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TSP 201: Your Guide to the Lifecycle Funds

Your Guide to the Lifecycle Funds

Each of the ten Federal Government Thrift Savings Plan (TSP) Lifecycle Funds (L Funds) is a carefully diversified mix of the five core TSP Funds (G, F, C, S, and I). They’re designed to help participants invest their portfolio into the L Fund that may get them a return on their level of investment risk when they begin withdrawing from their TSP. If you enjoy the “set it and forget” method of investing, then L Funds could be an excellent choice for you.

Source: https://www.tsp.gov/publications/tsplf14.pdf
Source: https://www.tsp.gov/funds-lifecycle/

But not all L Funds are created equal. It’s important to know which L Fund might make the most sense for you, your age, your career trajectory, and how soon you foresee yourself withdrawing from your TSP.

An Overview of Lifecycle Funds

Source: https://www.tsp.gov/publications/tsplf14.pdf
Source: https://www.tsp.gov/funds-lifecycle/
Source: https://federalnewsnetwork.com/mike-causey-federal-report/2021/03/why-the-tsps-lifecyclefunds-are-picking-up-popularity/

L Funds were introduced in August of 2005 as a way to invest in the other five funds based on various “time horizons” of the account holder. As such, they are designated by the year of their target date range that contributors might expect to start needing the money in their account:

• L 2025: Expect to withdraw money between 2022 – 2027
• L 2030: Between 2028 – 2032
• L 2035: Between 2033 – 2037
• L 2040: Between 2038 – 2042
• L 2045: Between 2043 – 2047
• L 2050: Between 2048 – 2052
• L 2055: Between 2053 – 2057
• L 2060: Between 2058 – 2062
• L 2065: Between 2063 or later
• L Income: Withdrawing now or before 2022

The farther away the target date, the more aggressive the fund allocations. This is because the standard trend for people making retirement financial plans is to get more conservative with spending and allocations the closer to retirement they get. Younger participants in the L Funds can take more risk because they are further away from retirement, thereby having more time to potentially recover from any potential market downturns before needing their money.

Every three months, the target allocations for every L Fund (except L Income) are automatically adjusted so that they shift just a little further from higher risk and return to lower risk and return. When an L Fund reaches its target date (as L 2010 and L 2020 already have, back when there were only ten-year designations instead of the current five-year designations), it ceases to exist, and its money becomes part of the L Income Fund.

It’s important to remember that L Funds carry the same risks as any of the five core funds they include. If those funds experience loss, any allocations made to them via L Funds may experience a similar loss. The difference lies within how much funding has been allocated to each core fund based on which L Fund you contribute to.

L Income Fund

Source: https://www.tsp.gov/funds-lifecycle/

You may consider investing in this fund if you were born before 1958 or are already withdrawing from your TSP account. The objectives of this fund are to achieve a low level of growth and a high emphasis on preserving your assets. Unlike the other L Funds, the L Income does not change quarterly, but it is rebalanced daily to maintain its target investments.

As of October 2021, the L Income Fund contributed:

• 70.99% to the G Fund
• 5.76% to the F Fund
• 12.20% to the C Fund
• 2.91% to the S Fund
• 8.14% to the I Fund

L 2025 Fund

You may consider investing in this fund if you were born between 1958 – 1964 or plan to begin withdrawing from your TSP account between 2022 – 2027. The objective of this fund is to achieve a moderate level of growth, mixed with a moderate emphasis on preserving your assets.

As of October 2021, the L 2025 Fund contributed:

• 49.58% to the G Fund
• 6.19% to the F Fund
• 22.96% to the C Fund
• 5.79% to the S Fund
• 15.48% to the I Fund

L 2030 Fund

You may consider investing in this fund if you were born between 1965 – 1969 or you plan to begin withdrawing from your TSP account between 2028 – 2032. The objective of this fund is to achieve a moderate to high level of growth, but this time with a low emphasis on preserving your assets.

As of October 2021, the L 2030 Fund contributed:

• 33.31% to the G Fund
• 6.57% to the F Fund
• 31.02% to the C Fund
• 8.06% to the S Fund
• 21.04% to the I Fund

L 2035 Fund

You may consider investing in this fund if you were born between 1970 – 1974 or you plan to begin withdrawing from your TSP account between 2033 – 2037. The objective of this fund is to again achieve a moderate to high level of growth, with a low emphasis on preserving your assets. But it allocates to the core funds slightly differently than the L 2030 Fund, taking just a little more risk.

As of October 2021, the L 2035 Fund contributed:

• 26.72% to the G Fund
• 7.34% to the F Fund
• 33.83% to the C Fund
• 9.03% to the S Fund
• 23.08% to the I Fund

L 2040 Fund

You may consider investing in this fund if you were born between 1975 – 1979 or you plan to begin withdrawing from your TSP account between 2038 – 2042. The objective of this fund is to achieve a high level of growth with a low emphasis on preservation of assets.

