The Federal Drive with Terry Gerton If your TSP is in an L fund, do not set it and forget it
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Jun 26, 2025 Art Stein, a Certified Financial Planner from Arthur Stein Financial, reveals the risks of a 'set it and forget it' approach to L funds in the Thrift Savings Plan. He warns that this passive strategy can undermine purchasing power due to inflation and taxes. Stein emphasizes the need for active management and offers advice for young federal employees on taking control of their TSP investments. He explains how engaging with one’s investments can optimize financial outcomes as retirement approaches.
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L Funds Glide Path Explained
- L funds change their asset allocation over time from mostly stocks to mostly bonds following a glide path.
- The final conservative allocation aims to reduce volatility but may sacrifice growth potential.
Manage L Fund Actively
- Don't treat your L fund as a set-it-and-forget-it investment.
- Reassess your allocation 10 to 15 years before retirement and adjust between stocks and bonds as needed.
Customize Your TSP Allocation
- You can allocate your TSP contributions among the five traditional funds or the eleven L funds based on your preference.
- Adjust existing balances and future contributions separately to fit your risk tolerance over time.