New L Funds
The TSP has announced the rollout of 6 new L fund options effective July 1, 2020. As a result of recommendations made in 2017, the Board is providing L fund options in 5-year increments. Previously, the L funds were based on 10-year time targets. The new funds will be L 2025, L 2035, L 2045, L 2055, L 2060, and L 2065. Now that it is the year 2020, the Board will retire the L 2020 fund by rolling it into the L Income fund. Employees who have funds in the L 2020 fund were notified earlier this year that they will be moving their L 2020 funds into L Income effective June 30th.
The L funds are incredibly popular with federal employees as an investment choice. In 2019, about 43% of all federal employees used the L funds as part of their TSP allocation. This was up from 2018 when the number was about 37%. Generally, an employee looking to retire in the middle of a decade would be forced to choose between the more conservative target date or the more aggressive one which led to confusion as to what would be best for the employee. The implementation of the funds in 5-year increments should help employees make more appropriate decisions if they plan to retire in the middle years of a decade.
Returns for May
Also in TSP news this week, the performance figures for the month of May 2020 were released. The best performer for the month of May was the S fund at 8.79%, while the G fund was the worst at .06%. For the month, every fund, including the L funds were positive- reflecting the upward trend of markets overall. For the year to date beginning January 1, 2020, the best performing fund was the F fund at 5.42% and the worst was the I fund at (14.04%). Year to date, only the G and F funds are positive overall.
TSP Board Member Announces Resignation at End of Month
Finally, Michael Kennedy, who has served as the Chair of the TSP Board since 2010, announced today that he will resign his position effective June 30, 2020. This comes on the heels of the announcement that the White House put forth several new nominees to replace current Board Members in response to the growing controversy over planned changes to the I fund. There are two additional members who are expected to be replaced upon Senate approval of the new nominees.
As always, at Serving Those Who Serve we are monitoring all things TSP and will keep our federal employees’ best interests in the forefront as we continue to navigate the waters ahead. Please reach out to us with questions and follow our website for the most recent updates.
**Written by Jennifer Meyer, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jennifer Meyer and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.**