Todd Carmack discusses L funds and retirement
The L Funds (Lifecycle funds) became part of the TSP allocation options in August 2005. The objective of L funds is to provide a balance between risk and return combined with an employee’s future retirement year. The L Funds are designed to make life a little easier for federal employees by taking the guesswork out of trying to diversify and rebalance TSP allocations for retirement planning.
The L-funds are comprised of the six basic allocations of the Thrift Savings Plan:
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G fund – government securities
F fund – government, corporate and mortgage-backed bonds
C fund – S&P 500 index fund (large cap companies of the US)
S fund – small to medium cap US companies
I fund – international stocks of more than 20 developed countries
These lifecycle funds offer both risk (exposure to stock market losses) and reward (exposure to stock market gains). The funds are designed to have greater risk in the portfolio the farther out your expected retirement date will be and a more conservative stance the closer you are to retirement. The idea is to pick the fund closest to your goal retirement date. Utilizing L funds and retirement planning can be helpful in preparing you for retirement. The funds will be rebalanced over time, going from containing higher percentages of risk (C, S, and I funds) to greater percentages of G fund as time gets closer to retirement.
Here is the current breakdown composition of the L funds:
L income – designed for those retiring in the next year or two.
G fund – 74%
F fund – 6%
C fund – 11.2%
S fund – 2.8%
I fund – 6%
L-2020 fund – retiring between 2017-2024
G fund – 50.28%
F fund – 5.72%
C fund – 24.32%
S fund – 6.48%
I fund – 13.2%
L-2030 fund – retiring between 2025-2034
G fund – 30.78%
F fund – 5.72%
C fund – 34.53%
S fund – 9.92%
I fund – 19.05%
L-2040 fund – retiring between 2035-2044
G fund – 20.43%
F fund – 5.57%
C fund – 39.8%
S fund – 12.35%
I fund – 22.20%
L-2050 fund – retiring between 2045-2054
G fund – 12.13%
F fund – 3.87%
C fund – 44.14%
S fund – 14.66%
I fund – 25.20%
These funds are rebalanced each quarter moving to a less risky mix of investment allocations with a greater percentage going into the G fund.
Source: www.opm.gov
Other Todd Carmack Articles
Social Security for FERS Employees by Todd Carmack
Understanding The Thrift Savings Plan, By Todd Carmack
Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack
Understanding Your FEGLI Coverage, by Todd Carmack
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