TSP G Fund 2026: Is Your 'Safe' Money Actually Losing Value?
The TSP G Fund has never lost money on paper. But after inflation, G Fund holders lost purchasing power in 4 of the last 15 years. Here's what the data shows.
TSP G Fund 2026: is your "safe" money actually losing value?
Last Updated: February 8, 2026 Reading Time: 10 min
The TSP G Fund has never posted a negative year. Not in 2008. Not in 2020. Not in 2022 when the C Fund dropped 18%. That is the pitch, and it is true.
But "never lost money" and "kept up with inflation" are two different things. Over the past six years, they have not been the same thing at all.
Key takeaways
- The G Fund returned 4.44% in 2025 with a current rate of 4.250% for January 2026
- From 2020-2025, cumulative inflation (~25%) exceeded cumulative G Fund returns (~19.8%), meaning G Fund holders lost about $5,200 in purchasing power on every $100,000
- The C Fund's 10-year annualized return (14.79%) means money doubles every 5 years vs. every 26 years in the G Fund (2.76%)
- About 22-24% of all TSP assets sit in the G Fund, with workers over 60 holding the highest concentration
- FERS employees already have a guaranteed pension, which means their TSP can afford more growth risk than they might think
The G Fund rate right now
The G Fund rate is set monthly by the U.S. Treasury. It is the weighted average yield of all outstanding Treasury securities with 4+ years to maturity.
| Month | G Fund rate |
|---|---|
| January 2026 | 4.250% |
| December 2025 | 4.125% |
| November 2025 | 4.125% |
| October 2025 | 4.250% |
| September 2025 | 4.250% |
| August 2025 | 4.375% |
That 4.25% is historically good. In 2020, the rate was 0.97%. In 2021, it was 1.38%. If the Federal Reserve cuts rates in 2026 (Goldman Sachs projects 1-3 cuts), the G Fund rate will likely drift back toward 3.5-4.0% by year-end.
So the current rate is a high-water mark, not the new baseline.
The inflation problem: where your money actually went
The G Fund's nominal return is always positive. That is baked into the design. But nominal returns are not what you spend in retirement. You spend purchasing power.
Year by year:
| Year | G Fund return | CPI inflation | Real return |
|---|---|---|---|
| 2025 | 4.44% | 2.6% | +1.84% |
| 2024 | 4.40% | 2.9% | +1.50% |
| 2023 | 4.22% | 4.1% | +0.12% |
| 2022 | 2.98% | 8.0% | -5.02% |
| 2021 | 1.38% | 4.7% | -3.32% |
| 2020 | 0.97% | 1.2% | -0.23% |
Three consecutive years of negative real returns from 2020 to 2022. The 2022 number is the ugly one: inflation hit 8% while the G Fund paid less than 3%. That is a 5% real loss in a single year.
Add it up and the picture gets worse:
| Metric | Value |
|---|---|
| G Fund cumulative return (2020-2025) | ~19.8% |
| Cumulative CPI inflation (2020-2025) | ~25.0% |
| Purchasing power loss | ~$5,200 per $100,000 |
A federal employee with $100,000 in the G Fund at the start of 2020 has about $119,800 today. But they need $125,000 to buy the same stuff. The account balance went up. The value of the money inside it went down.
The long view is trending the wrong direction
| Period | G Fund avg annual | Avg inflation | Real return |
|---|---|---|---|
| 1987-2025 (since inception) | 4.7% | 2.8% | +1.9%/year |
| 2000-2009 | ~4.8% | ~2.6% | +2.2%/year |
| 2010-2019 | ~2.2% | ~1.8% | +0.4%/year |
| 2020-2025 | ~3.3% | ~3.9% | -0.6%/year |
The real return is shrinking decade by decade. The 2010s were barely positive. The 2020s so far have been outright negative. The G Fund's best days were the 1990s and early 2000s when rates were high and inflation was low. That combination does not exist anymore.
The opportunity cost: what the other funds did
This is the part that should bother you if you are 100% G Fund.
2022-2025 returns, all five funds
| Fund | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| G Fund | 2.98% | 4.22% | 4.40% | 4.44% |
| F Fund | -12.83% | 5.58% | 1.33% | 7.21% |
| C Fund | -18.13% | 26.25% | 24.96% | 17.85% |
| S Fund | -26.26% | 25.30% | 16.93% | 11.38% |
| I Fund | -13.94% | 18.38% | 4.27% | 32.45% |
Yes, the G Fund was the only fund to post a positive return in 2022. That is its best argument. But look what happened next: the C Fund gained 26% in 2023, then 25% in 2024. Investors who stayed in equities through the downturn more than recovered. Investors who fled to the G Fund during the crash locked in their losses and earned 4% while the C Fund gained 69% over two years.
