TSP Lifecycle funds

From Bogleheads
Jump to navigation Jump to search

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 January 18, 2018[note 1].

General themes of the Lifecycle funds glide path:

  • The glide paths shift toward bond funds over the years, as expected.
  • Within the bonds allocations, the allocation shifts more toward G Fund and away from the F Fund as retirement age is reached.
  • Within the US equity allocation, there is a slight shift from the S Fund (small cap) toward the C Fund (large cap) as retirement age is reached.
  • The US to International equity ratio stays at 70:30 through the entire glide path.

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 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 2018 (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 question 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 in the Lifecycle fund, the F Fund starts at 6 percent for the youngest investor, and stays at almost that same percentage all the way through retirement age. By comparison, the G Fund starts out with an allocation nearly double 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 - 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. The F fund proportion starts out as roughly one-third of the overall fixed income allocation, and steadily decreases over the years.
  • US Stocks as Percentage - shows the relative holdings of the C Fund and S Fund and compares their relative weights across the decades of the Lifecycle funds. There is a slight shift toward C Fund (large-cap) and away from S Fund (small-cap) as the glide path goes from the younger investor toward retirement income phase.
  • US vs International - shows that the US equity (C Fund + S Fund) to International equity (I Fund) ratio stays constant at 70:30 for all Lifecycle funds.
Table. TSP Lifecycle Fund glide path

(View Google Spreadsheet in browser, then File --> Download as to download the file.)
Note: If the spreadsheet is blank, select a different sheet, then back to that sheet. The image will be refreshed.

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 of using individual funds and holding the international allocation outside the TSP. This concern will become moot in 2018 or 2019 because on December 6, 2017, the TSP's governing board "at its most recent meeting accepted a recommendation by a consultant to switch to linking the I fund to the MSCI All Country World Index, which covers non-U.S. developed markets, smaller companies and emerging markets."[1][2] The change could take a year or more to implement.
  • 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.[note 2] 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.


  1. Lifecycle Fund Performance at https://www.tsp.gov as of 18 January 2018. Readers are encouraged to visit the TSP site for up-to-date compositions of the Lifecycle Funds.
  2. Thrift Savings Plan Lifecycle Fund Asset Allocation, Mercer, November 2016.

See also

External links

  1. "TSP to Change I Fund Index, Leave Others as Is". FEDweek. 2017-12-06. Retrieved 2017-12-08. The board at its most recent meeting accepted a recommendation by a consultant to switch to linking the I fund to the MSCI All Country World Index, which covers non-U.S. developed markets, smaller companies and emerging markets.
  2. Bogleheads® forum topic: Thrift Savings Plan to Change I Fund Index. 07 December 2017