Post Your Total Annualized Rate of Return

[Cactus]

I was looking over my 2013 Annual Statement this weekend when I noticed that my Lifetime TSP Contributions were about half of my Ending Balance. I knew from the quick and dirty rule-of-72 that my money would double in 10 years at 7%, but I've been with the government over twice that so I'm making less than 3.5%. That is just pathetic. :sick:

Then it occurred to me that this is only the case if I had plunked the contributions down at the start and contributed nothing since then. That is the opposite of what I, and most people, do. We start with nothing and make contributions every paycheck. How much? Well that varies over time for most of us as our contributions go up with cost of living increases, step increases, and promotions. But, as a first step approximation I decided to divide my Lifetime TSP Contributions evenly over my entire government career and see how that affected my return. You can use the TSP How Much Will My Savings Grow Calculator (https://www.tsp.gov/planningtools/howsavingsgrow/howSavingsGrow.shtml), but I used the Growth + Contributions Calculator in the attached spreadsheet to come up with these gains for select years and growth rates:

Table1: Gain at X Annual Growth rate After Y Years


Years
4%
5%
6%
7%
8%
9%
10%


5
10.4%
13.1%
16.0%
18.8%
21.8%
24.8%
27.9%


10
22.4%
28.8%
35.6%
42.8%
50.4%
58.4%
66.9%


15
36.0%
47.3%
59.6%
73.1%
87.9%
104.1%
121.8%


20
51.7%
69.3%
89.2%
111.8%
137.5%
166.7%
199.9%


25
69.8%
95.5%
125.7%
161.4%
203.5%
253.2%
312.0%


30
90.5%
126.7%
171.0%
225.3%
291.9%
373.7%
474.2%



You can zero in on your personal return rate by modifying the Annual Growth Rate until it matches your return, but I found it easier to create the Growth Rate Calculator in the attached spreasheet. I just entered my contributions, balance, and years of service and came out to 5.5%. Yeah, not great but better than 3.5%. :p

Again, this assumes you didn't start with anything and have the same fixed contributions throughout your career. If you use the calculator on the TSP site you can add a percentage contribution increase to get an even more accurate result, assuming you've kept records of how much your contributions have increased over the years. :confused:


My Total Annualized Rate of Return: 5.5% @ 23.5 years.

[PessOptimist]

Geez Cactaceae person, I just this morning got back to your risk/CAGR/Total Return spread sheets and trying to come up with a better return figure for years before 2007. Now this? Now I gotta figure out what the cactus meant to say in the returns calculator? I'll study on it. Thanks for posting it.

PO

[jpcavin]

I'm not very good with math. Can someone help me. Let's use round numbers for ease of calculation.
If my lifetime contribution is $20,000 and my balance is $40,000 and I've only been working 5 years....what is my average annual rate of return? Would it be 10% (50%/5yrs)?

[jpcavin]

Wait, it should be 100%/5=20% right?

[Boghie]

Cactus,

Personally, I was an idiot before 1994. It was actually the Great Grandee Clinton tax code change that woke my lethargic butt up. I got promoted, had a very special - and expensive wet-down - where I spent my take home pay increase, and actually lost $50. That is what President Clinton did to me!!! I was so happy I learned how to play the tax game - and it has done me well in my TSP account...

Anyway, if you were anything like me, than your first years were a waste. I didn't even contribute. The only thing going into my TSP account for my first five years was the 1% the gubmint dumps into their 'G Fund' slush fund. So, should I - probably we - include those years we were not really investing in the equation. Me not think so. My guess is your returns are significantly better once you took things seriously...

But, lest anyone gets too happy, I think the 'Your Contributions' number does not include the match. The difference between this year's number and last year's seems to be my personal contribution. So, for most of us (those that contribute at least 5%) you will have to multiply that number by 1.5. Oh well. Not certain though...

[rlundy]

My Total Annualized Rate of Return: 2.94% @ 23 years.

[RealMoneyIssues]

Delete, missed the "annualized"

Will have to figure that one out... brb

[Boghie]

8.77% over 25 years...
The S&P500 did 12.02% in the same time-span...
I would have done better BirchTreeing it for the duration..

However, I kinda did. At least till about 2007. That is why I am not certain about the calculations. This is actually a hard thing to do, eh...

For me, this includes the brilliant move of 'saving' only the 1% 'match' into the 'G Fund' till 1994. Yowser. Start early. It is more important to have time in the market than to market time.

