A Basic Overview of changes of TSP L plan, and what you can change it to, and the risk…(read more)

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Thrift Savings Plan Investment Changes: What You Need to Know

The Thrift Savings Plan (TSP) is a retirement savings and investment plan available to federal employees and members of the uniformed services. It offers significant tax advantages and a range of investment options to help individuals build up their savings for retirement. Recently, there have been some important changes to the investment options available within the TSP. This article aims to provide you with an overview of these changes and what they mean for your retirement savings.

One of the significant updates is the introduction of two new index funds to the TSP’s investment lineup. Beginning in mid-2020, the TSP introduced the F fund and the I fund as new investment options. The F fund is a fixed-income fund that tracks the Bloomberg Barclays U.S. Aggregate Bond Index. It offers participants an opportunity to diversify their investment portfolio and potentially reduce risk by including more bonds in their asset allocation.

On the other hand, the I fund is an international stock index fund that tracks the MSCI EAFE (Europe, Australasia, Far East) Index. This fund allows TSP participants to invest in international equities and gain exposure to markets outside the United States. This addition provides individuals with an opportunity to diversify their investments globally.

In addition to these new investment options, the TSP has also made changes to the default investment for new participants. Previously, participants who did not select their investment allocation would be automatically placed in the G fund, which invests exclusively in government securities. However, as of October 2020, the default investment for new participants has been changed to a lifecycle (L) fund based on the participant’s projected retirement date. The L funds are designed to gradually shift towards more conservative investments as the participant nears retirement, reducing the risk exposure over time.

Another significant change worth noting is the expansion of withdrawal options for TSP participants. Previously, participants were only able to take a partial withdrawal or choose to take a full withdrawal. However, as of September 2019, participants who were still working in federal service could make multiple partial withdrawals – a feature known as “partial withdrawals”. This change gives individuals more flexibility in managing their retirement savings and allows for greater control over their account balance.

It is important for TSP participants to stay informed and make educated decisions about their retirement investments. With these recent changes to the TSP’s investment lineup, participants now have a wider range of options available to them. It is advisable to consult with a financial advisor or conduct thorough research before making any changes to your investment strategy.

In conclusion, the recent changes to the Thrift Savings Plan’s investment options provide TSP participants with greater flexibility and diversification opportunities. The inclusion of new index funds allows individuals to invest in fixed-income and international equities, expanding their investment horizons. Additionally, the changes to the default investment for new participants and the introduction of partial withdrawals provide participants with more control over their retirement savings. As always, it is essential to make informed decisions and seek professional advice when it comes to managing your retirement investments.