More Feds Invest in Lifecycle Retirement Funds

Nearly 50,000 federal employees have begun investing their retirement savings into lifecycle plans in 2013, appeasing Thrift Savings Plan officials who have long encouraged participants to enroll in the hybrid funds.

In January alone, TSP participants transferred $1.5 billion from equity funds to the L funds, which invest in a mixture of the fixed income  bond (F), government securities (G), common stocks (C),  small and midsize companies (S) and international (I) offerings that grows more conservative as participants near retirement. Officials on the Federal Retirement Thrift Investment Board said at a meeting Monday they had attributed the transfers to enrollees setting up their investments for the year, but the positive flow has continued throughout the year.

Even in February, when many federal employees were transferring investments into TSP’s safest offering -- the G Fund, which invests in government securities -- the L funds netted a positive influx of participants. TSP participants transferred $770 million to L funds in March and $467 million in April. So far in May, enrollees have shifted $476 million over to the L funds.

About 15 percent of TSP investments are now tied up in the L Income, L2020, L2030, L2040 and L2050, which have grown between 35 percent and 43 percent since their inception in 2005. By comparison, the G Fund has grown 28 percent during that time, officials said in April.

The trend “is what success looks like,” said TSP’s Executive Director Gregory Long. “When there’s fear of the marketplace, you see people running to the G Fund. Here is something different. Here people are actually leaving the equity funds and moving to the L funds.”

He added he and the board have put a concerted effort into getting participants to make these transfers, but said he is not certain those efforts deserve all the credit.

“We’d like to attribute it to the benefits of us banging the table for five years about why the L funds make sense,” Long said. “But the real answer is we’re not sure.”

In the fall, the board plans to revisit its proposal to move the default enrollment from the G Fund to the L funds. 

(Image via balein/Shutterstock.com)