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Why Your TSP Projection May Be Completely Wrong

Many federal employees use retirement calculators and immediately assume the projected TSP balance is accurate.

But many projections rely on assumptions that may be unrealistic.

Small changes in assumptions can dramatically change long-term outcomes.

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Why TSP Projections Fail

Most projections rely on assumptions involving:

Market returns
Inflation
Contribution rates
Retirement age
Withdrawal strategy

If the assumptions are unrealistic, the projection becomes misleading.

Mistake #1: Unrealistic Return Assumptions

Some calculators assume:

Constant market growth
Smooth annual returns
No major downturns

Real markets do not behave that way.

Returns fluctuate significantly over time.

Mistake #2: Ignoring Inflation

A projected $2 million balance decades from now may not have the same purchasing power it has today.

Inflation changes:

Retirement spending
Healthcare costs
Long-term purchasing power

This is one reason headline projections can feel misleading.

Mistake #3: Ignoring Withdrawal Reality

Many projections focus only on accumulation.

But retirement also includes:

Withdrawals
Taxes
Sequence risk
Healthcare costs

A large projected balance does not automatically create sustainable income.

Mistake #4: Wrong Retirement Age Assumptions

Retiring even a few years earlier or later may significantly change:

TSP growth
Pension income
Withdrawal needs
Social Security timing

Timing matters more than many employees realize.

Mistake #5: Ignoring Taxes

Traditional TSP balances are generally pre-tax.

That means retirees may owe taxes during withdrawals.

The projected balance is not necessarily spendable cash.

Sequence Risk Changes Outcomes

Poor market returns early in retirement combined with withdrawals can permanently damage long-term portfolio sustainability.

Many simple calculators fail to model this properly.

Federal Employees Have More Variables

Federal retirement planning also includes:

FERS pension
FEHB
Social Security
Potential VA disability
Retirement timing rules

Ignoring these creates incomplete projections.

Example Projection Problem

Projection A

Assumes 10% returns forever
No inflation
No taxes
No withdrawals

Result:
Huge projected balance

Projection B

Realistic returns
Inflation included
Taxes modeled
Retirement withdrawals included

Result:
Much different retirement outlook

5 Common Projection Mistakes

Assuming constant market growth
Ignoring inflation
Forgetting taxes
Ignoring retirement withdrawals
Never modeling retirement timelines

Key Takeaway

Many TSP projections are misleading because they rely on unrealistic assumptions.

Retirement planning should focus on:

Sustainable income
Net retirement cash flow
Withdrawal strategy
Long-term retirement flexibility

Not just headline balances.

What to Do Next

Run realistic retirement projections: