Every week, a recurring pattern emerges in the world of financial planning. It features the “TSP Millionaire”—federal employees who have spent decades diligently contributing to their Thrift Savings Plan, watching their balances climb into seven figures through discipline and compound interest. These individuals are world-class savers. Yet, when it comes time to reap the rewards of their labor, many find themselves paralyzed. They are too afraid to go on that dream vacation, too hesitant to renovate an aging kitchen, and too anxious to spend even a small fraction of the wealth they built for the very purpose of enjoyment.
They have mastered the art of accumulation but have failed to learn the art of distribution. This phenomenon is known as “under-living.” While the media often focuses on the dangers of under-saving, for a high-achieving demographic of savers, the real risk isn’t running out of money—it is running out of time and life before they give themselves permission to use what they have earned.
The Goal Beyond the Number
It is essential to clarify one thing: money is a tool, not the destination. We do not save and invest simply so that a digital number on a screen gets bigger. If the goal were merely to have the highest balance possible at the moment of death, then the strategy would be simple: never spend a dime. But for most of us, the actual goal is to use that capital to facilitate a great life for ourselves and our families.
As a federal employee, you are in an exceptionally blessed position compared to the average private-sector worker. You possess a guaranteed floor of income that acts as a powerful hedge against longevity risk. Between your FERS or CSRS pension, Social Security, and potentially the FERS Supplement, you have fixed income streams that will last as long as you do. For someone relying solely on a volatile brokerage account, extreme caution is a necessity. For a Fed, the TSP is often the “overflow” meant to move you from a comfortable retirement to an extraordinary one.
The Concept of the Memory Dividend
One of the most compelling reasons to spend money earlier in retirement rather than later is the concept of the Memory Dividend. When you spend money on an experience at age 60—perhaps a hiking trip through the Alps or a family reunion at a beach house—you aren’t just buying a one-week event. You are purchasing a memory that will pay dividends for the next 30 years.
Every time you look at the photos, tell the stories, or reminisce with your loved-ones, you receive a “return” on that initial investment. However, if you wait until you are 85 to take that same trip, two things happen. First, your physical ability to enjoy the experience may be significantly diminished. Second, the “dividend window” is much shorter; you have far fewer years left to enjoy the mental and emotional bank of that memory. Using money earlier in retirement yields a higher total life return because you maximize the time you spend enjoying the recollection of those experiences.
Calculating Your Life ROI
In the financial world, we are obsessed with ROI (Return on Investment). We track expense ratios, alpha, and annual growth rates. But have you ever stopped to calculate your Life ROI? This is the qualitative return you get on the money you “invest” into your own life.
If you have $2 million in your TSP and you are miserable because you refuse to spend $50,000 on a life-changing experience, your Life ROI is essentially zero—or even negative, considering the stress of over-monitoring your accounts. Money has a diminishing utility as we age. A dollar spent at age 65 on a “go-go” year adventure could provide more utility and joy than a dollar spent at age 90 on a more sedentary lifestyle.
The Inheritance Paradox
Many savers justify their frugality by saying they want to leave a legacy for their children. This is a noble goal, but it is often poorly timed. If you pass away in your late 80s or 90s, your children will likely be in their 50s, 60s, or even 70s. While they will certainly appreciate an inheritance, that is rarely the stage of life where the money would have the greatest impact.
Most children “need” financial help when they are in their 20s and 30s—when they are trying to navigate college costs, buy their first home, or start a family. By giving “with a warm hand” rather than a cold one, you get to see the impact of your generosity. Using a portion of your TSP to help a grandchild with tuition or help a child with a down payment today often creates more family utility than leaving a larger, unintended windfall decades from now.
The Data on Over-Saving
Research supports the idea that many savers are over-cautious. A study conducted by JP Morgan looked at “consistent savers”—those who had built a substantial nest egg—and tracked their balances through retirement. They found that the average member of this group still had a balance of $1.2 million at age 90.
While having over a million dollars at 90 is an incredible financial achievement, it could represent a massive missed opportunity for “life” for many people. Imagine how much earlier those individuals could have retired. Imagine the experiences they skipped because they were afraid of a “what if” scenario that never materialized. If you are on track to be a millionaire at 90, you have been given permission to be a “spender” at 65.
Balancing the Scales
This is not a license for recklessness. Spending half of your TSP in the first two years of retirement would create a sequence of returns that could jeopardize your long-term security. Financial planning is always about balance. You must take your goals and your health into stride.
However, if you find yourself checking your balance every day and feeling a sense of guilt when you buy something you enjoy, it is time to re-evaluate. You have spent decades being a “fantastic saver.” You’ve done the hard part. Now, the challenge is to become a “strategic spender.”
Don’t let your best years slip away while you wait for a future that is already guaranteed by your pension and your hard work. Ask yourself: is your money serving you, or are you serving your money?