Thrift Savings Plan (TSP) participants will have several new choices of lifecycle funds in 2020.
In 2017, the Federal Retirement Thrift Investment Board (FRTIB), the agency that administers the TSP, approved the expansion of the L (lifecyle) funds from a 10-year increment asset allocation to a five-year increment.
The L Funds use professionally determined investment mixes of the G, F, C, S, and I Funds in the TSP for a particular time horizon, or target retirement date. The objective of the L Funds is to strike an optimal balance between the expected risk and return associated with each fund. The investment mix of each L Fund becomes more conservative as its target date approaches.
According to FRTIB, using a five-year increment is an industry best practice and would give TSP participants a smaller window of time to meet their targeted retirement date with their asset allocation.
The board’s goal is to implement five-year L funds in the third quarter of 2020.
As of now, TSP participants have the following choices in the L funds:
- L Income
- L 2020
- L 2030
- L 2040
- L 2050
“We have an L-Income fund that is the terminus for all of our lifecycle funds,” said Kim Weaver, director of external affairs at FRTIB. “Come next year, the L2020 fund will roll into the L-Income fund. It’s a fund that is built to give some return as a protection against inflation, but also protect against the loss of principal as best we can.”
After the new L funds are fully implemented, TSP participants will have these lifecycle fund choices:
- L Income
- L 2025
- L 2030
- L 2035
- L 2040
- L 2045
- L 2050
- L 2055
- L 2060
- L 2065
In January 2019, the TSP increased the proportion of its L Funds that are invested in stocks.