Changes to the Thrift Savings Plan Lifecycle Fund Increments

Jun 7, 2017


The panel overseeing the Thrift Savings Plan unanimously approved offering lifecycle funds targeted to within 5 years of the participants’ expected retirement date rather than the current 10-year increments. It was recommended that TSP investment options follow a trend from private 401k providers and offer lifecycle funds. These would move investors to a more conservative portfolio as they near their retirement date, on a 5-year basis.

TSP will begin implementing the new Lifecycle fund increments in 2020.

It was also recommended that the TSP’s I fund, made up of international stocks and bonds, be diversified to include stocks in Canada, emerging markets, and international small-cap markets.

A financial consultant told the Federal Retirement Thrift Investment Board, “These are large markets to which we have no exposure. By adding these, we would improve the risk portfolio for participants, as well as improve outcomes on a forward-looking basis.”

The board further approved the examination of expanding the I fund’s portfolio. The deputy chief investment officer for the FRTIB said this could be done by this fall.

Blended Military System

TSP officials also briefed the board on their progress with preparing for the onset of the blended retirement system for the military, scheduled for January 2018. Under this system, new troops would automatically be enrolled in the TSP and receive a matching contribution from the government. The government will contribute 1-5 percent of the service members’ salary toward their TSP, depending on what they contribute themselves. Although, they will default into 3 percent of their paychecks. Their TSP account will begin 60 days into their service. Those who stay in the military for 20 years and are entitled to a retirement pension, would receive a smaller calculation of their annuity.

This new system automatically affects new service members starting January 1, 2018. Current service members are grandfathered into the existing system but can opt into the new one. The online opt-in website launched in April of this year and over 163,000 have already signed up.

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