The “exclusive” club of federal employees with seven-figure retirement accounts is becoming a little less exclusive—and a lot more crowded. As reported by FEDweek, the number of Thrift Savings Plan (TSP) participants with at least $1 million in their accounts surged to a record 194,722 to close out 2025.
This represents a nearly 24% increase in membership in just one year, driven by a perfect storm of disciplined savings and stellar market performance. While hitting the million-dollar mark is a cause for celebration, it also introduces a new set of financial complexities that many federal retirees are unprepared to manage.
The explosion in high-balance accounts wasn’t an accident. It was the result of a blistering year for the markets, particularly for those who maintained a diversified portfolio.
📈 The Numbers: How They Got There
Sound Data: The 2025 Growth Engine
- The “I” Fund Rocket: The International Stock Index Investment Fund (I Fund) was the MVP of 2025, delivering a massive 32.45% return.
- Domestic Strength: The C Fund (Large Cap) followed with a solid 17.85%, while the S Fund (Small Cap) posted 11.38%.
- The Time Factor: It’s not just about returns; it’s about endurance. Data shows that the average TSP millionaire has been contributing to the plan for 27.8 years. This is the result of decades of compounding, not a “get rich quick” scheme.
- The Peak: The largest individual TSP account balance reported in late 2025 hovered near **$10 million** ($9.93 million as of September), proving the unlimited potential of the plan over a full career.
⚠️ The “Millionaire” Problem: Taxes and Risk
Having $1 million in your TSP is a great “problem” to have, but it is a problem nonetheless if you lack a strategy.
1. The Tax Torpedo (RMDs): Most of these million-dollar balances are in Traditional TSP accounts, meaning the money has never been taxed.
- The Reality: When you reach the Required Minimum Distribution (RMD) age (currently 73), the IRS forces you to withdraw a percentage of that balance every year.
- The Impact: An RMD on a $1 million balance can easily add **$36,000+** to your taxable income in year one alone. This can push you into a higher tax bracket and trigger IRMAA surcharges on your Medicare premiums.
2. The “Drift” Danger: After a year where the I Fund grew by 32%, your portfolio is likely far more aggressive than you intended.
- Portfolio Drift: If you started 2025 with a balanced 60/40 split, the massive stock gains may have shifted you to an 80/20 split. If you are near retirement, this exposes your “safe” nest egg to significant risk if the market corrects in 2026.
🛡️ From Accumulation to Preservation
Reaching $1 million is the finish line of the accumulation phase, but it is just the starting line of the preservation phase. The strategies that got you here (maxing out contributions, 100% C Fund) are often the opposite of what you need to stay here.
Internal Benefit Advisors specializes in helping “TSP Millionaires” protect their hard-earned gains.
How We Help You Manage High-Balance Risks:
- Tax-Efficient Withdrawal Strategy: We help you plan your withdrawals before RMD age to smooth out your tax liability, potentially converting funds to Roth or using other vehicles to reduce the IRS bite.
- Strategic Rebalancing: We help you skim the profits from your 2025 winners (I and C Funds) and lock them into stable assets, restoring your risk profile without exiting the market entirely.
- Estate Planning: A large TSP balance can be a tax burden for your heirs. We help you structure your beneficiary designations to ensure your legacy isn’t consumed by taxes.
The “Millionaire Club” is open. Make sure you have the membership guide.
Contact Internal Benefit Advisors today for a high-balance TSP audit and tax strategy review.
References
- FEDweek. “TSP Millionaire Count Nears 200,000.” January 13, 2026.
- FEDweek. “TSP Closes 2025 at $1.07 Trillion; Stock Gains Making Holdings More Aggressive.” January 13, 2026.
- Federal Retirement Thrift Investment Board (FRTIB). Monthly Participant Activity Report, December 2025.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
Outstanding 2025 TSP Performance! Which Fund Had the Highest Return?
This video provides a breakdown of the specific fund performances in 2025 that drove the increase in millionaire accounts, validating the I Fund’s significant role in this growth.
