I'm a pretty big fan of the Thrift Savings Plan (TSP). I really like the basic funds. I don't normally use the L funds with clients, as I think I can come up with a portfolio that better aligns clients' goals and risk tolerance. But if you're not working with an advisor, using the L funds can be a great idea. There are some changes coming to the L funds and here is a brief summary.
TSP Adding More Life Cycle Funds
This summer (2020), the TSP will go from L funds based on 10 year increments (2030, 2040, 2050 and 2060) to funds with targets every 5 years (2025, 2030, 2035, etc). This is a good move as 10 years is a bit long, in my opinion. This will allow for the TSP Board to more precisely allocate assets for those at different points in their career.
TSP to Increase Risk Level in Life Cycle Funds
One complaint about the L funds is that they are too conservative. This means compared to other target-date funds the L funds had less equity exposure compared to a target date fund available on the commercial market or in a 401(k). That is changing.
When the L2060 and L2065 are opened, they'll have more stock (up to 10% more) than previous L funds when they launched. For the L funds already in existence, the equity portion will be frozen until reaching the new "glide path".
Additionally, the percentage of international equity inside the overall equity allocation is increased. This will also likely increase the risk associated within a L fund. This change has already been done.
TSP Might Increase Exposure to Emerging Markets
The TSP Board had decided to change the the index that the I Fund tracks. The I Fund currently tracks an EAFE index (Europe, Australia, Far East). The planned change would switch to an All Country (excluding US) index. That meant that the I Fund would be investing in China. As you can imagine, this has encouraged guidance from the President and Members of Congress. The change is currently on hold.
Military Financial Planning is Different
Just like the TSP isn't exactly like a 401(k), financial planning for military members and retirees isn't exactly like financial planning for civilians. We think you should work with someone who lives and breathes military finances. Give us a call if you'd like to chat about how we do it.
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