TSP Fund Performance in 2025: What’s Up, What’s Down, and What to Rethink

Missy E
November 14, 2025

Key Takeaways

TSP funds show a mixed bag in 2025, with some rebounding strongly after volatility in 2024, while others remain cautious bets.
Asset allocation strategies may need realignment in light of inflation trends, interest rate expectations, and global economic shifts.

Understanding the Landscape in 2025

You’re likely keeping a close eye on your Thrift Savings Plan (TSP) fund performance this year—and rightly so. With interest rate policies evolving and market volatility still part of the picture, 2025 isn’t a year for passive investing. You’ve probably noticed that some funds are climbing, while others have lost momentum. This is the time to reevaluate, not retreat.

The Economic Backdrop Shaping TSP Performance

Before diving into each fund, let’s look at the broader conditions influencing performance in 2025:

Inflation: While inflation cooled slightly from its 2022 peak, it remains sticky in core categories like services and housing.
Interest Rates: The Federal Reserve’s policy stance in 2025 is steady but cautious, keeping rates elevated to ensure inflation doesn’t rebound.
Global Events: Geopolitical tensions and supply chain adjustments are still creating ripples in international markets, affecting the I Fund and other international holdings.

Understanding these dynamics can help you make sense of your fund’s behavior.

G Fund: Steady, but Limited Upside

The G Fund continues to be the most stable TSP option. It invests in short-term U.S. Treasury securities, which means it’s virtually risk-free in terms of principal.

Performance: Modest gains in the 3-4% range so far in 2025, closely tied to prevailing interest rates.
Risk Profile: Extremely low risk, which can be helpful during uncertain times.
Strategy Tip: Good for capital preservation but not ideal for outpacing inflation. Consider rebalancing if you’re overweight in the G Fund.

F Fund: Still Facing Headwinds

The F Fund, which tracks the Bloomberg U.S. Aggregate Bond Index, is underwhelming in 2025.

Performance: Returns have hovered between flat and slightly negative. Higher interest rates are suppressing bond prices.
Risk Profile: Moderate risk, vulnerable to rate hikes.
Strategy Tip: You might want to hold off on adding heavily to the F Fund until there’s more clarity about interest rate cuts.

C Fund: A Resilient Climb

The C Fund, mirroring the S&P 500, is showing robust gains in 2025.

Performance: Up by around 8-10% year-to-date, driven by tech sector growth and steady consumer spending.
Risk Profile: Moderate to high risk, aligned with broad market performance.
Strategy Tip: If you’re still in the accumulation phase, the C Fund offers strong growth potential. However, don’t ignore diversification.

S Fund: Volatile but Promising

The S Fund tracks small and mid-sized U.S. companies. Its performance in 2025 reflects high volatility but with potential for upside.

Performance: Growth fluctuates month to month but shows an upward trend, currently around 6-7%.
Risk Profile: High risk, high reward.
Strategy Tip: Best used in moderation if you’re nearing retirement. Younger investors may afford more exposure.

I Fund: Rebounding, but Cautiously

After a rocky 2024 due to international instability, the I Fund is showing signs of recovery.

Performance: Gains of about 5-6% so far in 2025, mostly from European and emerging market rebounds.
Risk Profile: High risk due to currency and political risks.
Strategy Tip: Consider this for diversification but stay cautious with the percentage allocated.

L Funds: The One-Stop Strategy

L Funds remain a preferred option for hands-off investors. They automatically adjust asset mixes based on your target retirement date.

Performance: Varies by L Fund, but generally aligns with the weighted average of the underlying core funds.
Risk Profile: Adjusted automatically over time.
Strategy Tip: If you prefer not to actively manage your allocations, L Funds offer a reliable path—but you should still review them annually.

Should You Adjust Your Allocations in 2025?

It depends on your retirement timeline, risk tolerance, and financial goals. But if you haven’t touched your allocations in more than a year, this is a good time to take a fresh look.

Things to Consider:

Your Retirement Horizon: If you’re retiring in the next 5-10 years, you may want to shift some risk off the table.
Inflation Impact: Rising costs can erode fixed-income returns. Consider keeping some exposure to equities for growth.
Interest Rate Expectations: If rates stay high, bond funds may continue to struggle.
Diversification: Spreading your contributions across multiple funds can help mitigate risk.

Evaluating Year-to-Date Trends

2025 has been anything but predictable. Still, you can learn a lot from year-to-date performance when comparing past trends:

Q1 2025: C Fund and S Fund led growth, while the F Fund lagged.
Q2 Outlook: Market analysts suggest continued strength in equities, cautious optimism internationally, and a slow bond market recovery.

How Frequently Should You Rebalance?

Rebalancing isn’t a one-size-fits-all strategy. However, here are a few pointers:

Annually: At a minimum, check your portfolio every 12 months.
When Allocation Shifts 5% or More: If your actual mix deviates significantly from your target, it’s time to act.
During Major Market Events: Don’t try to time the market, but big shifts may warrant a review.

Common Pitfalls to Avoid

While tracking performance is critical, avoiding these traps is just as important:

Overreaction to Short-Term Changes: Avoid dumping a fund because of one bad quarter.
Ignoring Fees and Transfers: While TSP is low-cost, frequent interfund transfers can become problematic if you’re chasing trends.
Going All-In on One Fund: Even the strongest performers rotate. Diversification remains essential.

Tax-Deferred Growth Still Matters

Your TSP remains a powerful tool for long-term retirement savings. The tax-deferred nature of traditional TSP accounts allows your money to grow without annual tax hits. For Roth TSP accounts, your qualified withdrawals in retirement are tax-free.

Understanding fund performance in the short term helps you make smarter moves for the long haul. Don’t underestimate the compound power of consistently contributing and strategically allocating.

What If You’re Nearing Retirement?

For those within five years of retirement, preserving capital while still allowing for moderate growth is key:

Shift Toward Stability: Consider gradually increasing your allocation to the G Fund or more conservative L Funds.
Avoid Panic Selling: Market dips can happen. Staying the course with a diversified strategy often pays off.
Consider Withdrawals Strategy Early: How you plan to draw from your TSP affects how aggressive you can remain now.

Key Dates to Remember in 2025

April 15: Last day to make Traditional or Roth IRA contributions that can complement your TSP.
December 31: Deadline for Required Minimum Distributions (RMDs) if you’re age 73 or older.
Quarterly TSP Statements: Review these to monitor fund performance and ensure you remain on track.

Final Thoughts on Your 2025 TSP Strategy

TSP performance in 2025 reflects a dynamic economic landscape. Some funds are rising on the strength of resilient markets, while others tread water amid inflation and rate pressures. No matter your stage in the retirement journey, staying informed and proactive is your best strategy.

Your allocation decisions today can shape your financial freedom tomorrow. If you’re uncertain about your next steps, speak with a licensed agent listed on this website for personalized retirement planning advice.