U.S. Government’s Investment Options Are Good but Could Be Great

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The U.S. Federal Thrift Savings Plan’s Lifecycle Funds’ unique status as part of a huge government entity is a blessing and a curse.

As the workplace retirement savings vehicle for U.S. federal civilian workers and uniformed services members, the Federal Retirement Thrift Savings Plan stands as the largest defined-contribution plan in not only the United States but also the world. Its more than 6.7 million participants include most employees of the U.S. government, such as postal workers, military personnel, agency employees, and members of Congress.

Like most U.S. retirement savings plans, target-date strategies are important and growing components of TSP. They are known as the Lifecycle or L Funds, and more than half of TSP’s 6.7 million participants have directed at least a portion of their assets to these target-date funds; of those, 2.3 million workers invest solely in the L Funds. To offer a measure of independent analysis to L Fund investors and the advisors who serve them, Morningstar reviewed the L Funds through a lens similar to the one used to examine target-date investment strategies available to the general public, examining the funds’ Process, People, Price, Parent, and Performance.

Here, we explore the main advantages and disadvantages of TSP L Funds. Let us know if there are any other TSP-related questions that you’d like us to pursue in the future.

Thrift Savings Plan L Fund Advantages:

  • Rigorous annual testing of asset-allocation glide path.
  • Access to G Fund that provides U.S. government-guaranteed yields with no bond-market risk
  • Underlying funds rely on well-regarded managers via BlackRock and State Street Global Advisors.
  • Access to G Fund that provides U.S.-government-guaranteed yields with no bond market risk.
  • Among the lowest expense ratios available to investors.
  • Unmatched level of transparency via board meetings and various reports available to public.
  • Returns have soundly matched expectations by protecting in down markets.
  • Long-term results consistently ahead of peers. Click HERE to read more.