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Post Your Total Annualized Rate of Return
- Thread starter Cactus
- Start date
Cactus
TSP Pro
- Reaction score
- 38
Wow, this thread really took off this weekend. Must have been a slow one.
jpcavin, using the values ($40,000 - $20,000) / $20,000 = 100% / 5 years = 20% / year is an average return assuming the $20,000 was deposited in your TSP account when you started working and you contributed nothing since. That's what I did at first when I saw the numbers but it's not realistic. That's why I set up the spreadsheet to assume the total contributions were evenly divided over every pay period. It's a more realistic approximation and gives you a better return, 28.78% instead of 20% for this example. A still better approximation is to assume a steadily increasing contribution like the calculator on the TSP site lets you do but then the computations get even more complicated.
In your case, with only 5 years service, you probably still have your annual returns for all five years. The most accurate value is just to compute an average or annualized return from those numbers. For old timers like me who no longer have records of the early years, we have to use approximations.
Boghie, that's a good point. I don't know if the Agency Matching is included in our Lifetime TSP Contributions, or not, but comparing this years statement to last years should tell us. A bigger question is should it be? If it is included, nothing changes. If I made X% I made X% regardless how much I put in there. If the matching is not included and I contribute 5% then I make a 100% return every payday just from the matching. This get's complicated fast, but then I'm just trying to come up with a better approximation for those of us without records from the early years. Hopefully this was a first step.
You are right that we don't necessarily want to start the clock when we started working for the government. When I started I had to wait six months before I was allowed to particiapte in TSP. In your case, I wouldn't start until you started contributing. A really complicated issue would be breaks in service or people who only work part of the year (seasonal). You can't use the year you started because you aren't contributing for the entire time. You can't use your service comp date because you are earning gains on the balance when you aren't working. What do you do? I don't know. It's all an approximation so I gues you can compute it both ways and chose a value inbeween.
Your example with the S&P500 values don't work because there are no contributions. Essencially what you did was buy a share of S&P500 for $666 and about 5 years later it was worth $1848. That comes out to a gain of about 177% and an annualized return of 22.6%.
jpcavin, using the values ($40,000 - $20,000) / $20,000 = 100% / 5 years = 20% / year is an average return assuming the $20,000 was deposited in your TSP account when you started working and you contributed nothing since. That's what I did at first when I saw the numbers but it's not realistic. That's why I set up the spreadsheet to assume the total contributions were evenly divided over every pay period. It's a more realistic approximation and gives you a better return, 28.78% instead of 20% for this example. A still better approximation is to assume a steadily increasing contribution like the calculator on the TSP site lets you do but then the computations get even more complicated.
In your case, with only 5 years service, you probably still have your annual returns for all five years. The most accurate value is just to compute an average or annualized return from those numbers. For old timers like me who no longer have records of the early years, we have to use approximations.
Boghie, that's a good point. I don't know if the Agency Matching is included in our Lifetime TSP Contributions, or not, but comparing this years statement to last years should tell us. A bigger question is should it be? If it is included, nothing changes. If I made X% I made X% regardless how much I put in there. If the matching is not included and I contribute 5% then I make a 100% return every payday just from the matching. This get's complicated fast, but then I'm just trying to come up with a better approximation for those of us without records from the early years. Hopefully this was a first step.
You are right that we don't necessarily want to start the clock when we started working for the government. When I started I had to wait six months before I was allowed to particiapte in TSP. In your case, I wouldn't start until you started contributing. A really complicated issue would be breaks in service or people who only work part of the year (seasonal). You can't use the year you started because you aren't contributing for the entire time. You can't use your service comp date because you are earning gains on the balance when you aren't working. What do you do? I don't know. It's all an approximation so I gues you can compute it both ways and chose a value inbeween.
Your example with the S&P500 values don't work because there are no contributions. Essencially what you did was buy a share of S&P500 for $666 and about 5 years later it was worth $1848. That comes out to a gain of about 177% and an annualized return of 22.6%.
BichonFreeze
TSP Strategist
- Reaction score
- 3
Kind of hard to say for me. I've only been in for one full year. Not sure how we're supposed to weight this but I guess you could say my annualized return is somewhere around 14%, mainly because I didn't change out of G until a year had passed. Shame on me. Shame on me.
jpcavin
TSP Legend
- Reaction score
- 97
Here's what I found out after looking over my annual statements:
2009 - 3.10% (G Fund)
2010 - 2.67% ( G Fund)
2011 - 7.51% (Moved into equities at some point during the year)
2012 - 15.74 (Equities)
2013 - 28.75 (Equities)
Combined annual average: $11.55%
I guess that's not too shabby considering I was in the G Fund for 2 1/2 years. Now if I can only keep this up until I retire...I'll be prettty damn happy.
