Those funds will start with 99% of their holdings in equities, up from the 90% for the youngest L fund investors in the past. The funds geared toward the youngest investors-the L 2060 and L 2065 funds set to launch this summer-will feature a new, more-aggressive glide path. But the TSP is expected to launch L 2025, L 2035, L 2045, L 2055, L 2060, and L 2065 funds this summer.Īn additional change, which Morningstar director of policy research Aron Szapiro addressed last year, is to make the asset allocations of the L funds more aggressive and stock-heavy than was the case before. Currently the TSP offers L funds in 10-year increments (L 2020, L 2030, and so on). These alterations will affect the number of L funds, as well as the allocations within them. The big changes on the horizon largely relate to the firm’s L, or Lifecycle funds, which are the default options for participants who don’t make any investment selections. Lifestyle Funds Getting a Needed Overhaul On the other, the slow pace means that the TSP still has a few idiosyncratic characteristics that participants should be aware of if their aim is to build a well-rounded retirement plan. On the one hand it's reassuring that those changes are happening very gradually. That said, the TSP is currently planning a few more changes to the lineup than usual, largely designed to bring the plan’s offerings more in line with other large defined-contribution plans. To the extent that the board overseeing the TSP alters the lineup, those changes are invariably well considered and clearly communicated in advance.
The TSP has another quality I like to see in a company retirement plan: The menu changes very infrequently. The closest analog is probably stable-value funds, which use insurance contracts to maintain stable net asset values but aren’t technically guaranteed. I’ve described “G” as kind of a unicorn, in that it guarantees its investors’ principal but features a higher return than cash. The TSP menu also includes a ringer: the G fund, which is available only to TSP participants.
In most important ways, the Thrift Savings Plan, or TSP, a retirement savings plan for government workers and the largest defined-contribution plan in the world, is a model for other workplace retirement plans.įirst and foremost, it features a utilitarian menu of ultralow-cost index funds as well as target-date funds (“Lifecycle,” or “L” funds) composed of those index funds.
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