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Defined Contribution

TSP to boost stock allocation in lifecycle funds

The Thrift Savings Plan, Washington, will increase stock allocations in its lifecycle L Funds beginning in January, the Federal Retirement Thrift Board decided at its meeting on Monday.

The board oversees the $554 billion Thrift Savings Plan. As of Dec. 31, the L Funds had $108.2 billion in assets.

A notice on the TSP website said the changes to the L Funds are "an effort to improve outcomes for participants who invest in them."

The L Funds invest in an appropriate mix of the G, F, C, S and I funds, with allocations becoming more conservative as respective target retirement dates approach. The G Fund invests in government securities, F is a fixed-income index fund, C is a common stock index fund, S is a small-cap stock index fund and I is an international stock index fund. They are all managed by BlackRock (BLK) except the G Fund, which is managed internally.

The L Income Fund stock allocation (C, S and I funds combined) will increase to 30% from 20% over a period of up to 10 years. The income fund is the most conservative of the L Funds, focusing on capital preservation.

Total stock allocation for the L 2030, L 2040 and L 2050 funds will hold steady for several years to facilitate transition to the L 2060 Fund that is scheduled to be introduced in 2020. At that point, the L 2060 Fund will begin with a 99% stock allocation.

Current lifecycle funds start at 90% stock, dropping to 50% at age 50, and then 20% at age 62. Existing accounts will maintain their current equity ratio until they intersect with the new L 2060 glidepath.

In January 2019, TSP officials will increase exposure to international stocks to 35% from 30% of the equity exposure for all L Funds, TSP said.

The assumed age of first withdrawal also will increase, to 63 from 62.