10-year annualized returns (through December 2025)
| Fund | 10-year return | Years to double (Rule of 72) |
|---|---|---|
| G Fund | 2.76% | ~26 years |
| C Fund | 14.79% | ~4.9 years |
| S Fund | 11.04% | ~6.5 years |
| I Fund | 8.70% | ~8.3 years |
Sit with that for a second. Money in the C Fund doubles every 5 years. Money in the G Fund doubles every 26 years. Same 10-year window, same trailing averages. Nobody cherry-picked the dates.
The dollar impact on $100,000
Using actual returns from 2022 through 2025:
| Fund | Ending value | Gain |
|---|---|---|
| G Fund | $117,161 | +$17,161 |
| C Fund | $151,982 | +$51,982 |
| I Fund | $138,773 | +$38,773 |
| S Fund | $123,052 | +$23,052 |
The G Fund investor missed $34,821 compared to the C Fund. Over just four years. On $100,000.
Stretch it to 20 years using the 10-year averages, and $100,000 becomes:
- G Fund (2.76%): $173,167
- C Fund (14.79%): $1,571,804
That $1.4 million gap is the real cost of "safety."
Past performance does not guarantee future results. The C Fund lost 37% in 2008 and 18% in 2022. This comparison shows compounding differences, not a prediction.
Who is actually in the G Fund?
About 22-24% of all TSP assets sit in the G Fund. That share has been falling (it was 33% in 2022) as younger employees default into L Funds and older employees shift toward equities. But it is still a massive concentration.
The age breakdown tells the story:
| Age group | G Fund allocation | L Fund usage |
|---|---|---|
| Under 29 | ~5% | 65.8% |
| 50-59 | Increasing | Decreasing |
| 60+ | Highest of any single fund | 14.8% |
Before 2015, new TSP enrollees were defaulted into the G Fund. Many never changed it. Since 2015, the default is the age-appropriate L Fund, which is why younger workers have almost no G Fund exposure. But legacy holdings from the pre-2015 era remain large.
If you have not changed your allocation since you were first enrolled, there is a decent chance your money has been sitting in the G Fund for years. Check your allocation at TSP.gov.
When the G Fund actually makes sense
I am not arguing that the G Fund is useless. It is a genuinely unique instrument. No private investor can get long-term Treasury returns with zero principal risk. That combination only exists inside the TSP. The question is whether it deserves 100% of your money.
If you are within 2-3 years of retirement, money you need soon should be protected. The "bucket strategy" says keep 2-3 years of planned withdrawals in the G Fund and let the rest grow.
In retirement, it works as part of a mix. The L Income Fund puts about 67% in the G Fund and spreads the rest across equities. Even L Income returned 9.36% in 2025, more than double the G Fund alone.
As 10-20% of a diversified portfolio, a small G Fund allocation reduces volatility without dramatically hurting long-term returns.
And some experienced investors hold G Fund reserves as dry powder to rebalance into equities after a crash. That is a real strategy, but it requires active management, not autopilot.
When the G Fund does not make sense
100% allocation at any age is hard to justify. Even financial advisors who specialize in federal employees rarely recommend more than 40-70% G Fund, and that is only for retirees already taking withdrawals.
Mid-career with 20+ years to go is where the damage compounds. A GS-13 contributing $500/month for 30 years at the G Fund's 2.76% ends up with about $271,000. The same contributions at the C Fund's 14.79% would be approximately $2,300,000. Two million dollars. Gone. Because of a default setting nobody changed.
Panic selling after markets drop is the classic mistake. In March 2020, many TSP participants sold equity funds and moved to the G Fund. The C Fund finished that year up 18.31%. Those who fled earned 0.97%. The same pattern played out in 2022: people who bailed missed the 2023-2024 recovery.
And if you have a FERS pension, this is the thing almost nobody thinks about: your pension is a guaranteed, inflation-adjusted income stream. It functions like a massive bond allocation you already own. Putting 100% of your TSP into the G Fund on top of that is doubling down on conservative assets while giving up the growth that equities provide.
Your pension already does what the G Fund does. Your TSP does not need to do it too.
The L Fund alternative
If you want diversification but do not want to manage it yourself, the L Funds do the work for you.
| L Fund | Target date | Approx. G Fund allocation |
|---|---|---|
| L Income | Retired | 67% |
| L 2030 | Near-term | ~50% |
| L 2040 | Mid-career | ~25% |
| L 2050 | Early career | ~10% |
| L 2060+ | New career | ~5% |
2025 L Fund returns:
| Fund | 2025 return |
|---|---|
| L Income | 9.36% |
| L 2030 | 15.17% |
| L 2040 | 17.31% |
| L 2050 | 19.07% |
| L 2055+ | 21.87% |
| G Fund (for comparison) | 4.44% |
Even L Income, the most conservative option, beat the G Fund by more than double. That extra return comes from having about 33% in equity funds. The L Funds rebalance automatically every quarter, shifting more conservative as you approach your target date.
