These TSP Funds Don’t Make Headlines—But They Could Be the Engine Behind Your Retirement Income

Key Takeaways

• Some of the most reliable Thrift Savings Plan (TSP) funds are also the least discussed, yet they offer essential stability and growth potential for your retirement.

• Understanding how these quieter funds fit into your retirement income strategy can help you weather market volatility and preserve your nest egg for decades.

The Quiet Power of TSP Funds

When you think of retirement income from your TSP, your mind might immediately go to the C Fund or the S Fund. These growth-focused options tend to get the spotlight. But there’s another story unfolding in the background. The G Fund, F Fund, and even the Lifecycle (L) Funds are often overlooked, yet they can serve as the steady engine that powers your income when growth becomes secondary to preservation.

As you approach retirement, protecting what you’ve earned starts to matter more than chasing high returns. These less flashy funds are designed to do exactly that.

The G Fund: Principal Protection with Daily Interest

The Government Securities Investment (G) Fund is unique. It invests in special-issue U.S. Treasury securities that are only available through the TSP. It’s the only TSP fund that guarantees your principal won’t lose value.

Here’s what makes the G Fund essential in 2025:

• Zero market risk: Your balance never goes down due to market volatility.

• Daily interest accrual: Your money earns interest daily, making it a stable component in times of economic uncertainty.

• Liquidity: It’s a valuable short-term holding during retirement distribution planning.

For retirees or those within five years of retirement, the G Fund can become a foundational tool. It provides a safe harbor to park funds you may need in the short term.

The F Fund: A Fixed Income Option That Deserves a Second Look

The Fixed Income Index Investment (F) Fund tracks the Bloomberg U.S. Aggregate Bond Index. It’s sensitive to interest rate movements, but it can deliver solid returns in specific interest rate environments.

Here’s how it fits into your strategy:

• Diversification: Bonds often move differently than stocks, offering balance during downturns.

• Income potential: It pays regular interest, which can become part of your cash flow strategy.

• Inflation response: While not an inflation hedge per se, it tends to hold value better than equity funds during market corrections.

In 2025, with interest rates stabilizing after hikes in prior years, the F Fund has gained renewed attention. If your TSP allocation has avoided this fund due to poor past performance, it may be time to reevaluate.

Lifecycle (L) Funds: Built-In Rebalancing for the Risk-Averse

The L Funds are designed to adjust your investment mix based on a target retirement date. These funds combine all five core TSP funds (G, F, C, S, I) in a diversified, age-appropriate strategy.

Benefits of the L Funds include:

• Automatic rebalancing: You don’t have to worry about manually adjusting your portfolio.

• Glide path: The closer you get to your target date, the more conservative the allocation becomes.

• Simplicity: Ideal if you don’t want to actively manage your TSP.

If you’re within 10 years of retirement, the L Income Fund or one of the near-term L Funds (such as L 2030 or L 2035) might offer a smart blend of growth and protection. These funds rebalance daily, adjusting for shifts in market performance and maintaining a disciplined approach.

When to Start Shifting Into These Funds

Timing matters when transitioning your TSP for income. The ideal window to begin rebalancing into more conservative funds is often 5 to 10 years before your retirement date. That gives you enough time to gradually reduce volatility without pulling everything into conservative positions all at once.

Consider this timeline:

• 10 years out: Start introducing the F Fund or an age-appropriate L Fund.

• 5 years out: Increase exposure to the G Fund, reduce reliance on S and I Funds.

• 1 year out: Build a cash-equivalent cushion for early retirement withdrawals.

This shift should not be abrupt. Gradual reallocation reduces market timing risk and allows you to test your income strategy before retirement.

Why Growth Funds Can’t Do It Alone

In your early and mid-career years, aggressive TSP allocations to the C, S, and I Funds can drive portfolio growth. But if you carry that same aggressive allocation into retirement, you’re exposing your nest egg to unnecessary risk.

Here’s why that matters:

• Sequence of returns risk: Losses in the early retirement years can permanently reduce your lifetime income.

• Withdrawal pressure: If the market is down and you’re forced to sell shares, you’re locking in losses.

• Longevity concerns: You may live 30 years in retirement. Balancing growth and protection is critical.

That’s where the G and F Funds step in. They create a buffer, reducing your reliance on equity funds during market declines.

Creating a Multi-Bucket TSP Strategy

You don’t have to choose between safety and growth. A bucket strategy lets you divide your TSP into segments based on when you’ll need the money.

Bucket 1: Immediate Needs (0–2 Years)

• G Fund heavy

• Focused on principal preservation

• Supports required minimum distributions (RMDs) or early withdrawals

Bucket 2: Medium-Term (3–10 Years)

• Mix of F and conservative L Funds

• Designed for moderate growth with lower risk

Bucket 3: Long-Term Growth (10+ Years)

• C, S, I Funds and aggressive L Funds

• Seeks growth to offset inflation and fund later retirement years

This layered approach can help you maintain flexibility, reduce risk, and plan withdrawals with confidence.

What to Monitor in 2025 and Beyond

Your TSP allocation is not a set-it-and-forget-it decision. In 2025, there are some specific trends and timelines to watch:

• TSP fund performance: Monthly returns fluctuate. Don’t rely on yearly averages alone.

• Interest rate policy: A pause or reduction in interest rates could improve F Fund performance.

• Global market volatility: The I Fund can swing sharply. A conservative rebalancing schedule helps manage exposure.

• Lifecycle Fund updates: TSP periodically reviews the glide paths. Stay informed about any changes.

Plan to review your allocation at least once a year and after major market shifts or life events.

Avoiding Common Missteps

While the less volatile funds seem simple, many TSP participants still fall into traps:

• Overconcentration in the G Fund: While safe, the G Fund offers minimal growth. If it makes up too much of your portfolio too early, inflation may erode your purchasing power.

• Ignoring the F Fund: Past underperformance can lead to bias. The F Fund has its place, especially when rates stabilize.

• Misusing the L Funds: The L Funds work best when held as a whole. Mixing them with individual funds can reduce their effectiveness.

• Not adjusting for income needs: Your TSP is not just an investment. It’s a future paycheck. Align it with when and how you’ll draw income.

Each of these missteps can be avoided with periodic reviews and a clear retirement timeline.

Make These Funds Work for You

The G, F, and L Funds may not grab headlines, but they are workhorses in a well-built retirement strategy. They offer the reliability and balance that become more valuable the closer you get to leaving government service.

When used intentionally, these funds allow you to preserve gains, reduce anxiety, and ensure your income can last 20 to 30 years or more.

Don’t underestimate the power of these understated funds. They might not make noise, but they help you sleep better at night.

Build a Retirement Income Plan That Uses Every TSP Tool

Your retirement income shouldn’t rely on guesswork. The funds available to you in the TSP were designed with specific roles in mind. If you’re nearing retirement, now is the time to explore how these quieter options can form the stable foundation of your withdrawal plan.

Speak with a licensed professional listed on this website to review your strategy, align it with your goals, and avoid costly mistakes during your transition from accumulation to distribution.