Effective Aug. 1, participants in the Federal Retirement Thrift Savings Plan will have another investment option known as Lifecycle Funds – so named because the funds are structured to a participant’s target time horizon. The target horizon is the time when the participant intends to withdraw the funds – as the withdrawal date approaches, the lifecycle fund’s investment mix automatically becomes more conservative.
Consequently, participants who select lifecycle funds do not need to reallocate their account assets to achieve this result – the lifecycle investment models automatically reallocate the accounts for the participants.
The Federal Retirement Thrift Investment Board announced during its regular monthly meeting Monday that the TSP Lifecycle Funds will be made available to Plan participants beginning Aug. 1, 2005. The meeting also included readiness reports from Executive Director Gary A. Amelio and the agency’s senior staff.
Amelio and Pamela-Jeanne Moran, the agency’s director of benefits services, described the extensive communications effort that will be launched in connection with the roll-out of the new “L” Funds. Amelio compared this comprehensive approach to “the best of the best” that he saw during a private sector career spanning 23 years.
According to Amelio, the roll-out has begun with new lifecycle fund information on the TSP web site. This will include the July edition of the newsletter TSP Highlights with a feature story entitled “L Funds Offer a New Approach” as well as the L Funds Information Sheet that provides more technical details about the funds.
A “teaser” post card is being mailed to all Plan participants, inviting them to consider putting their TSP investments on “cruise control.” The post card will also notify participants to “watch for future mailings.” This is because after Aug. 1, the date when the full complement of TSP lifecycle fund materials will be placed on the web site, a specially-made DVD will be mailed to all participants.
“Proper asset allocation is critical to optimum long-term growth in retirement savings. Whether participants have it done automatically for them by using the L Funds, or do it themselves, this DVD will help them understand this important concept,” Amelio said.
TSP participants now have four broadly diversified stock and bond funds, as well as a Government Securities (G) Fund, in which to invest their retirement savings. Taken together, the Common Stock Index Investment (C) Fund, the Small Capitalization Index Investment (S) Fund, the International Stock Index Investment (I) Fund, the Fixed Income Index Investment (F) Fund, and the G Fund cover “all the major food groups at an exceptionally low cost to participants” Amelio said. “The new L Funds will automatically allocate assets among the five underlying funds at no additional cost to TSP participants. This is a wonderful opportunity for participants to receive the benefit of professionally determined asset allocations with virtually no ongoing effort on their part and at no charge.”
The TSP is a retirement savings plan for federal employees; it is similar to the 401(k) plans offered by many private employers. As of June 30, 2005, TSP assets totaled more than $159 billion, and retirement savings accounts were being maintained for more than 3.4 million TSP participants. Participants include federal civilian employees in all branches of government, employees of the U.S. Postal Service, and members of the uniformed services.