Learning about L Funds by Todd Carmack

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Todd Carmack discusses L funds and retirement 

The L Funds (Lifecycle funds) became part of the TSP allocation options in August 2005.   The objective of L funds is to provide a balance between risk and return combined with an employee’s future retirement year. The L Funds are designed to make life a little easier for federal employees by taking the guesswork out of trying to diversify and rebalance TSP allocations for retirement planning.

The L-funds are comprised of the six basic allocations of the Thrift Savings Plan:

G fund – government securities

F fund – government, corporate and mortgage-backed bonds

C fund – S&P 500 index fund (large cap companies of the US)

S fund – small to medium cap US companies

I fund – international stocks of more than 20 developed countries

These lifecycle funds offer both risk (exposure to stock market losses) and reward (exposure to stock market gains). The funds are designed to have greater risk in the portfolio the farther out your expected retirement date will be and a more conservative stance the closer you are to retirement. The idea is to pick the fund closest to your goal retirement date. Utilizing L funds and retirement planning can be helpful in preparing you for retirement. The funds will be rebalanced over time, going from containing higher percentages of risk (C, S, and I funds) to greater percentages of G fund as time gets closer to retirement.

Here is the current breakdown composition of the L funds:

L income – designed for those retiring in the next year or two.

G fund – 74%

F fund – 6%

C fund – 11.2%

S fund – 2.8%

I fund – 6%

L-2020 fund – retiring between 2017-2024

G fund – 50.28%

F fund – 5.72%

C fund – 24.32%

S fund – 6.48%

I fund – 13.2%

L-2030 fund – retiring between 2025-2034

G fund – 30.78%

F fund – 5.72%

C fund – 34.53%

S fund – 9.92%

I fund – 19.05%

L-2040 fund – retiring between 2035-2044

G fund – 20.43%

F fund – 5.57%

C fund – 39.8%

S fund – 12.35%

I fund – 22.20%

L-2050 fund – retiring between 2045-2054

G fund – 12.13%

F fund – 3.87%

C fund – 44.14%

S fund – 14.66%

I fund – 25.20%

These funds are rebalanced each quarter moving to a less risky mix of investment allocations with a greater percentage going into the G fund.

Source: www.opm.gov

Other Todd Carmack Articles

Social Security for FERS Employees by Todd Carmack

Understanding The Thrift Savings Plan, By Todd Carmack

Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack

Understanding Your FEGLI Coverage, by Todd Carmack

Disclosure: For informational purposes only. Investment advisory services offered through BWM Advisory, LLC (BWM). *Due to various registration requirements concerning the dissemination of investment and insurance product and service information, we are currently required to limit access of the following pages to individuals residing in states where BWM is currently registered. Investment and advisory services available only to residents where BWM is registered or where State determined registration thresholds have not been met. Please contact BWM Advisory for a copy of their most recent ADV for Registration and additional disclosure information. Investing involves risk. Always contact your own investment advisor before making any investment decision.

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