Today we’re talking about the TSP lifecycle funds and how they work compared to the individual funds they offer. We’ll go through a super quick overview of the S fund, and C fund as well as talk about how the G fund is positioned in the TSP. We will share the current makeup of the L2050 fund in the TSP so you can see what investment decisions you may want to make for your retirement if using the TSP.
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TSP, the Thrift Savings Plan, is a retirement saving and investment plan for federal employees and members of the military. One of the primary investment options available to TSP participants is the TSP Lifecycle Fund. This article will explain what these funds are and how they work.
TSP Lifecycle Funds, also known as “target-date” funds, are a type of mutual fund that is designed to provide a diversified investment portfolio that automatically adjusts its asset allocation over time based on your retirement date. These funds are set up for investors who have a specific retirement date in mind and want to minimize the work required to manage their investments.
When you invest in a TSP Lifecycle Fund, you choose the fund with the year closest to your expected retirement date. For example, if you plan to retire in 2040, you would choose the TSP L 2040 Fund. Each Lifecycle Fund is a diversified portfolio of the five TSP core investment funds – the G, F, C, S, and I Funds.
In the early years of the fund, the portfolio is weighted more heavily towards the stock-based TSP funds, the C and S Funds. As you approach your target retirement year, the allocation is gradually shifted towards the more conservative bonds-based TSP funds, the G and F Funds.
This gradual shift in asset allocation helps to reduce the investment risk as you near your retirement date. As you approach retirement, the fund automatically rebalances to keep its asset allocation in line with the target date. After retirement, the fund continues to adjust its allocation to become increasingly conservative.
Overall, TSP Lifecycle Funds are an excellent option for investors who want a simplified investment strategy that requires minimal ongoing attention. If you don’t want to spend a lot of time managing your investments, Lifecycles Funds may be the perfect choice for your TSP retirement savings plan.
As a retiree, should you be in one of the L FUNDS or is it best to be in the LETTER FUNDS??
You didn't talk about how the allocations change over time, so your risk goes down the closer you get to your target date. I think that's the main advantage of the lifecycle funds — if you want to be a bit more risky than your own retirement date, choose one of the L funds with a later date. I plan to retire in 2028, but am invested in the 2040. For what it's worth, you can also choose to mix your allocations across different L funds, so, say 50% 2040 and 50% 2030. Of course, now they have started plans in 5-yr increments, so probably not as much a need to do that…but it is an option.
I did:
10% F fund
20% L50 fund
10% S fund
60% C fund
My TSP is like 65% C Fund, 25% S Fund, 5% I Fund, 2.5% F Fund, and 2.5% G Fund. Is it too aggressive?
No mention of F fund…. that’s the bonds.
Dustin now your speaking my language! I looked into this and I wasn't too sure if it worked for me. I just invest into the C, S, and I and it has worked out pretty well for me. They now broke the funds down into 5s for example L2045, L2040.
No Love for the F fund.
C Fund is where it’s at if you’ve got a long Time horizon. (Not Financial advice)
Thanks Dustin good to know.
Can you comment on Roth usage with tap funds as well. I’m currently in the 2030 life cycle fund. Plan to retire around 2032.
I bought Facebook, Microsoft, Apple, Google, Adobe, Alteryx, Wells Fargo, Snap, Twitter.
YIKES!!!!!!!!!!! 30% international.. Good lord.. smh
Thanks for the info.
is it even worth imvesting in the tsp if my goals are different im trying to do fire so investing in something 2 retire at 65 aint it imo when my goal is 40???
Lifestyle funds are a joke, you said it, make up your own!
Thanks for the info.