TSP L 2050 Fund: [Ultimate Guide for Your Retirement Savings]

By Sam •  Updated: 01/29/22 

Is the TSP L 2050 Fund Right for You?

You might have heard that TSP is auto-enrolling new federal employees in TSP Lifecycle Funds. But can you achieve a diversified portfolio allocation simply by setting your contributions to the TSP L 2050 Fund?

Keep reading to learn if the default investment fund is really the best way to achieve a diversified investment portfolio!

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Table of Contents

Please do not confuse my personal blog for financial advice, tax advice or an official position of the U.S. Government. This post may contain affiliate links. If you make a purchase after clicking on a link, I get a small percentage of the sale at no additional cost to you.

Overview of the Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees and members of the uniformed services. The TSP is a defined contribution plan that is similar to a 401(k) retirement plan available to private sector employees.

Contributing to the TSP is an easy way to start saving for retirement, whether you choose to contribute to a Traditional or a Roth TSP. Federal and state income taxes apply differently based on the type of account you choose.

For the Traditional TSP, you defer paying taxes until you begin withdrawals in retirement. For the Roth TSP, you pay taxes on contributions made in the current tax year.

The government also contributes “free money” through agency matching contributions in the form of dollar for dollar matching on the first 5% of your salary!

You can contribute up to a maximum of $20,500 for both types of TSP accounts. If you are over age 50, you can make an additional “catch-up contribution” of $6,500 if you are over age 50. There are many benefits to making maximum contributions to your TSP.

Understanding the TSP Lifecycle Funds

In 2005, the Thrift Savings Board offered the first TSP Lifecycle Funds. The TSP Lifecycle funds are target date funds that contain a blend of all five core TSP funds, including the C Fund, S Fund, I Fund, F Fund, and the G Fund.

Lifecycle Funds are a “set and forget” investment option with a target allocation that rebalances quarterly. You don’t have to make any adjustments! The allocation becomes more conservative as you approach the target retirement date.

The TSP Lifecycle Funds automatically keep your TSP dollars on a pre-planned retirement glide path. The glide path changes the TSP allocation so that the projected risk and rate of return both decrease as you approach retirement.

New federal employees fresh off their background investigation and oath of office are automatically enrolled in the TSP at a 5% contribution rate. The government picks an “age-appropriate” L Fund for new hires and invests your TSP contributions based on an estimated target retirement age of 63. This default setting helps new hires receive the maximum matching government contribution. (Side note, most federal employees can retire as early as 57 and not the Lifecycle Fund target age of 63)

Once you’ve settled into your federal job, you might be wondering: What is in each of the TSP Lifecycle funds? Should I change my contribution from the default TSP Lifecycle Fund?

You’ve come to the right place! Read the next section to learn more about the TSP L 2050 Fund.

What’s in the TSP L 2050 Fund?

The TSP L 2050 Fund contains a blend of the main TSP funds. The allocation of funds will change over time as you approach the fund’s target date of 2050.

Composition of the TSP L 2050 Fund from the 5 core TSP Funds.
Composition of the TSP L 2050 Fund from the 5 core TSP Funds.

Your investment in the L 2050 Fund will help you to achieve the best expected return for the amount of expected risk that is appropriate for your time horizon.

The L 2050 Fund simplifies investing with automatic asset allocation. You never have to decide how to diversify your investments or remember to rebalance.

It should be noted that the TSP L 2050 Fund is more conservative than private sector counterparts. Whereas the L 2050 Fund contains ~82% stocks, the BlackRock LifePath Index 2050 Fund has 97% stocks.

The TSP L 2050 Fund allocation compared to a private sector target date fund.
The TSP L 2050 Fund allocation compared to a private sector target date fund.

Who should consider investing in the TSP L 2050 Fund?

According to the Federal Retirement Thrift Investment Board, the TSP L 2050 Fund is appropriate for anyone in the federal workforce planning to begin TSP withdrawals between 2048 and 2052. The L 2050 Fund will protect against declines in portfolio value by changing the fund’s allocation to become more conservative as you approach the year 2050.

If you want to forget your TSP account password and never touch your TSP account until retirement age, the TSP L 2050 fund might be a good choice!

What are the downsides of the L 2050 Fund?

The TSP L 2050 Fund includes corporate and government bonds through the F and G Funds, as well as exposure to international equities through the I Fund. By definition, the L 2050 Fund will underperform portfolios that keep contributions in stock funds in years when the US stock market has high returns.

For example, in 2021, the L 2050 Fund had an annual return of 16.34%. Sounds great, right? Consider that in the same year, the C Fund had an annual return of 28.68%.

Some civilian government workers are risk-averse by nature. You don’t end up in a stable government job with a pension by accident, right? But the federal workforce can actually afford to take on more risk within their TSP portfolios!

Many people are worried about the potential risk of running out of money in old age. The good news is that federal retirees are already well protected against longevity risk!

Federal employees already have two guaranteed streams of income and access to low cost health insurance in retirement. Both the FERS pension and social security provide monthly payments that will last the rest of your life.

By choosing the L 2050 Fund instead of investing your TSP dollars more aggressively, you are likely to end up with a smaller TSP nest egg by the time you reach retirement age.

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Where to learn more

Want to learn more about the TSP? Check out my TSP School series.

Do you have questions or comments? Drop a note in my Facebook community.


Sam i.e. "Gov Worker" started working for the government at age 18 and loved it so much that he never left. He started GovernmentWorkerFI in 2019 to help fellow federal employees understand their benefits, take control of their finances, and live their best lives.

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