Big changes coming to TSP Fund Lineup. Do you have the best fund for your situation?

The 1.3 million Uniformed Services participants in the Thrift Savings Plan (TSP) are about to get more choices when it comes to investing their money. Starting July 1, 2020, there will be a total of ten Lifecycle Funds, bringing the number of fund choices up to 15.

Best Retirement Plan Ever?

The TSP, the government’s version of a civilian 401k retirement plan, has been called one of the best employer-backed retirement savings accounts around because of its low administrative fees and expenses. Recent changes to withdrawal options have made the TSP even more attractive to potential investors because they have added flexibility when it comes to taking distributions.

But the plan has sometimes been criticized for having too few fund choices.

Understanding the Type of Funds Available

Currently, the TSP has five “core” funds: the G fund, a government securities investment fund, and four index funds, the F, C, S, and I.

The G fund invests in a special treasury security and is the only fund guaranteed to not lose the investor’s principal. However, it also has the lowest return of any fund.

The F, C, S, and I funds all mirror a market index. For example, the C fund invests in the same large and midsize companies that make up the Standard and Poor’s 500 index. These are companies like Microsoft, Apple, and Amazon. Historically, these index funds have had a greater return than the G fund, but they also bring a greater risk of loss.

The other funds in the TSP are all L, or Lifecycle, funds. These funds are target-date funds. Lifecycle funds are composed of different percentages of the 5 core funds. As you get closer to your target retirement date, those percentages change, with the goal of lowering your risk.

Younger investors can take on more risk, and potentially reap more rewards because they have time to recover from any market downturns. Older investors who are growing closer to their retirement date typically must be less aggressive in their investment choices.

The Lifecycle funds adjust automatically, taking most of the work out of figuring out which core funds to invest in.

More Funds to Choose From

In the past, the L funds only came in 10-year increments, so if a service member had a projected retirement date that fell between two funds, they had to choose whichever fund seemed to best match with their timeline or perhaps split their investment between multiple funds.

Now the funds will be offered in 5-year increments, with the fund with the furthest time horizon being the L 2065 fund, which is targeted at military members with a birthdate after 1999 or who plan on withdrawing funds from their account after 2062.

The fund with the closest timeline is the L 2025, designed for those born between 1958-1964 or those who plan on withdrawing from their account between 2021 and 2027.

There is also an L Income Fund which is designed for those who are currently withdrawing from their TSP account. It’s the most conservatively-invested Lifecycle fund.

Check Fund Allocations Now

While almost 70 percent of service members participate in the TSP, not everyone is diligent about checking their accounts.

Many military members do not know which funds they are holding in their accounts. The TSP has certain “default” funds that service members are automatically enrolled in unless they go into their account and make changes.

If a participant established their TSP account before September 5, 2015, and never made any changes afterward, then their investments are all going into the extremely conservative G fund. Those who enrolled after that date will be automatically invested in the most appropriate Lifecycle fund.

Service members can check their accounts at tsp.gov. If necessary, passwords can be reset online. Participant Service Representatives are available to talk Monday through Friday 7 a.m.- 9 p.m. via the ThriftLine, 1-877-968-3778.

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