For most federal employees who do not want to actively manage their TSP, the age-appropriate L Fund is a better default than the G Fund. Not reckless. Just not leaving money on the table for no reason.
Five common G Fund mistakes
1. Never changing the default. Pre-2015 enrollees were auto-placed in the G Fund. Some have been there for decades without realizing it. Log in to TSP.gov and check.
2. Panic selling into G after a crash. Selling equities when they are down and buying G Fund locks in losses. The recovery always comes, but only for people who are still invested.
3. Ignoring inflation. The account balance goes up every year. That makes people feel safe. But if inflation is higher than the return, you are falling behind even as the number gets bigger.
4. Treating TSP like a savings account. TSP money is for retirement, decades away for most contributors. Short-term stability is not the priority. Long-term growth is.
5. Forgetting the pension. Your FERS pension already gives you guaranteed income. Piling the G Fund on top of that is like wearing two life jackets.
The gold IRA pitch (and why you should ignore it)
A recent Federal News Network article titled "The G Fund's Silent Erosion" made a real case that the G Fund is losing to inflation. The data was mostly accurate. But the article was sponsored content from a gold dealer called National Gold Group, and their recommended solution was transferring TSP money to a "Gold IRA." That part deserves scrutiny.
In-service withdrawals from the TSP are only available to separated employees or those 59.5 and older. Gold IRAs carry storage fees, dealer markups, and are far less liquid than TSP funds. For active-duty federal employees, this is not a viable option.
The G Fund's inflation problem is real. The solution is not gold. It is the other four funds already sitting inside your TSP at zero additional cost. No storage fees. No dealer markup. No sales pitch required.
Model your own allocation
Use our free TSP Calculator to model how different allocations affect your retirement balance. Plug in your actual contribution rate, current balance, and years to retirement. Compare 100% G Fund against a balanced approach and see the difference in dollars.
Frequently asked questions
What is the current TSP G Fund interest rate in 2026?
The G Fund rate for January 2026 is 4.250%. The rate is calculated monthly by the U.S. Treasury based on the weighted average yield of outstanding Treasury securities with 4+ years to maturity. It has ranged from 4.125% to 4.500% over the past 12 months.
Is the TSP G Fund losing money to inflation?
In nominal terms, no. The G Fund has never posted a negative year. In real terms, yes. Cumulative inflation from 2020-2025 (~25%) exceeded cumulative G Fund returns (~19.8%). On $100,000, that is roughly $5,200 in lost purchasing power. The G Fund posted negative real returns in 2011, 2012, 2020, 2021, and 2022.
Should I move my TSP to the G Fund before a market crash?
Timing the market is extremely difficult and usually backfires. Research shows that missing just the 10 best trading days in a decade can cut returns by more than half. In 2020, people who moved to the G Fund during the crash earned 0.97% while the C Fund finished up 18.31%. Maintain an age-appropriate allocation. L Funds handle this automatically.
What percentage of my TSP should be in the G Fund?
General guidance from financial professionals: 0-10% for early career (20+ years to retirement), 10-20% for mid-career, 20-40% within 10 years of retirement, and 40-70% for retirees. FERS employees with a pension can be more aggressive since the pension functions like a large bond allocation.
How does the TSP G Fund compare to the C Fund?
Over the past 10 years, the C Fund returned 14.79% annually vs. the G Fund's 2.76%. Money doubles every 5 years in the C Fund vs. every 26 years in the G Fund. But the C Fund lost 18.13% in 2022 while the G Fund gained 2.98%. The right mix depends on your time horizon and risk tolerance. Use our TSP Calculator to model both.
Is the TSP G Fund the same as a money market fund?
No. The G Fund invests in special-issue Treasury securities that deliver long-term bond returns with short-term bond price stability. This is a unique government privilege. No private investor can replicate it. The G Fund typically pays more than money market rates because its yield is based on medium- and long-term Treasury bonds.
Will the G Fund rate go down in 2026?
Likely. The Federal Reserve is expected to cut rates 1-3 times in 2026. As Treasury yields decline, the G Fund rate follows with a lag. The current 4.25% is favorable compared to recent history (0.97% in 2020). If the Fed cuts to 3.00-3.25%, the G Fund rate could drift to 3.5-4.0% by late 2026.
Related resources
- TSP Calculator: Model how different allocations affect your retirement balance
- TSP 2025 performance review: Full fund-by-fund breakdown of last year's returns
- TSP millionaire strategy: What TSP millionaires did differently
- TSP withdrawal guide: How to take money out without unnecessary penalties
- TSP I Fund allocation strategy: The case for international diversification
- TSP guide 2026: Complete TSP reference with 2026 limits and rules
Sources: TSP.gov, BLS.gov CPI Data, FRTIB 2024 Annual Report, NARFE TSP Funds, FedSmith
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