[RealMoneyIssues]

Delete, missed the "annualized"

Will have to figure that one out... brb

4.67% over 12 years

:(

[jpcavin]

Is someone going to help me with the formula or not? Where's the love?

[RealMoneyIssues]

Is someone going to help me with the formula or not? Where's the love?


Then it occurred to me that this is only the case if I had plunked the contributions down at the start and contributed nothing since then. That is the opposite of what I, and most people, do. We start with nothing and make contributions every paycheck. How much? Well that varies over time for most of us as our contributions go up with cost of living increases, step increases, and promotions. But, as a first step approximation I decided to divide my Lifetime TSP Contributions evenly over my entire government career and see how that affected my return. You can use the TSP How Much Will My Savings Grow Calculator (https://www.tsp.gov/planningtools/howsavingsgrow/howSavingsGrow.shtml), but I used the Growth + Contributions Calculator in the attached spreadsheet to come up with these gains for select years and growth rates:

http://www.runemasterstudios.com/graemlins/images/clap.gif

I just used the bottom section...

[PessOptimist]

Mine comes out to 7.84% @ 16 years.

jpcavin, the formula is very complicated, at least to me. Use the functions in Cactus' attached spread sheet in the first post. Leave cell B1 at 26, ignore the rest and fill in cells B23, B24 and B25. Your example comes out as 28.78%.

This does make the assumption that all contributions over the years were equal. At least I think it does.

To get the real real number I believe you would have to get the averaged balance per pay period and figure the rate of return per pay period and then figure out the overall rate of return based on the return per pay period. I may be wrong on that and may be using the wrong function name as I am no Cactus when it comes to these things. Using other spread sheets Cactus has posted I think you could do this but it is a lot of data entry.

PO

[jpcavin]

I was looking for something simpler. If I invested $10 and I now have $20, wouldn't that be a $10 profit or 100%. And if I divide that by 5 years I have an average of 20% earnings per year? Is that over simplified or is it correct?

[jpcavin]

Ok. I took the difference between my lifetime contribution and my ending balance and divided that by my lifetime contribution. I got 82.68%. If I divide that percent by 5 years (time in tsp) that comes out to an average of 16.5% a year. Does my computation jive?

[Boghie]

To All,

I love throwing monkey wrenches. This might be one: I don't think the TSP paperwork includes the match in 'Your Contributions'. Should we really be including the match as growth. Can someone shed light by doing some math...

JP, the market (the S&P500) has almost tripled since March 2009. It was at $666 on something like March 9th, 2009. It was at $909 on December 31, 2008. It ended 2013 at $1,848. Putting those numbers in the spreadsheet ends up with BirchTrees C Fund:

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%

So, no, me not think the calculations are quite right. This is hard to do. Much like the CAGR. I'm thinking the problem has to do with compounding. Getting real numbers is very difficult. In fact, Tom provides a grand service hooking us up with real annual numbers.

By the way, for all us cocky trader types, the S&P500 (our much maligned C Fund) has an average annual return of 18.41% over the past five years. That computation is just the average of annual growth rates. I don't know if that is legit. I think the number of folks documented in the AutoTracker that can claim to have beaten the S&P500 from 2009 through 2013 can be counted on one hand. Oddly enough, you will need two hands if you incorporate 2008 - some folks don't lose as much as the S&P500 when it dives. So, something like <1% of the folks beat the market (but something has to be said for smoothing out the curves while still attaining good returns). And - Amoeba, I'm talking to you - the S&P500 <sarcasm>cratered by +9.14% annually</sarcasm> from 2008 through 2013. Just sitting in the 'C Fund' and drowning your 2008 sorrows in a never ending whisky bottle would have been one of the best strategies documented in the AutoTracker.

How is that for something to talk about;)

[Boghie]

Here are two great calculators that seem valid:


Investment Return (Annualized Rate) (http://www.moneychimp.com/features/portfolio_performance_calculator.htm)

and, a CAGR for the S&P500 (http://www.moneychimp.com/features/market_cagr.htm)

By looking at the discussion, you can see that attaining those numbers is very difficult - especially the CAGR. Cactus is doing us a great service with his CAGR computations - even though I cannot seem to get my version of Excel to do them right. Believe it or not, my wife 'helped' me get the horrible equation noted in the S&P500 CAGR discussion in a spreadsheet. The problem is that it doesn't seem readily transferable - and it is gross.

[jpcavin]

To All,

I love throwing monkey wrenches. This might be one: I don't think the TSP paperwork includes the match in 'Your Contributions'. Should we really be including the match as growth. Can someone shed light by doing some math...

