Which TSP Fund is Bonds? How the TSP F Fund and G Fund Work

By Sam •  Updated: 01/10/23 

Are you a federal employee or military member that want to know which TSP fund is bonds?

Both the F Fund and the G Fund invest in bonds. However, these funds are quite different! In the remainder of this post I’m going to walk you through what you need to know about these bond funds.

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What is the Thrift Savings Plan (TSP)?

The TSP is a qualified retirement plan for federal employees and members of the Uniformed Services who have taken the oath of office. Founded in 1986 through the Federal Employees’ Retirement System Act (FERS), the TSP operates in a similar manner to a 401(k) for government employees.

Federal employees can contribute up to the 401(k) maximum ($22,500 in 2023, not including catchup contributions). They even receive matching contributions up to 5% of their salary; most of it with no vesting period (free money).

Currently, employees can choose between one of 5 index funds with no added fees:

Which TSP Fund is Bonds?

As you can see from the previous paragraph, there are 2 bond index funds in the TSP: The F fund and the G Fund.

The F Fund is short for the “Fixed Income Index Investment Fund” and it aims to match the performance of the Bloomberg U.S. Aggregate Bond Index.

The G Fund is short for “Government Securities Investment Fund” and the TSP states the investment objective is to “ensure preservation of capital and generate returns above those of short-term U.S. Treasury securities.”

Confused? Let’s jump into some more in-depth analysis.

Understanding the Differences Between the TSP F Fund and the TSP G Fund

What the F Fund Invests in

The F Fund is an index fund that tracks the Bloomberg U.S. Aggregate Bond Index. There are a lot of private sector funds that track this same index, such as the Vanguard Total Bond Index Fund (VBTLX) or the aptly named exchange-traded fund (ETF) with ticker symbol BND. The index contains nearly 12,000 notes and bonds including U.S. Treasury notes and other fixed income investments. Currently, the federal retirement thrift investment board (FRTIB) reports that the index contains roughly 40% government bonds, 30% securitized bonds, and 30% credit instruments. In other words, it’s about 40% government bonds and 60% private sector debt.

What the G Fund Invests in

The G Fund is unlike any other mutual fund because it invests in non-marketable securities (I.e. bonds specially issued to the TSP). In fact, the FRTIB is vague about what the G Fund actually invests in, but instead states

Basically, the government guarantees you a return rate if you choose to invest in the G Fund. Since the government is the government, their guarantees are pretty good. The advantage for investors is that you get a guaranteed rate of return that is much higher than you could get in a comparable money market fund.


What are the Risks in the TSP G Fund

While the TSP G Fund is billed as a “risk free” investment, there are always risks.

Like all investments, the G Fund is subject to inflation risk. That is, the G Fund interest rate is less than inflation. So even while you are earning a positive interest rate in nominal dollars, there is a risk that you’d have less purchasing power.

What are the Risks in the TSP F Fund

There are two types of risks with an F Fund Investment.

Similar to the TSP G Fund, F Fund investors are subject to inflation risk. The F Fund returns may not offset the reduction in purchasing power caused by inflation.

However, the performance of the Bloomberg U.S. Aggregate Bond Index also depends upon interest rate risk.

Interest rate risk

When the prevailing interest rates fall, bond prices go up. The bonds are more valuable because new bonds pay less interest. In contrast, as interest rates rise, bond prices fall. This is called interest rate risk. I tried to give a simple example in the diagram below.

Simple diagram showing how interest rate risk works.

Risk vs. Returns for the F Fund

When you use the F Fund, you can lose money when the Federal Reserve raises interest rates because of interest rate risk. On the other hand, when the Fed slashes interest rates, the opposite happens and the bond market experiences growth. While the F Fund provides more risk than the guaranteed interest rate paid by the G Fund, there is also a higher potential for returns.

Which TSP Bond Fund is Best? The F Fund or the G Fund?

If you’ve read my post about Best TSP Allocations, you’ll know that I will tell you that there is no one best fund for your portfolio! What’s best for you, as an individual investor depends upon your age, your level of wealth, how much of your spending your FERS pension will provide in your retirement, etc.

So while I can’t tell you which fund is best for you, I can do a broad comparison.

Historical Returns

If you look at the average inflation adjusted returns, you can see that the F Fund outperforms the G Fund, over every 1, 5, and 10 year window. The average annual return for the G Fund (inflation adjusted) is 1.8% compared to 2.6% in the F Fund.

Inflation Adjusted annualized returns of the F Fund and and G fund from 1988-2022
Inflation adjusted annualized returns of the F Fund and and G fund from 1988-2022 for different time windows.

However, if you were only looking at investment returns, you’d be much better off choosing stock funds like the C Fund. People add bonds to their portfolio to balance risk from stock market fluctuations. When choosing between these two funds, you should consider not just the returns but also the risk as well.

Risk Tolerance

The G Fund’s investment objective is to provide a guaranteed positive return. While it may not keep up with inflation, it will always yield a positive return. This is not the case for the F Fund. In 2022, the F Fund had a return of -12.83%. When you consider inflation, the real return on your investment was closer to -20% in 2022.

Yearly inflation adjusted annualized returns of the F Fund and the G Fund plotted as a function of time.

If you’re a retiree living off the retirement savings in your TSP account, can you afford to experience a 20% loss in purchasing power in your “safe” bond market index funds? It’s definitely something to think about and/or discuss with your financial advisor.

Summary: Both the F Fund and G Fund Give You Bond Exposure In Your TSP

Hopefully by now you know which TSP fund is bonds. (There’s actually two of them, the F Fund and G Fund). If you learned something in this article and want to learn more you can check out my YouTube channel. You can also talk with like-minded individuals 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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