TSP Lifecycle (L) Funds: A Deep Dive for Retirement Planning
The Thrift Savings Plan (TSP) Lifecycle (L) Funds are a popular investment option, notably for those new to the system, but require active management rather than a “set it and forget it” approach [[1]]. Introduced over a decade ago, L Funds offer a diversified portfolio that automatically adjusts its asset allocation over time, shifting from higher-risk stocks to lower-risk bonds as the target retirement year approaches [[2]].
How They Work:
Glide Path: The core principle of L Funds is the “glide path” – a pre-persistent shift in investment allocation. Initially, L Funds heavily favor stock funds (C, S, and I) to maximize growth potential. As the target year nears, the allocation gradually increases towards bond funds (F and G) to preserve capital [[1]].
Target Date Funds: L Funds are designated by a target year (e.g., L 2030, L 2075). this year represents when the fund is expected to mature, at which point its assets transition into the L Income Fund [[1]].
* L Income Fund: Once an L fund reaches its target date, its holdings move to the L Income Fund, which maintains a conservative allocation of 24% stocks and 76% bonds, with the majority of the bond allocation in the G Fund