05-09-2005, 09:21 PM
Hellow All;
Follow up to the New Fund:
Investing on autopilot. Putting investments on cruise control. Choosing a new TSP fund to help navigate the road to retirement.
Those themes and variations will be part of a communications effort this summer aimed at explaining "lifecycle funds" to government employees enrolled in the Thrift Savings Plan, TSP officials told representatives of federal and postal unions and employee and retiree associations yesterday.
Gary A. Amelio , executive director at the Federal Retirement Thrift Investment Board, said the TSP would spend about $10 million, or roughly $3 per participant, on the communications effort. The L funds, as they probably will be called, will be launched in July or August, he said.
Amelio predicted that TSP participants would benefit from the campaign to explain the importance of diversified investments and balanced accounts, including employees who decide against signing up for one of the L funds.
The board plans to offer five L funds, which will automatically change asset allocations and rebalance accounts to reflect market trends. In theory, the L funds will help employees achieve the right mix of investments in the TSP's four index funds and government securities fund, while taking on no more risk than necessary. Over time, and especially as investors near the time when they will start drawing down savings, portfolios will shift from aggressive to conservative investments.
Under the board's plan, the TSP will start with these asset allocation options:
· Current Income Fund, for participants in or near retirement. This L fund will focus on preserving an employee's savings. It will allocate 74 percent of an employee's account to the government securities fund (G fund), which never loses money, and 6 percent to the bond index fund (F fund). The rest will be split among the TSP's three stock funds.
· 2010 Target Date Fund, for participants who plan to retire in three to nine years. This fund will focus on moderately long-term growth, allocating 43 percent to the G Fund, 27 percent to the common-stock index fund (C) and 15 percent to the international stock index fund (I). The remainder will be divided between small and medium-size company stocks (S) and the F fund.
· 2020 Target Date Fund, for participants who plan to retire in 10 to 19 years. This fund will concentrate on moderate to high growth. It will allocate 34 percent of an account to the C fund; 27 percent to the G fund; 19 percent to the I fund; 12 percent to the S fund; and 8 percent to the F fund.
· 2030 Target Date Fund, for participants who plan to retire in 20 to 29 years. This fund will strive for high, long-term growth and capital appreciation. It will allocate 38 percent to the C fund; 21 percent to the I fund; 16 percent to the S fund; 16 percent to the G fund; and 9 percent to the F fund.
· 2040 Target Date Fund, for participants who will retire in 30 or more years. It, too, will focus on high growth and will allocate 42 percent to the C fund; 25 percent to the I fund; 18 percent to the S fund; 10 percent to the F fund; and 5 percent to the G fund.
The asset allocation will change over time, essentially moving participants from fund to fund. As the 2010 fund merges into the Current Income Fund, the TSP will add a 2050 fund.
Each L fund will be rebalanced daily to reflect changes in the markets, and each L fund asset mix will be reallocated quarterly, Amelio said.
TSP officials worry that too many participants are locked into one or two funds (41 percent of TSP assets are in the C fund and 40 percent in the G fund), and they hope that adding the L funds will make it easier for participants to diversify their investments.
Amelio said that the thrift board will not impose any restrictions on investments and that L fund participants will retain the right to use any, some or all of the other TSP funds for retirement savings.
Barbara
Follow up to the New Fund:
Investing on autopilot. Putting investments on cruise control. Choosing a new TSP fund to help navigate the road to retirement.
Those themes and variations will be part of a communications effort this summer aimed at explaining "lifecycle funds" to government employees enrolled in the Thrift Savings Plan, TSP officials told representatives of federal and postal unions and employee and retiree associations yesterday.
Gary A. Amelio , executive director at the Federal Retirement Thrift Investment Board, said the TSP would spend about $10 million, or roughly $3 per participant, on the communications effort. The L funds, as they probably will be called, will be launched in July or August, he said.
Amelio predicted that TSP participants would benefit from the campaign to explain the importance of diversified investments and balanced accounts, including employees who decide against signing up for one of the L funds.
The board plans to offer five L funds, which will automatically change asset allocations and rebalance accounts to reflect market trends. In theory, the L funds will help employees achieve the right mix of investments in the TSP's four index funds and government securities fund, while taking on no more risk than necessary. Over time, and especially as investors near the time when they will start drawing down savings, portfolios will shift from aggressive to conservative investments.
Under the board's plan, the TSP will start with these asset allocation options:
· Current Income Fund, for participants in or near retirement. This L fund will focus on preserving an employee's savings. It will allocate 74 percent of an employee's account to the government securities fund (G fund), which never loses money, and 6 percent to the bond index fund (F fund). The rest will be split among the TSP's three stock funds.
· 2010 Target Date Fund, for participants who plan to retire in three to nine years. This fund will focus on moderately long-term growth, allocating 43 percent to the G Fund, 27 percent to the common-stock index fund (C) and 15 percent to the international stock index fund (I). The remainder will be divided between small and medium-size company stocks (S) and the F fund.
· 2020 Target Date Fund, for participants who plan to retire in 10 to 19 years. This fund will concentrate on moderate to high growth. It will allocate 34 percent of an account to the C fund; 27 percent to the G fund; 19 percent to the I fund; 12 percent to the S fund; and 8 percent to the F fund.
· 2030 Target Date Fund, for participants who plan to retire in 20 to 29 years. This fund will strive for high, long-term growth and capital appreciation. It will allocate 38 percent to the C fund; 21 percent to the I fund; 16 percent to the S fund; 16 percent to the G fund; and 9 percent to the F fund.
· 2040 Target Date Fund, for participants who will retire in 30 or more years. It, too, will focus on high growth and will allocate 42 percent to the C fund; 25 percent to the I fund; 18 percent to the S fund; 10 percent to the F fund; and 5 percent to the G fund.
The asset allocation will change over time, essentially moving participants from fund to fund. As the 2010 fund merges into the Current Income Fund, the TSP will add a 2050 fund.
Each L fund will be rebalanced daily to reflect changes in the markets, and each L fund asset mix will be reallocated quarterly, Amelio said.
TSP officials worry that too many participants are locked into one or two funds (41 percent of TSP assets are in the C fund and 40 percent in the G fund), and they hope that adding the L funds will make it easier for participants to diversify their investments.
Amelio said that the thrift board will not impose any restrictions on investments and that L fund participants will retain the right to use any, some or all of the other TSP funds for retirement savings.
Barbara