Best TSP Allocation 2026: A Guide by Age
TSP allocation strategies by age bracket. 2025 returns: I Fund +32%, C Fund +18%. How to split C, S, I, G, F funds and when L Funds make more sense.
Best TSP Allocation 2026: A Guide by Age and Risk Tolerance
Last Updated: February 19, 2026 Reading Time: 12 min
The I Fund returned 32% in 2025. The C Fund returned 18%. And now everyone wants to know: should I change my TSP allocation?
The honest answer is that the best allocation depends on how far you are from retirement, not on what happened last year. Chasing the I Fund after a big year is exactly the kind of move that hurts long-term returns.
This guide breaks down TSP allocation frameworks by age bracket, compares L Funds to DIY allocations, and shows you how to think about the five TSP funds without getting sold on someone's advisory service.
Key Takeaways
- Your age and retirement timeline matter more than last year's returns when choosing a TSP allocation
- The I Fund's 32% return in 2025 doesn't mean you should go all-in. A balanced approach across C, S, and I Funds has historically outperformed single-fund bets.
- L Funds are a solid choice for hands-off investors. They rebalance automatically and have zero additional fees.
- The 2026 contribution limit is $24,500 (under 50), with a new $11,250 super catch-up for ages 60-63
- The G Fund earned 4.44% in 2025, barely above 2.8% inflation. Keeping too much in G Fund is its own risk.
What each TSP fund actually does
Before picking an allocation, understand what you're choosing between.
| Fund | Tracks | 2025 Return | 12-Month Return (Feb 2026) | Risk Level |
|---|---|---|---|---|
| G Fund | Government securities | 4.44% | 4.42% | Lowest |
| F Fund | Bloomberg Barclays U.S. Aggregate Bond Index | 7.21% | 6.88% | Low |
| C Fund | S&P 500 (large U.S. stocks) | 17.85% | 16.32% | Medium-High |
| S Fund | Dow Jones U.S. Completion TSP (small/mid U.S. stocks) | 11.38% | ~14-15% | High |
| I Fund | MSCI EAFE (international developed markets) | 32.45% | 35.33% | High |
The G Fund is the safety net. It has never lost money in any month since the TSP started in 1987. But "never lost money" and "kept up with inflation" are not the same thing.
The C Fund tracks the 500 largest U.S. companies. Over the long run, this is where most of the growth comes from.
The S Fund fills in the rest of the U.S. stock market, mostly smaller companies. More volatile than C, but higher growth potential over decades.
The I Fund tracks international developed markets (Europe, Japan, Australia). It's the most volatile fund, but it's also the diversification piece most people skip. That 32% in 2025 was partly the dollar weakening against foreign currencies.
The F Fund tracks U.S. investment-grade bonds. It sits between G (safety) and C (growth).
TSP allocation by age bracket
There's no single "best" allocation. But there are frameworks that work for most people at each career stage. These aren't financial advice. They're starting points.
Ages 20-35: aggressive growth
You have 25 to 40 years until retirement. You can afford to ride out market drops because you have decades for recovery.
| Strategy | C Fund | S Fund | I Fund | F Fund | G Fund |
|---|---|---|---|---|---|
| Aggressive | 60% | 20% | 20% | 0% | 0% |
| Moderate Aggressive | 50% | 20% | 15% | 10% | 5% |
| L Fund equivalent | L 2060 or L 2065 |
At this age, the biggest risk isn't a market crash. It's not investing aggressively enough. A 25-year-old putting 100% in the G Fund might feel safe, but they're losing purchasing power to inflation every year.
The classic 60/20/20 split across C/S/I gives you broad exposure to U.S. and international stocks. If you don't want to think about it, the L 2060 or L 2065 does something similar and rebalances for you.
Ages 36-50: growth with some guardrails
You have 10 to 25 years until retirement. Still plenty of time for stock growth, but starting to add stability.
| Strategy | C Fund | S Fund | I Fund | F Fund | G Fund |
|---|---|---|---|---|---|
| Growth | 50% | 15% | 15% | 10% | 10% |
| Balanced | 40% | 15% | 15% | 15% | 15% |
| L Fund equivalent | L 2040 or L 2045 |
This is the bracket where most financial advisors will try to sell you a consultation. You don't need one. The L 2040 or L 2045 fund does a reasonable job of balancing growth and stability for this age range.
If you want to go DIY, the main difference from your 20s is adding some F and G Fund exposure. You're not abandoning stocks. You're adding a cushion.
Ages 51-60: transition to preservation
Retirement is on the horizon. You can't afford a 40% drop right before you walk out the door.
| Strategy | C Fund | S Fund | I Fund | F Fund | G Fund |
|---|---|---|---|---|---|
| Moderate | 35% | 10% | 10% | 20% | 25% |
| Conservative | 25% | 5% | 10% | 25% | 35% |
| L Fund equivalent | L 2030 or L 2035 |
The mistake at this age is going 100% G Fund. You may be retired for 30 years. If your money only earns 4% and inflation runs 3%, your purchasing power erodes every year. You still need stock exposure. Just less of it.
Ages 61+: income and stability
If you're at or near retirement, capital preservation matters more, but you still can't abandon growth entirely.
| Strategy | C Fund | S Fund | I Fund | F Fund | G Fund |
|---|---|---|---|---|---|
| Near-retirement | 20% | 5% | 5% | 30% | 40% |
| In retirement | 15% | 0% | 5% | 30% | 50% |
| L Fund equivalent | L Income or L 2025 |
If you're already receiving TSP installment payments, the L Income fund is built for this. It targets about 20% stocks and 80% bonds/G Fund. It's conservative, but not zero-growth.
L Funds vs. picking your own: which is better?