As of October 2021, the L 2040 Fund contributed:

• 20.70% to the G Fund
• 7.55% to the F Fund
• 36.61% to the C Fund
• 10.03% to the S Fund
• 25.11% to the I Fund

L 2045 Fund

You may consider investing in this fund if you were born between 1980 – 1984 or you plan to begin
withdrawing from your TSP account between 2043 – 2047. The objective of this fund is to again achieve
a high level of growth with a low emphasis on preserving your assets. But it allocates to the core funds slightly differently than the L 2040 Fund, taking just a little more risk.

As of October 2021, the L 2045 Fund contributed:

• 15.16% to the G Fund
• 8.09% to the F Fund
• 38.80% to the C Fund
• 11.09% to the S Fund
• 26.86% to the I Fund

L 2050 Fund

You may consider investing in this fund if you were born between 1985 – 1989 or you plan to begin withdrawing from your TSP account between 2048 – 2052. The objective of this fund is to achieve a high level of growth with a very low emphasis on preserving your assets.

As of October 2021, the L 2050 Fund contributed:

• 10.37% to the G Fund
• 7.88% to the F Fund
• 41.13% to the C Fund
• 12.01% to the S Fund
• 28.61% to the I Fund

L 2055 Fund

You may consider investing in this fund if you were born between 1990 – 1994 or you plan to begin withdrawing from your TSP account between 2053 – 2057. The objective of this fund is to again achieve a high level of growth with a very low emphasis on preserving your assets. But it allocates to the core funds significantly differently than the L 2050 Fund, taking even more risk.

As of October 2021, the L 2055 Fund contributed:

• 0.50% to the G Fund
• 0.50% to the F Fund
• 49.72% to the C Fund
• 14.63% to the S Fund
• 34.65% to the I Fund

L 2060 Fund

You may consider investing in this fund if you were born between 1995 – 1999 or you plan to begin withdrawing from your TSP account between 2058 – 2062. The objective of this fund is to again achieve a high level of growth with a very low emphasis on preserving your assets. It allocates to the core funds in a way similar to the L 2055 Fund, but once again, is adjusted to take a little more risk.

As of October 2021, the L 2060 Fund contributed:

• 0.44% to the G Fund
• 0.56% to the F Fund
• 49.72% to the C Fund
• 14.63% to the S Fund
• 34.65% to the I Fund

L 2065 Fund

You may consider investing in this fund if you were born after 1999 or you plan to begin withdrawing from your TSP account sometime after 2062. The objective of this fund is to again achieve the highest level of growth with the lowest emphasis on preserving your assets.

As of October 2021, the L 2065 Fund contributed:

• 0.36% to the G Fund
• 0.64% to the F Fund
• 49.72% to the C Fund
• 14.63% to the S Fund
• 34.65% to the I Fund

Source: https://www.tsp.gov/funds-lifecycle/
Source: https://www.tsp.gov/funds-lifecycle/l-income/

Choosing the Right L Fund for You

The Lifecycle Funds’ time horizons were developed by Mercer Consulting, who based their choices on the data and characteristics of the average U.S. federal retiree. While sticking with the recommended birth and withdrawal dates may be a safe option for those who don’t desire to play an ongoing active role in designating their core fund allocations, it isn’t a requirement to do so.

Source: https://themilitarywallet.com/thrift-savings-plan-lifecycle-funds/

The L Funds don’t preclude any federal employee or armed service member from contributing to whichever fund they would like. In other words, no matter what year you were born or when you estimate you’ll be needing money from your TSP, you can allocate to any of the ten active L Funds you desire. You can invest any part of your TSP account into any L Fund (or other core fund), and can even allocate your investments to more than one L Fund. Just keep in mind that by doing so, you could duplicate your investments to each of the core funds, as every L Fund allocates to each of them to some extent.

Choosing which L Fund to contribute to largely comes down to determining how much risk you’d like to take with your assets. And that risk depends heavily on which of the five core funds you may be considering.

Ann Vanderslice Federal Benefits Made Simple, an E.A. Buck Company is an independent financial services firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This firm is not affiliated with or endorsed by the US government or any governmental agency. E.A. Buck is an independent financial services firm, offering investment and insurance products to consumers. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Securities offered only by duly registered individuals through Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM), a Registered Investment Adviser. Insurance services offered through Ann Vanderslice Federal Benefits Made Simple an E.A. Buck Company. MAS, AEWM, and Ann Vanderslice Federal Benefits Made Simple, an E.A. Buck company are all separate entities. 01163196- 12/21.