This is why you invest in your 401k

Got a quarterly statement from the Thrift Savings Plan (the government version of a 401k) yesterday and it tickled my fancy in ways my fancy has never been tickled before.

unicorn tickles

There was a good amount of information on there that seemed totally pointless. Like the section that told me if I was 62 years old (I’m only 28) and retired today, I could expect to withdraw $364/mo from it.


But the very last section on the form made reading all the useless stuff worth it. The section was titled “Your total lifetime contributions”.

I frequently think about my retirement contributions.

  • As a percentage of my income (10%)
  • As a dollar amount out of each paycheck ($310)
  • As an amount I hope to have in my TSP come retirement (millions)

But I don’t think I’ve ever considered exactly how much money I have put in to my TSP. According to this quarterly statement, I’ve invested a total of $28,122 over the last six years I’ve been working.

Here’s where things get sexy.

I’ve put $28,000 of my own money in to this account, but my total account balance is about $72,000 as of this writing.

That right there friends is why I freaking love my retirement accounts. My $28,000 investment has made for itself an additional $44,000 in gains. In the words of that kid who got drugged up at the dentist 9db

Since I don’t make a million dollars a year nor am I anticipating being gifted a million dollars, the only way for me to reach millionaire status is by investing diligently. Deciding to contribute to my 401k at 22 years old was probably one of the better decisions I’ve ever made. Hopefully it will continue to pay off handsomely for years to come.

Now go up your contributions!


13 thoughts on “This is why you invest in your 401k”

  1. Awesome stuff! That’s some pretty nifty returns right there! Over 6 years, I’m afraid that this might not actually be “real life”. Or at least, its not going to continue like that forever (sorry to be a downer!!). However, for the time being, ROCKING!! 🙂

  2. Isn’t that awesome to see? My company’s financial planning website has a feature where we can do cool projections for the future. That’s what really gets me excited! I am maxed out on my 401k.

  3. Is this on top of a pension?

    I’m having trouble getting to 10% with the high rents in my area and student loan and debt payments… but I have a pension I pay into and I’m hoping to see my income increase soon…

    I’m not planning on children, hoping that means I can actually afford retirement. I’m still around 40,000 in debt at 26.

  4. Hi Ninja,

    Friendly TX landlord here. I’m writing on this most recent post to comment about your earlier post regarding building a garage apartment.

    I think you should go for it, but $100K is waaaaay more than it should cost, regardless of where you are in the world. I can build a 2 bedroom 1 bath garage apartment (with a 2 car garage downstairs) in my BIG city, permitted with all permits, for about $50K. It should not cost twice that for you to build something similar. Will it be expensive? Yes. Will it be time consuming and frustrating at times? Absolutely. Will it help support you and your wife if something happens to you? Yes.

    Almost all rich folks own real estate (separate from what they live in). Having owned rentals for ten years now, I can definitely say that it is worth it and has contributed significantly more to my net worth than my 401K (by a factor of 3). And now that some of my rentals are getting close to paid for (15 year notes that I have been paying ahead on), my income will start going up up up even more!

    An added benefit of a garage apartment (which we have behind our house) is that they can watch your house/pets while you are away. It is a great benefit. Having an additional car coming/going at odd times (i.e., getting a tenant that works a shift different than yours) makes for fantastic security. The previous owner of the house was a widow. Apparently the husband knew that he would not outlive her and built it for her as a means for her to have some income once he was gone. Now, it pays more than 1/2 the mortgage on the property.

    And selling your house now seems like a terrible idea.

    Put every thing that you own towards making passive income if you can. (I am a proponent of early retirement extreme in case you can’t tell.) Even if you like your job and don’t want to retire early, it sure makes coming to work a lot more pleasant once it becomes a choice and not a necessity!

    Anyway, good luck!

    • TX Landlord and Ninja,

      I got an absolute steal on my house (highly desirable small city with very little supply, managed to find someone selling who hadn’t listed and didn’t want to pay a broker, etc, etc). I bought it a year ago for $200K but it’s probably worth $250K now. It would likely bring in $1800 in rent and my mortgage (including taxes and ins) is currently $1200. Should I sell and pocket the $50K or rent it out?

  5. I was told during my Annual Review from last year’s performance I’ll be getting a raise this April (how much, I don’t know yet); it’s all going to increase my contribution to my personal RSP. Also means a bigger contribution to my works RSP/Pension, as we can contribute up to 5%, and employer antes up 2.5%.

  6. Already upped the contribution for this year, so that I max out all the tax favorable accounts. Still a few of the “backdoors” that I could use though, but I’ll need to get a raise (likely), find another way to lower expenses (unlikely) or be able to pull a profit from the bees and plants (likely) for that to be in the cards.

    And “backdoor” just means contribute to one type of account and convert to another. Like After-Tax 401k to Roth 401k/Roth IRA, or After-Tax IRA to Roth IRA.

  7. I’m always unclear about whether maxing out a 401k is helpful, but if you’re already maxing out a Roth and still want some tax advantages… why not? We’re just mastering what maxing a Roth looks like in a budget but hopefully we’ll be working on the 401k stuff soon. Lifetime contribution is definitely the most exciting number in the bunch.

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