TSP L Funds: Quick Guide
- tress14plaid
- Mar 29
- 4 min read
Updated: Apr 23
TSP L Funds: The Lifecycle Funds Guide
The L Funds are professionally managed "target date" funds that automatically adjust their asset allocation to become more conservative as you approach retirement. Each L Fund invests in a specific mix of the G, F, C, S, and I Funds, offering a diversified, age-appropriate portfolio with a single investment choice that rebalances automatically.
Table of Contents
Introduction
The L Funds (Lifecycle Funds) provide federal employees with a professionally designed, diversified investment portfolio based on when they expect to begin withdrawing money. Each L Fund contains a mix of the five individual TSP funds (G, F, C, S, and I) that automatically adjusts quarterly, becoming more conservative as the target date approaches and even more conservative during retirement.
TSP L Funds Key Features
Feature | Description |
Investment Type | Diversified portfolio of all five core TSP funds (G, F, C, S, and I Funds) |
Risk Level | Varies by target date (Higher risk for distant dates, lower risk for near-term dates) |
Volatility | Decreases as target date approaches |
Rebalancing | Automatic quarterly rebalancing to maintain target allocations |
Glide Path | Gradual shift from stocks to bonds as target date approaches and beyond |
Principal Protection | Increases over time as allocation to G Fund increases |
Management Expense Ratio | 0.049% (2023) - Same as the weighted average of component funds |
Available L Funds
Fund | Target Audience | Primary Focus |
L Income | Current retirees or those withdrawing soon | Capital preservation with modest growth |
L 2025 | Those retiring between 2021-2027 | Conservative growth transitioning to income |
L 2030 | Those retiring between 2028-2032 | Balanced growth and preservation |
L 2035 | Those retiring between 2033-2037 | Moderate growth with increasing preservation |
L 2040 | Those retiring between 2038-2042 | Growth with moderate risk |
L 2045 | Those retiring between 2043-2047 | Long-term growth with higher risk tolerance |
L 2050 | Those retiring between 2048-2052 | Aggressive growth for long time horizons |
L 2055 | Those retiring between 2053-2057 | Maximum growth for very long time horizons |
L 2060 | Those retiring between 2058-2062 | Maximum growth for very long time horizons |
L 2065 | Those retiring in 2063 or later | Maximum growth for very long time horizons |
The TSP adds new L Funds in 5-year increments as needed.
Historical Performance
Performance varies by fund, with longer-term funds showing higher returns and volatility.
L Fund | 1-Year (2023) | 3-Year (2021-2023) | 5-Year (2019-2023) |
L Income | 9.49% | 2.71% | 5.43% |
L 2025 | 13.00% | 3.27% | 6.92% |
L 2030 | 15.03% | 4.02% | 7.98% |
L 2035 | 16.66% | 4.72% | 8.88% |
L 2040 | 18.20% | 5.42% | 9.75% |
L 2045 | 19.42% | 5.99% | 10.46% |
L 2050 | 20.44% | 6.48% | 11.07% |
L 2055 | 21.18% | 6.86% | 11.55% |
L 2060 | 21.59% | 7.08% | 11.81% |
L 2065 | 21.78% | 7.18% | 11.91% |
Source: TSP Fund Performance
Risk Profile
The risk profile varies by L Fund:
Newer L Funds (2050-2065): Higher equity allocation (approximately 85-90%) with corresponding market risk and volatility
Mid-term L Funds (2035-2045): Moderate equity allocation (approximately 65-80%) with balanced risk
Near-term L Funds (2025-2030): Lower equity allocation (approximately 40-60%) with reduced volatility
L Income: Conservative allocation (approximately 20% equity, 80% fixed income) with focus on preservation and income
Each L Fund's risk automatically decreases over time as the allocation shifts toward more conservative investments.
Ideal Investor Profile
L Funds may be appropriate for:
Hands-off investors: Those preferring professional management without need for rebalancing
Uncertain investors: Those unsure about how to allocate their TSP contributions
Time-constrained employees: Those without time or interest to manage investments
Risk-appropriate investors: Those wanting age-appropriate risk without manual adjustments
Behavioral risk managers: Those wanting to avoid emotional reactions to market movements
Advantages and Limitations
Advantages
Professional management: Follows proven investment principles and academic research
Automatic rebalancing: Maintains target allocation without investor action
Age-appropriate risk: Adjusts based on time until retirement
Diversification: Provides exposure to all asset classes in one fund
Behavioral buffer: Reduces tendency to time markets or react emotionally
Simplicity: One-decision strategy that requires minimal monitoring
Continuous management: Adjusts through working years and into retirement
Limitations
Generic approach: Not customized to individual circumstances or needs
Limited flexibility: Cannot adjust for personal risk tolerance differences
Potential overconservatism: May become too conservative too quickly for some
International allocation: Some investors may prefer different international exposure
Single strategy: Uses only strategic asset allocation without tactical adjustments
No alternative assets: Limited to traditional stocks and bonds
Strategic Considerations
Consider these strategic approaches when incorporating L Funds in your TSP allocation:
Pure L Fund strategy: Invest 100% in the L Fund closest to your expected retirement date
Core and satellite approach: Use an L Fund as the core holding (70-80%) with tactical allocations to individual funds
Custom risk adjustment: Choose an L Fund with a date later than your retirement for more aggressive exposure
Conservative adjustment: Choose an L Fund with a date earlier than your retirement for more conservative exposure
Two L Fund strategy: Split between two L Funds to customize your allocation
The L Funds are designed as complete portfolios, so it's generally not recommended to mix them with individual funds unless you have a specific strategic reason for doing so.
For a detailed breakdown of each L Fund's current and projected allocations, visit the TSP L Funds Information page.
This guide is intended for educational purposes only and does not constitute financial, legal, or tax advice. Federal employees should consult with qualified professionals regarding their specific circumstances.
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