The TSP will start a 2075 target date L fund next year when the current 2025 fund reaches the same investment profile as the Income fund and will be merged into it. Image: pogonici/Shutterstock.com
By: FEDweek StaffAt the latest meeting of the TSP governing board, agency officials highlighted several changes in progress, with the most immediate being the launch on Friday (July 26) of a target-date 2070 lifecycle fund, the first fund addition since the TSP created L funds through 2065 four years ago.
The new fund is “designed for participants born after 2004,” a presentation said, meaning for the immediate years ahead mainly new military personnel, since federal agencies hire few employees that young. Like the L 2055, 2060 and 2065 funds, it will begin with 99 percent invested in the three stock-based funds and the remainder about evenly split between the government securities G fund and the bond F fund.
The TSP will start a 2075 target date L fund next year when the current 2025 fund reaches the same investment profile as the Income fund and will be merged into it.
Also, officials said that “preparations are underway” for carrying out in January a provision of the Secure 2.0 Act enacted in late 2022 as part of a larger budget measure. That provision will allow for larger “catch-up contribution” investments for those ages 60 to 63.
Catch-up investments, allowed above the standard limit (which is $23,000 this year) for those who are age 50 or above in a year, currently are limited to $7,500. Under the upcoming change, starting next year, those 60-63 in a year will have a limit of the greater of $10,000 or 150 percent of the standard catch-up limit.
The latter figure would apply, making the limit for them $11,250 next year, pending a possible inflation-linked increase in the underlying $7,500 amount (which will continue to apply to those ages 50-59 or 64 and above in a given year).
Also still in progress, officials noted, is a transition of the international stock I fund to a broader index. Where the current index reflects stocks of some 800 large and mid-sized companies in 21 developed markets and reflects 55 percent of the non-U.S. market value, the new index will reflect stocks of some 5,600 large, mid-sized and small companies in 21 developed markets plus 23 emerging markets and will reflect 92 percent of non-U.S. market value.
The new index will notably exclude stocks of China and also drops the Hong Kong market, which the current index includes. The transition is to be complete by the end of this year.
The presentation also noted that as of the end of June, the total on investment stood above $900 billion for the first time, at $912 billion. The number of account holders is now nearly 7.1 million.
4 Key Reasons Why TSP Lifecycle Funds May Miss the Target – Lifecycle Fund, Target Date Fund, LifeStrategy Fund, Target Retirement Date Fund: Regardless of the branding, these funds are all constructed around the same concept. The further away you are from a specific date, the more aggressive your investment portfolio can be, generally meaning more stocks and less bonds. As you get closer to that target date, the asset allocation shifts and becomes more conservative (fewer stocks, more bonds). However, Lifecycle Fund investors need to be cognizant of higher fees, unintentional overlap/concentration, improper time horizon, and shifting too conservative too soon.
Senate Eyes Vote to Pay Federal Employees Working Unpaid
Series of Bills Offered to Address Shutdown’s Impact on Employees
Public Starting to Feel Impact of Shutdown, Survey Shows
OPM Details Coverage Changes, Plan Dropouts for FEHB/PSHB in 2026
Does My FEHB/PSHB Plan Stack Up? Here’s How to Tell
2025 TSP Rollercoaster and the G Fund Merry-go-Round
See also,
TSP Takes Step toward Upcoming In-Plan Roth Conversions
5 Steps to Protect Your Federal Job During the Shutdown
Over 30K TSP Accounts Have Crossed the Million Mark in 2025
