Five Funds, One Plan: A Federal Employee's Guide To The TSP
What Each Core Fund Owns
The TSP, the federal government's version of a 401(k), offers five core funds that each track a different part of the market. The G Fund holds Treasury securities issued only to the TSP, so principal cannot fall and the interest rate resets monthly. That rate follows Treasury notes and bonds with four or more years left to maturity.
However, that safety has a price. The G Fund returned 4.44% in 2025 but only 2.76% a year over the past ten years.
The F Fund tracks the broad U.S. investment-grade bond market and returned 7.21% in 2025. Bond prices fall when interest rates rise, and the F Fund averaged a negative 0.30% return over the past five years through 2025.
The three stock funds supply most of the growth. The C Fund holds the 500 companies in the S&P 500 and returned 17.85% in 2025, or 14.79% a year over ten years. The S Fund covers about 3,375 small and mid-sized U.S. companies outside the S&P 500 and returned 11.38% in 2025. The I Fund follows roughly 5,100 companies in 44 countries outside the United States, China, and Hong Kong. It returned 32.45% in 2025, with about eight points of that coming from currency moves against the dollar. Costs across all five funds ran between 34 and 51 cents per $1,000 invested.
How The Lifecycle Funds Work
The Lifecycle funds, called L Funds, blend those five funds according to a target date. Eleven exist today: L Income, plus L 2030 through L 2075 in five-year steps. A participant would typically pick the year closest to when they expect withdrawals to begin, such as RMDs for example. Each quarter the fund shifts toward the G and F Funds as that date nears, and it rebalances every trading day. At the end of 2025, L 2030 held 57% in stocks, L 2040 held 71%, and L 2050 held 83%. Funds dated 2055 and later held 99%. When an L Fund reaches its year, the balance rolls into L Income, which holds 67% in the G Fund. The L Funds carry the same market risks as the funds inside them, so losses can still occur near retirement.
A Simple Framework For Choosing A Mix
A bucket approach sorts TSP dollars by when the money will be needed. Money needed within about five years sits in the first bucket, where the G and F Funds limit damage from a bad market. Money needed in five to fifteen years goes into a middle bucket that blends bonds with some stocks. Money needed beyond fifteen years belongs in a growth bucket of C, S, and I Funds, which has time to recover from a downturn.
Risk tolerance sets the size of each bucket. A 30% loss requires a gain of about 43% to break even. On a $200,000 balance, that drop equals $60,000, and a participant who would sell at that point may be holding more stock than is comfortable.
An L Fund answers the same question with one choice, though it assumes a typical investor. It cannot see a spouse's pension, a rental property, or savings held elsewhere. Spreading money across several funds also softens the drag that large swings place on long-term growth.
Contribution Room In 2026
For 2026, employees can defer up to $24,500 into the TSP. Participants 50 and older can add $8,000, and those aged 60 to 63 can add $11,250 instead. Employees under the newer federal pension system, known as FERS, also receive agency contributions worth up to 5% of pay.
Oasis can review and make recommendations for a TSP's allocation with federal employees in the D.C. area and beyond!
This article is for informational purposes only and is not investment advice. It does not predict market performance or recommend any specific action. A bucket-based framework is a planning approach and does not guarantee against loss or ensure a profit. Past market patterns do not guarantee future results. Please reach out to us about your specific situation before making any changes to your plan.