The agency that oversees the Thrift Savings Plan (TSP) has noticed a difference in the investment patterns of new workers. The agency found that these workers are moving their default investment fund from the government securities (G Funds) to age-appropriate lifecycle funds (L Funds). The TSP recently analyzed investor behavior and found that younger workers are investing more in L Funds.
The agency found that workers below the age of 30 invest 63% of their assets in L Funds. Those between 30 and 39 invest around 39% of their assets in the funds. In addition, workers between ages 50 and 59 invest 20% of their assets in the funds. Those between age 60 and 69 invest 17%, and those who are 70 and above invest 13%.
In its report, the agency stated that the 2015 shift of default investment from the G Fund to age-appropriate L Funds had changed the fund-utilization ratio. It also stipulated that the beliefs about the advantages of utilizing the L Funds also constitute a factor.
The report also stipulated that workers who have been using the TSP for longer have more investments in the G Fund than newer participants. Those between the age of 60 and 69 have 38% investments in the fund. Workers who are 70 and above have more assets in the G Fund, with an investment of 43%. On the contrary, only 9% of those under 30 and 18% of those between 30 and 39 invest in the fund.
The report stated that participants focus more of their investments on income-producing assets as they approach retirement. This factor, it stated, could be responsible for the new investment patterns. The agency also stated in its reports that fewer young workers are investing in the G Fund. In 2014, the youngest participants invested 42% of their assets in the G Fund.
The high percentage had prompted the agency to change the default investment fund from the G Fund. The agency explained that the fund is guaranteed against investment losses but has a lower growth potential than other funds. The change has the intended effects, as shown by the recent survey. Fewer younger workers are investing in G Funds, just as the agency wanted.
Though participants can change their default investment fund and amount, the agency said many participants never bother to do that.
Only FERS employees were considered for this survey.