Questions...
First of all your TSP account is functionally a 401(k). The managers of TSP elected to provide four index funds for us to use and one money market type of investment. The 'G Fund' can be seen as cash or a money market - but, it really is Social Security bonds. The 'F Fund' is effectively a bond index fund. The 'C Fund' is an S&P500 index fund. The 'I Fund' is the European/Japanese equivalent of the S&P500. The 'S Fund' is the remaining equities excepting those in the S&P500. Finally, the L Funds are predetermined mixes (allocations) of the five main funds.
As a 401(k), your TSP account can be rolled into a new employers 401(k) when you leave gubmint service. It can also be rolled into a Traditional IRA. You cannot do either while holding your current position. As a 401(k) you can continue to hold the assets in this account after you separate. It is generally not a good idea to do so, but you could. The very low expenses in TSP might be a decent reason to do so...
So, how do your TSP account assets compound? The exact same way an S&P500 index fund compounds (as an example). The three equities funds (C/S/I) DO NOT have anything like a guaranteed rate of return - but they do have normal long term returns. Let us assume that you are 100% in the 'C Fund'. The average annual return is about 10% (but it was a rather depressing -37% in 2008 - so see how wonderful averages are
). If you buy 50 shares for (through contributions and match) $1,000 in January 2013 at $20 a share and it goes up 1% over the month your account is worth $1,010 at the end of January. Your share price is $20.20. Now, a 1% increase/share happening in February results in a dime of compounding (those assets are now worth $1,020.10 rather than $1,020). See the wealth building advantage - yuk, yuk. But, with bigger numbers - and especially more time - the compounding is more important than the balance. We oldsters know this. It is a joy to behold.
Finally, I was like you. I got my first position working with the USMC during a recession. I thought I hated the Military Industrial Complex. I was wearing a nice brand of Burlap Sack and Birkenstocks right out of college (sort of) and figured I would be outbound soon. Learned to love it so here I still am. The biggest recommendation I can give you is to forget about the pension portion of your retirement package. The pension will be a minimal (maybe 20% of your retirement package) and can be seen as a baseline. Your pension will not be with you if you leave gubmint service before 20 years or whatever. I didn't even know about it and always (well, that is kinda wishful thinking because I was an idiot for my first six years or so) contributed AT LEAST 10% of my gross salary to TSP. That meant that 15% of my gross salary went to my retirement account - and I had it in the 'C Fund' and forgot about it. Yummy. And, because of tax reasons that 10% contribution doesn't take 10% out of your take home pay. It takes less!!! Yummy, yummy... Finally, had I started contributing into the C/S/I when I started I would be able to stop contributing now and still have a multi-Winnebago, multi-Boat, multi-condo retirement.
Time is your best friend. Remember me in my dottage. I won't be chowing on dog food (Alpo Meal Deal Retirement Fund), but I won't be as well off as Your Lordship if you start early and heavy(ish). I so envy you!!! I might vote to move some of your savings to buy me some fine booze.:nuts:
Happy Hunting
