TSP L 2070 Fund

The TSP L 2070 Fund is the latest addition to the TSP Lifecycle series, introduced on July 26, 2024. Designed for younger investors who plan to withdraw from their account in 2068 or beyond, the L 2070 Fund emphasizes long-term growth with a very low emphasis on capital preservation in its early years.

About TSP Lifecycle Funds

TSP Lifecycle Funds provide a streamlined, “all-in-one” investment approach, blending diversification with a hands-off management style. As investors approach their retirement date, the fund’s managers gradually shift the asset allocation from growth-focused stocks to conservative bonds, reducing volatility. This transition is preprogrammed and managed on your behalf. The fund managers also maintain the target mix — no need for annual rebalancing.

A Closer Look at the L 2070 Fund

The TSP fund managers describe the Lifecycle Funds as a “diversified mix of the five individual funds (G, F, C, S, and I).” Traditionally, “diversification” means a substantial allocation to both stocks and bonds. However, it’s worth noting that the L 2070 Fund will remain invested almost entirely in stocks until October 2042, so until then it’s equivalent to investing in an all-stock portfolio of C, S, and I Funds. While this high equity exposure supports long-term growth, it also introduces periods of greater volatility.

As a new fund, the L 2070 doesn’t yet have long-term performance data. But since we know that the fund’s initial allocation is a mix of 0.36% G, 0.64% F, 51.48% C, 12.87% S, and 34.65% I Fund, we can accurately simulate the historical performance of this allocation since June 2003 (the first date that the TSP began publishing fund prices):

As you can see, stocks performed well during this period.

Preparing for Market Downturns

But with a 100% stock allocation, investors should also be prepared for occasional severe drops in the fund value, such as what happened during the “COVID Crash” in 2020. Or worse: let’s take a closer look at a hypothetical unlucky investor who began with $1,000 in this fund right before the 2008 Global Financial Crisis (GFC):

As you can see, the L 2070 Fund would have performed very poorly during this period.

Though this drop would have only been temporary for those who stayed invested, many “real world” investors during the GFC reacted to market turmoil by shifting away from stocks, locking in losses. The point here is not to scare anyone away, but rather to illustrate the importance of preparing for both positive and negative market swings, and to think carefully about which TSP Funds to invest in for the best possible outcome.

Your Thoughts?

Once the L 2070 Fund builds sufficient performance history, we’ll update this page to track its results. In the meantime, we hope this analysis provides some insights into what to expect. What else do you want to know about the L 2070 Fund or any other TSP Funds? Send us a message here — we read every response, and would love to hear what you think.