Service Members Now Have More Options to Invest in TSP

new tsp options

Service Members Now Have More Options to Invest in TSP

The Thrift Savings Plan will retire one fund and add six new funds on July 1st. The six new TSP options consist of L Funds or lifecycle funds which are crafted to allow investors to balance returns and risk on their TSP portfolio of holdings.

Five Main Funds

Servicemembers and others who qualify can choose to invest in five main funds:

G Fund

Offers the least risky option and while you won’t lose money with this investment, the rate of return is the lowest. The G Fund invests in government securities.

F Fund

This fund is low risk but offers little by rate of return. The F Fund invests in US government mortgage-backed corporate and government bonds. Bonds increase in value as the stock markets go down.

C Fund

Riskier than the G and F Funds, but the rate of return is higher because the funds invest in the stock market. The stocks consist of S&P 500 Index (Standard and Poor’s 500) which is a mix of stocks of 500 large to medium-sized US companies. When these stocks go up, so does the investment return but the reverse is also true.

S Fund

This fund is riskier than the C Fund. It invests in the stock market as well but not in larger companies. It invests in smaller companies, not in the S&P 500. When the stock market goes up so does the investment return and vice versa.

I Fund

The riskiest fund as it invests in international stock markets.

L Funds

The L funds were designed to help participants reallocate their investments more easily as they work towards retirement.  This is achieved by combining various investments from the five main fund options.

There are five L funds with different retirement goal dates. As the retirement goal date nears, the L funds automatically adjust their holdings to become increasingly conservative. These investment fund types are also known as target-date funds because they reallocate participant investments regularly based on the retirement goal date.

L Funds Designed to Work By Themselves

Whether TSP participants are deployed or just casually investing, they may not have time to closely monitor their mix of investments and now there is no need to. The funds are beneficial to military members because they are designed to work by themselves once they are set up and don’t require rebalancing every quarter.

The new plan allows L Funds to be divided by 5 years instead of 10. The more precise division of funds gives participants more room for adjustments to maximize their investment performance while maintaining the safety of their money and not having to micro-manage their portfolio mix.

 

New TSP 2020 L Fund Options

Selection By Date of Birth and Retirement Year

L 2025 Fund

  • This fund is created for those born between 1958 and 1964
  • Those who plan to start withdrawing from their TSP account between 2021 and 2027

L 2030 Fund

  • For those born between 1965 and 1969
  • Plan to start withdrawing from their TSP account between 2028 and 2032.

L 2035 Fund

  • Created for those born between 1970 and 1974
  • Plan to start withdrawing from their TSP account between 2033 and 2037

L 2040 Fund

  • This fund is created for those born between 1975 and 1979
  • Plan to start withdrawing from their TSP account between 2038 and 2042

L 2045 Fund

  • For those born between 1980 and 1984
  • Plan to start withdrawing from their TSP account between 2043 and 2047.

L 2050 Fund

  • Created for those born between 1985 and 1989
  • Plan to start withdrawing from their TSP account between 2048 and 2052

L 2055 Fund

  • This fund is created for those born between 1990 and 1994
  • Plan to start withdrawing from their TSP account between 2053 and 2057

L 2060 Fund

  • For those born between 1994 and 1999
  • Plan to start withdrawing from their TSP account between 2058 and 2062.

L 2065 Fund

  • Created for those born after 1999
  • Plan to start withdrawing from their TSP account after 2062

L Income Fund

  • This fund is created for those born before 1958
  • Those currently withdrawing from their TSP account

 

Many participants and most new participants have invested automatically into the L Fund most appropriate to their age. Anyone wishing to make changes to their investment fund can log in to the TSP website after July 1 to make adjustments.

Source

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