Retirement & Financial Planning Report

The TSP has charted how investment patterns among its investors are changing, with one major factor being the change in the default investment fund for newly hired employees from the government securities G fund into the lifecycle L fund appropriate for the person’s age.

An analysis of investor behavior shows that employees under age 30 have 63 percent of their assets in L funds and those between 30 and 39 have 39 percent. In contrast, those age 50-59 have 20 percent in L funds, those 60-69 17 percent and those 70 and over 13 percent.

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“Fund utilization is likely influenced by the default investment changing from the G fund to an age-appropriate L fund in 2015 and the impact of ongoing communications regarding the benefits of utilizing the L funds,” the report said.

It added that older participants have higher allocations to the G Fund than younger participants—38 percent by those 60-69 and 43 percent by those 70 and above, compared with just 9 percent by those under 30 and 18 percent by those age 30-93.

“This behavior is consistent with the expectation that participants tend to shift their investment allocation toward the relative safety of guaranteed/income producing assets as they approach retirement age. This is also a significant improvement from 2014” when the youngest participants held 42 percent of their assets in the G fund, it said.

The TSP changed the default investment fund largely out of concern that younger employees were over-invested in the G fund, which is guaranteed against investment losses but does not have the potential for gains over time offered by the other funds. While those who are enrolled by default may change the investment fund, or the amount being invested, at any time, the TSP has repeatedly found that significant percentages make no changes.

The data involve only FERS employees.

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