2009 - 3.10% (G Fund)
2010 - 2.67% ( G Fund)
2011 - 7.51% (Moved into equities at some point during the year)
2012 - 15.74 (Equities)
2013 - 28.75 (Equities)
Combined annual average: $11.55%
I guess that's not too shabby considering I was in the G Fund for 2 1/2 years. Now if I can only keep this up until I retire...I'll be prettty damn happy.
Cactus
TSP Pro
- Reaction score
- 38
For one year it should be easy. It's simply your annual return. Next year you can average the two like jpcavin did with here 5 years or compute an annualized return if you feel up to it. Either one should be more accurate than the approximation I came up with. That's for folks like me who don't have the records for their earlier years. I just wanted to show that your return is really greater than (balance - contributions) / contributions so don't have a heartattack.
Cactus
TSP Pro
- Reaction score
- 38
Boghie, you love throwing monkey wrenches. Here's one for you. jpcavin posted her 5 annual returns and as she pointed out they average to 11.55%. We can annualize those values and find that comes out to 10.46%. That's not too different and probably as accurate as it gets. But when she plugged her contributions & balance into my little spreadsheet calculator she got 20.66%. Something is not right there. I applied those 5 annual returns to $100 and plugged the result into my calculator and came up with 20.46%. OK, that tells me she did it right so there is a problem with my calculator. 
Now to find out what.
Now to find out what.
jpcavin
TSP Legend
- Reaction score
- 97
Boghie, you love throwing monkey wrenches. Here's one for you. jpcavin posted her 5 annual returns and as she pointed out they average to 11.55%. We can annualize those values and find that comes out to 10.46%. That's not too different and probably as accurate as it gets. But when she plugged her contributions & balance into my little spreadsheet calculator she got 20.66%. Something is not right there. I applied those 5 annual returns to $100 and plugged the result into my calculator and came up with 20.46%. OK, that tells me she did it right so there is a problem with my calculator.
I didn't plug anything in. I looked at what Boghie posted:
Ending Balance: $1,848
Total Contributions: $909 - I'm guessing the starting balance is kinda like a onetime contribution
Number of Years: 5
Gain: 103.30%
Annualized Return: 29.48%
I simply divided 103.30%/5 yrs and the answer was 20.66% vice 29.48%
I'm not trying to confuse anyone...honest. But I do confuse myself sometimes :laugh:
Frixxxx
Moderator
- Reaction score
- 131
Troublemaker!
jpcavin
TSP Legend
- Reaction score
- 97
jpcavin
TSP Legend
- Reaction score
- 97
Like I said, I confuse everyone. Wait, I did say I was not good with math...shame on you! :laugh:
Reading backwards from the beginning of this thread it seems that you are discussing what I noticed also in my own savings path. In my thread I am wanting to compare PIP to autotracker. But really want to understand if the math is working.
I try to use simple interest, and my contribution over the past five months to tell me what my rate of return is actual.
Lets says I have $100,000 in the TSP funds total. and I contribute $10,000. So just the savings would be $110000. But because of simple interest on the $100,000 of say 5% earned to date (yes I know I need to include the $10,000 in the interest calculation, but I am calling that insignifcant for now); my capital plus interest is $105,000 , plus contribution should be $115,000 grand total.
when I apply this algorthm to my actual numbers I get about 3% interest to date from end of FY13 until now (using dollars in the account). yet PIP says 13% for the year to date (yes i know its for the 12 months), while Autotracker says 7% interest to date.
It just does not make sense. yet
I try to use simple interest, and my contribution over the past five months to tell me what my rate of return is actual.
Lets says I have $100,000 in the TSP funds total. and I contribute $10,000. So just the savings would be $110000. But because of simple interest on the $100,000 of say 5% earned to date (yes I know I need to include the $10,000 in the interest calculation, but I am calling that insignifcant for now); my capital plus interest is $105,000 , plus contribution should be $115,000 grand total.
when I apply this algorthm to my actual numbers I get about 3% interest to date from end of FY13 until now (using dollars in the account). yet PIP says 13% for the year to date (yes i know its for the 12 months), while Autotracker says 7% interest to date.
It just does not make sense. yet
