TSP Board Approves New Fund

The Thrift Savings Plan’s governing board has approved creation of a new “lifecycle” (L) fund, which essentially would be a “fund of funds,” using the TSP’s currently existing five funds to create a target portfolio depending on the individual’s expected date for withdrawing the money. The TSP board had been considering such a move for several months, out of a concern that participants are not well diversified and are not getting sufficient returns for the level of risk they are taking. Such funds, also called “target asset allocation funds” are increasingly popular in the mutual fund industry. They create a target portfolio of the available investments depending on amount of time before the expected withdrawal date and automatically adjust the balance over time to take into account differing returns of the funds-the lack of rebalancing is another behavior of TSP participants that concerns the board. The investments further are adjusted over time to become more conservative as the withdrawal date approaches.