance. I was also worried about the outcome of the presidential election. So on October 1st, I transferred my entire balance and TSP to G Fund during October. October hit a record high. All-time high records were updated day after day. Another all-time high. And unfortunately, in my situation, I lost the opportunity to earn $225,000 in TSP. Tom, I’m not looking for pity. I’m not looking for someone to sympathize with me. It was a decision I made based on my own fears, my own fears. And I will look for opportunities to return to other TSP funds. But for now I’m going to sit and wait.
Tom Temin Unfortunately, I now have to travel by coach to Las Vegas.
Abe Grangold No, I don’t think that’s necessary. However, I have had a very successful experience with TSP and am very grateful for how it has grown over the years. But fear. The words I always tell everyone, “Don’t be afraid,” resonated with me.
Tom Temin You might say that the only thing we have to fear is fear itself.
Abe Grangold That’s right. And my wife always said, now that we’re older, maybe it’s time to step back and be a little more conservative. And that was in the back of my mind too. And I wasn’t ready to quit C Fund or S Fund, so I entered G Fund, but I still think the stock market will grow more. But fear gripped me.
Tom Temin Yes, you made a common mistake that amateur investors and non-experts make. That means trying to time the market, which is always risky.
Abe Grangold Yes, that’s right. And that’s what I was doing too. And I always tell people, customers, friends, investors, never try to time the market. Very few people succeed in doing that. We want to make long-term investments. If you have a career in the federal government, you need to make a long-term investment of 20 to 30 years. And even if you are a regular investor, you need to invest for the long term. You can’t enter or exit the market based on what people say on Facebook or what a bunch of experts say on financial news. There are always experts who contradict other experts. Therefore, you need to be patient and continue investing for the long term.
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