TSP Lifecycle funds

The Thrift Savings Plan offers participants five Lifecycle funds containing a mix of the TSP's five core funds. The Lifecycle funds are Target date retirement funds, with the same expenses as the other TSP funds.

Glide path
The charts and data below, one separate tabs of the embedded spreadsheet, show the glide path of the Lifecycle funds, using data as of June 27, 2014.

The various tabs (click each tab's hyperlink to view) depict:


 * TSP Lifecycle Glide Path - Illustrates how each decade, the holdings in the three equity funds and even the F Fund gradually decline, while the G Fund steadily climbs until the G Fund becomes 74% of the holdings when the Income phase is reached. The sky blue line labeled Equity shows the overall equity percentage of each fund (C Fund + S Fund + I Fund).
 * Glide Path - displays the equity percentage (C Fund + S Fund + I Fund) of each Lifecycle fund, starting in year 2014 (representing the L 2050 fund) through the 40 years ending with the L Income fund. Note that the data points are in ten-year intervals, so the actual glide path is a gentler slope. For comparison, Vanguard Target Retirement Date funds and Fidelity Freedom Funds of the same year are shown.
 * Fixed Income Glide Path - Many TSP investors are concerned about how much G Fund to hold relative to the F Fund and other fixed income assets. This decision can be informed by the prescribed holdings of the G Fund and F Fund in the Lifecycle funds, relative to the investor's point in time in their investment lifetime. The chart on this tab shows how the F Fund, after climbing to nearly ten percent of the portfolio, declines very slightly throughout the decades. By comparison, the G Fund starts from a lower holding than the F Fund and then climbs steadily over the decades, increasingly so over the five years before the "Income" year is reached.
 * Fixed Income as Percentage - This tab shows the relative holdings of the G Fund and F Fund and compares their relative weights as the two components of the fixed income portion of the portfolio, across the decades of the Lifecycle funds.
 * US Stocks as Percentage - This tab shows the relative holdings of the C Fund and S Fund and compares their relative weights across the decades of the Lifecycle funds.

Note that these curves were auto-created by Google Spreadsheets. A more careful look at the glide path reveals that the rise in G Fund, and the attendant decline in the other four funds, occurs more dramatically in the final five years before the the Income level arrives, than is depicted in the smoother blue line in the chart. Also, be aware that the data points in these spreadsheet are separated by ten years; the lines between the data points in this graph are "straighter" than they truly are in real life. In real life the lines will be smoother.

Role in portfolio
TSP investors considering a Lifecycle fund should consider the same questions that investors in any target date retirement fund must weigh. See Target date retirement funds for a review of these general considerations.

Issues of concern to TSP investors in particular include:
 * The fact that the I Fund is not a complete international fund may lead some investors to not use the Lifecycle fund in favor or using individual funds and holding the international allocation outside the TSP.
 * The TSP Lifecycle funds employ an active investing approach for setting the funds' glide paths, which is based on efficient frontier analysis using capital market assumptions over a 20-year time horizon and stochastic modeling projections for inflation, economic growth, salary growth, corporate profits, P/E rations, interest rates, and exchange rates. Investors looking for a passive approach may want to use individual funds and look to Vanguard, Fidelity, or another large fund family for examples of target date glide paths.