The honest answer: L Funds are good enough for most people, and better than most DIY allocations in practice.
Here's why: the value of an L Fund isn't the allocation formula. It's the automatic rebalancing. Most people who pick their own funds set it and forget it. They never rebalance. That means after a year where the C Fund returns 18%, their allocation drifts toward stocks and they're taking on more risk than they intended.
L Funds rebalance daily and gradually shift toward more conservative allocations as the target date approaches. No additional fees. No action required.
When DIY makes sense:
- You want more international exposure than L Funds provide (L Funds have historically been underweight on the I Fund)
- You have a specific view on U.S. vs. international markets
- You actually commit to rebalancing at least once a year
When L Funds make sense:
- You don't want to think about your allocation
- You've tried DIY but never rebalanced
- You want a "set it and leave it" approach that's well-diversified
There's no wrong choice here. The wrong choice is not investing at all, or putting everything in the G Fund at age 30.
Don't chase last year's winner
After the I Fund returned 32% in 2025, TSP investors dramatically increased their I Fund allocations. This is normal human behavior. It's also historically a bad idea.
The TSP "quilt chart" (published annually by FedSmith) shows fund rankings by year. The pattern is clear: whatever fund was on top last year is rarely on top the next year.
| Year | Best Fund | Return | Next Year's Return |
|---|---|---|---|
| 2023 | C Fund | +26.27% | +17.85% (2024 still strong) |
| 2024 | I Fund | +32.45% | TBD |
The I Fund surge in 2025 was partly driven by a weakening U.S. dollar, not just international stock performance. Currency effects can reverse quickly.
If you had zero I Fund exposure and want to add some, 15-25% is a reasonable allocation. Going from 0% to 50% because of one good year is performance chasing.
2026 contribution limits and new rules
The 2026 changes affect how much you contribute, not necessarily how you allocate. But they're worth knowing:
| Category | 2026 Limit |
|---|---|
| Regular contributions (under 50) | $24,500 |
| Catch-up (ages 50-59, 64+) | $8,000 |
| Super catch-up (ages 60-63) | $11,250 |
| Total possible (age 60-63) | $35,750 |
Other 2026 changes:
- Roth In-Plan Conversions are now available. You can convert traditional TSP to Roth within the plan. See the TSP Roth Conversion Guide for details.
- Mandatory Roth catch-up: If you earned over $145,000 last year, your catch-up contributions must be Roth. See the SECURE 2.0 Roth Catch-Up Guide.
- L 2075 fund introduced: New target-date fund for younger employees with 2075 retirement horizon.
- L 2025 merging into L Income: If you were in the L 2025 fund, it's transitioning to L Income.
Model your TSP growth
Use the TSP Calculator to model different allocation scenarios. Plug in your current balance, contribution rate, and expected returns to see how different stock/bond splits affect your projected balance at retirement.
The difference between a 60/40 stock/bond split and an 80/20 split over a 25-year career can be $300,000 to $500,000 or more, depending on your contribution level. Run your own numbers.
For a broader look at TSP strategy, see the TSP Guide 2026.
Frequently asked questions
What is the best TSP allocation for a 30-year-old federal employee?
With 25+ years to retirement, most guidance points toward 80-100% in stock funds (C, S, I). The L 2060 or L 2065 fund automates this. For a DIY approach, a common split is 60% C, 20% S, 20% I. Use the TSP Calculator to model growth scenarios for your specific timeline.
Should I invest in the I Fund after its 32% return in 2025?
Past performance doesn't predict future returns. The I Fund tracks international developed markets (MSCI EAFE). Chasing last year's winner is a common mistake. If you had 0% in the I Fund, adding 15-25% improves diversification. But don't go all-in based on one year.
TSP Lifecycle funds vs. individual funds, which is better?
L Funds are best for hands-off investors. They automatically rebalance and shift toward conservative allocation as you approach retirement. Individual funds give you control but require discipline to rebalance regularly. L Funds have zero additional fees beyond the standard TSP expense ratio.
How should I allocate my TSP near retirement at 55 to 65?
Most guidance suggests shifting to 40-60% stock funds and 40-60% G and F funds. The L Income or L 2030 fund automates this. But you still need some growth. You may be retired for 30 years, and a purely conservative allocation won't keep up with inflation.
Should I move my TSP to the G Fund during market volatility?
The G Fund has never lost money, but it barely beats inflation (4.44% in 2025 vs. 2.8% CPI). Moving to the G Fund after a market drop locks in your losses. Historically, staying invested through downturns has outperformed switching to G Fund in every rolling 20-year period.
What are the new TSP rules for 2026?
The 2026 contribution limit is $24,500 (under 50). Catch-up contributions are $8,000 (ages 50-59, 64+). A new super catch-up of $11,250 applies to ages 60-63. Roth In-Plan Conversions are available. Employees who earned over $145,000 last year must make catch-up contributions as Roth.
Related resources
- TSP Calculator: Model different allocation scenarios for your retirement timeline
- TSP Guide 2026: Complete guide to TSP funds, limits, and strategies
- TSP I Fund Allocation Strategy: Deep dive on the I Fund after 2025's surge
- TSP G Fund Analysis 2026: Is the G Fund keeping up with inflation?
- TSP 2025 Performance Review: Full-year fund performance breakdown
- TSP Roth Conversion Guide: How the new Roth In-Plan Conversions work
- SECURE 2.0 Roth Catch-Up Guide: Mandatory Roth catch-up explained
Sources: TSP.gov Fund Performance, TSP.gov Lifecycle Funds, FedSmith: TSP Quilt Chart 2025, FedSmith: 2026 TSP Performance January, TSPFolio Fund Data, Federal News Network: 2026 Roth and TSP Changes
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