The L Funds are an easy option if you don't necessarily have the time, experience, or interest to manage your beneficiary participant account.
The five L Funds are:
- L 2050 — For beneficiary participants who will need their money in the year 2045 or later.
- L 2040 — For beneficiary participants who will need their money between 2035 and 2044.
- L 2030 — For beneficiary participants who will need their money between 2025 and 2034.
- L 2020 — For beneficiary participants who will need their money between 2015 and 2024.
- L Income — For beneficiary participants who expect to begin withdrawing their money before 2015.
The assumption underlying the L Funds is that the longer your time horizon, the more risk you are able to tolerate while seeking higher returns. The funds automatically adjust to reflect a reduced ability to sustain risk as the investment time horizon approaches.
Each L Fund invests in a mix of the five individual TSP funds. The mix is chosen by experts based on each fund's time horizon. The L Funds' asset allocations are designed to achieve the highest expected rate of return for the amount of risk taken. The L Funds with farther time horizons will be more exposed to risky assets, i.e., stocks (C, S, and I Funds). As time horizons shorten, the allocations gradually shift toward less volatile Government securities and bonds (G and F Funds).
The L Income Fund is designed to preserve your account balance while protecting against inflation.
Each L Fund is automatically rebalanced each business day to restore the fund to its intended investment mix. Each quarter, the funds' asset allocations are adjusted to slightly more conservative investments. When an L Fund reaches its designated time horizon, it will roll into the L Income Fund, and a new fund will be added with a more distant time horizon.
To learn each L Fund's specific investment mix, visit Investment Funds: Fund Options.
Investing in the L Funds does not eliminate risk, and the funds are not guaranteed against loss. The L Funds are subject to the risks inherent in the underlying funds and have periods of gain and loss.