In a data analysis that underscores the importance of employer-sponsored retirement plans, the Center for Retirement Research has said that the lack of such coverage for private sector employees is “the main reason that U.S. workers end up with inadequate retirement savings.”
The report said that only about half of private sector employees are covered by a defined benefit plan and/or a defined contribution plan, in contrast to the federal employment package, which features both types for virtually all employees—the FERS or CSRS annuity in the former category and the TSP in the latter.
The percentage of those covered in the private sector has been about flat over the last 20 years, it added, but in that time there has been a shift away from defined benefit plans toward defined contribution plans, with a resulting shift in much of the financial obligation for retirement security from the employer to the employee.
“Workers can be uncovered in three ways: 1) their employer does not offer a plan; 2) their employer does offer a plan, but they are not included; or 3) they are self-employed,” it said. “The first group accounts for three-quarters of all uncovered workers. Initiatives to close the coverage gap generally focus on expanding coverage to the first group, but some also aim to eventually include the other groups.”
It noted that during that period the federal government has launched several initiatives to widen coverage, but those programs “have relied on the voluntary participation of employers and therefore have had little impact . . . Legislative proposals for mandatory programs are more likely the answer.”
What it Takes to Be a TSP Millionaire in Today’s Dollars
With a long enough timeline, involving consistent large contributions and decent long-term stock returns during the period, it’s possible to become a millionaire from compounding a middle-class or upper middle-class income, including most jobs in federal service.