JP, the market (the S&P500) has almost tripled since March 2009. It was at $666 on something like March 9th, 2009. It was at $909 on December 31, 2008. It ended 2013 at $1,848. Putting those numbers in the spreadsheet ends up with BirchTrees C Fund:

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%

So, no, me not think the calculations are quite right. This is hard to do. Much like the CAGR. I'm thinking the problem has to do with compounding. Getting real numbers is very difficult. In fact, Tom provides a grand service hooking us up with real annual numbers.

By the way, for all us cocky trader types, the S&P500 (our much maligned C Fund) has an average annual return of 18.41% over the past five years. That computation is just the average of annual growth rates. I don't know if that is legit. I think the number of folks documented in the AutoTracker that can claim to have beaten the S&P500 from 2009 through 2013 can be counted on one hand. Oddly enough, you will need two hands if you incorporate 2008 - some folks don't lose as much as the S&P500 when it dives. So, something like <1% of the folks beat the market (but something has to be said for smoothing out the curves while still attaining good returns). And - Amoeba, I'm talking to you - the S&P500 <sarcasm>cratered by +9.14% annually</sarcasm> from 2008 through 2013. Just sitting in the 'C Fund' and drowning your 2008 sorrows in a never ending whisky bottle would have been one of the best strategies documented in the AutoTracker.

How is that for something to talk about;)

I get 20.66% annualized. :-(

[PessOptimist]

Probably close enough for your purposes. Take the 1 year rate of return from page 3 of your 2012-13 annual TSP statements, page 1 of previous statements, add it together and divide it by 5 and see what you get. There are so many ways to figure this. I kind of like the "difference between my lifetime contribution and my ending balance divided that by my lifetime contribution" method. Unless you want to find out what years were down and what you could have done different. And discount the matching contributions.

I contributed A. My balance is now B. My employer contributed C (or C&D if you want to show automatic and matching) but that's how the game works. Is my balance increasing?

If you get too wrapped up in this it can be discouraging. If I had been keeping track of my balance v my contributions minus employer contributions in my first year, 1998, I would have seen that I actually lost money two months during that year. I probably would have put it all in G and let it go at that point.

FWIW using your method my number is 5.88% @ 16 years. Not great. Every year was not 2013.

I see that while I was writing this Boghie has made a couple of posts. The starting balance was the first 1% matching contribution for that pay period. Again that question about "Should we really be including the match as growth".

Do you want to look at your bottom line, see where you made mistakes or brag about what a great investor you are?

In 2008 my gain was either -.23% or -.35% depending on how you figure it. In 2002 it was either -.49% or -55%. Either way my balance was higher at the end of both years. Due to of course personal contributions and employer contributions.

PO

[jpcavin]

PO. I included the matching as part of the total contribution and not part of growth. I also don't care when the market was up or down. Not for what I was trying to figure out at the moment. I was just trying the get the average for all years combined. I can see where "double" doesn't cut it as you add more years to the computation. Good lord knows I'm not a good investor lol. I get by on luck. Gotta stay on my toes now.

[PessOptimist]

You have done very good based on the figures you posted. As long as you figured out what you wanted to figure out the rest of this doesn't matter. My figures could be higher except for a few down years. I do not worry about them since I cannot change them. I do not claim to be a good investor and luck plays a part. Just tryin to explain what some of these people are talking about and how simple or complicated you can make it. Good luck with your TSP and I hope there are not too many 2008s in your future.

PO

[jpcavin]

I got hired Sep 2008 so I was not invested yet. Thank God or I probably would be in the G Fund now.
Thank you for taking the time to explain and for your words of encouragement.
Judy

[Cactus]

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]

Deleted my post. Didn't make sense.

[BichonFreeze]

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]

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.

[Cactus]

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.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]

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. :eek: Now to find out what.

[jpcavin]

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. :eek: Now to find out what.

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]

I'm not trying to confuse anyone...honest. But I do confuse myself sometimes :laugh:
Troublemaker!

[jpcavin]

Troublemaker!
Says Mr. Easter! http://www.runemasterstudios.com/graemlins/images/roflmao.gif
Once again, I couldn't help myself. :laugh:

[Cactus]

Oh, my mistake. I thought you were saying that was your Annualized Rate of Return. :embarrest:

[jpcavin]

Oh, my mistake. I thought you were saying that was your Annualized Rate of Return. :embarrest:
Like I said, I confuse everyone. Wait, I did say I was not good with math...shame on you! :laugh:

[offroad]

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