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At present, the are five Lifecycle Funds offered through the government Thrift Savings Plan: L 2050, L 2040, L 2030, L 2020 and L Income. Five more L Funds will be created soon.

When a new lifecycle fund is created, it starts out with about 80% in stocks and 20% in bonds and then at the age of retirement, it will stop adjusting once it is 80% in bonds and 20% in stocks. The F Fund and G Fund are bonds and the S Fund, C Fund, and I Fund are stocks.

At present, the L 2050 Fund is made up of:
[G Fund = 11.14%]
[F Fund = 7.86%]
[C Fund = 42.76%]
[S Fund = 13.94%]
[I Fund = 24.30%]

The L Income Fund is made up of:
[G Fund = 74.00%]
[F Fund = 6.00%]
[C Fund = 11.20%]
[S Fund = 2.80%]
[I Fund = 6.00%]

Why is this investment strategy bad? It is because it does not serve your specific needs. It is a one size fits all for ALL government employees. It does not factor in your ability to deal with volatility in your portfolio, your income and growth needs, the value of your assets outside of your retirement account, your allocations in other investment accounts, your tax minimization strategy, and your time horizon (time period over which you are investing).

Lifecycle funds also begin with 20% in bonds. If someone is investing for over 30 years, then they should be in stocks to earn a higher return. Because the average person is so risk adverse, the fund administrators are deliberately and extremely conservative with their fund allocations.

Being in the G Fund is bad because there are some years it does not even outperform inflation. Every year inflation can be between 2-4% and if the G Fund cannot earn that, people are net losing money in real dollar purchasing power.

Lifecycle Funds also undercut your stocks' performance when the economy is good. Because the percentages in the funds are fixed, your stocks actually have to be sold as they increase in value in order to purchase more shares of the G Fund in order to keep the fixed percentages of the L Fund constant. This is a terrible investment strategy to not let each fund perform on its own and let compound interest work in your favor over time.

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DISCLAIMER:
This video is for entertainment purposes only. I am not in any way acting as an agent or representative of the Department of Defense or United States Federal Government when presenting this information. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.

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