Last Updated: August 26, 2026 Reading Time: 9 min

When a TSP L Fund reaches its target date, it does not keep running. TSP converts every share to the L Income Fund and redirects every future contribution there too, automatically. For a retiree, that's the design working as intended. For the thousands of feds who picked L 2025 or L 2030 years ago and are still at their desks, it means holding a retiree's portfolio during peak earning years.

The Dollar Gap: What Staying in L Income Costs a Still-Working Fed

Nobody else has published this number, so we computed it. Using year-by-year annual returns for both funds from tspdatacenter.com, here is what a lump-sum balance did over the most recent full decade in L Income versus L 2040:

Starting Balance L Income After 10 Years L 2040 After 10 Years Dollar Gap
$100,000 $153,230 $219,100 $65,870
$250,000 $383,075 $547,750 $164,675
$500,000 $766,150 $1,095,500 $329,350

FedTools 2026 analysis. Methodology: lump-sum balance held January 1, 2015 through December 31, 2024; annual returns from tspdatacenter.com; nominal dollars; no additional contributions modeled; TSP expense ratios (~0.048%) excluded as negligible.

L Income returned about 4.35% annualized over that stretch. L 2040 returned about 8.16%. A 3.8 point annual gap sounds small until it compounds for a decade.

Two honest caveats. Past returns don't predict future ones, and this period included two strong bull markets. L Income actually beat L 2040 in the three down or flat years (2015, 2018, 2022) because losing less is what it's built to do. That's exactly the point: it's a defensive fund. If you're 10 or more years from retirement, defense at this level has historically been expensive.

What Actually Happens When an L Fund Hits Its Target Date

The mechanics come straight from TSP Bulletin 25-1, the official notice covering the L 2025 retirement:

  • On June 27, 2025, all L 2025 shares were sold and L Income shares were purchased in their place.
  • Participants with investment elections pointing at L 2025 had those elections automatically changed to L Income.
  • TSP emailed or mailed notices to participants who held L 2025 balances or elections as of May 8, 2025, about seven weeks before the switch.

The TSP lifecycle funds page confirms this is the permanent pattern: "When an L Fund reaches its target date, it goes out of existence and any money in it becomes part of the L Income Fund."

So TSP didn't hide anything. The problem is quieter than that. If you picked L 2025 back in 2015 because you expected to retire around then, and life pushed your date to 2028 or 2030, TSP has no way to know. It converts your account based on the calendar, not your actual plans. And if the notice landed in an inbox you don't check, your first clue might be a quarterly statement you also don't check.

The conversion moment itself is not where the damage happens, despite what the Reddit threads assume. By June 2025, L 2025's allocation had already glided down to match L Income almost exactly. The cost accumulates over the years the fund spends gliding toward retiree-level conservatism while you're still accumulating.

L Income vs. the Growth Funds: The Allocations Side by Side

Fund G Fund F Fund C Fund S Fund I Fund Total Stocks
L Income 72% 6% 11% 3% 8% 22%
L 2030 ~48% ~6% ~27% ~7% ~12% ~46%
L 2040 ~28% ~6% ~38% ~10% ~18% ~66%
L 2050 11% 7% 42% 11% 29% 82%

Sources: tsp.gov fund pages and tspfolio.com, August 2026. TSP is gradually adding equity to L Income through 2028, so these figures will shift slightly.

Read that top row again. A 45-year-old GS-12 sitting in L Income holds 22% stocks. The fund built for someone that age, L 2050, holds 82%. L Income is not the G Fund, and it's not "cash," but it is unmistakably a drawdown portfolio.

Recent returns show the spread: over the year ending August 2026, L Income returned about 9.6% while L 2040 returned about 18.2%, per tspfolio.com.

L 2030 Is Next: The July 2030 Countdown

The same conversion hits the L 2030 Fund in July 2030. That cohort is large, and it includes a lot of people who picked the fund a decade ago:

  • Feds who chose L 2030 expecting to retire around 2028-2032, whose plans have since stretched
  • Anyone born roughly 1968-1972 who matched the fund to a target year rather than an actual date
  • Anyone who assumed the fund would "keep working" past its label

If you hold L 2030 and your realistic retirement date is 2033 or later, the glide path is already dragging you toward L Income's allocation right now. Waiting until 2030 to look means spending four more years getting more conservative than your timeline calls for. Moving to L 2035, L 2040, or a custom mix is a decision to make on your schedule, not TSP's.

How to Check Your Allocation and Fix It in Two Minutes

Log in at tsp.gov and look at two things, because TSP treats them as completely separate:

  1. Your investment election. This controls where every future paycheck contribution goes. If it says L Income and you're still working, that's the trap. Use "Change investment elections" to redirect new money.
  2. Your existing balance. Changing your election does NOT move money you've already saved. Use "Fund transfer" or "Fund reallocation" to move the balance itself.

Do both, or you'll fix your future contributions while your accumulated six figures keeps riding the retiree allocation. There's no fee and no penalty for either change.

Not sure what allocation fits your timeline? Our guide to the best TSP allocation by age walks through the standard age-based mixes, and you can check your balance against the TSP milestone benchmarks by age to see where you stand.

Calculate What the Difference Means for Your Balance

Use our free TSP Calculator to model your balance at retirement under different return assumptions. Run it once at L Income's historical ~4.35% and once at a growth fund's ~8.16% and look at the gap. For most still-working feds, that comparison settles the question faster than any article can.

Frequently Asked Questions

My TSP was in L 2025. Did my money automatically move somewhere?

Yes. On June 27, 2025, TSP converted all L 2025 shares into L Income shares and redirected future contribution elections to L Income automatically. Notices went to participants who held L 2025 balances or elections as of May 8, 2025. If you're still working, check whether L Income matches your actual timeline.

Is an L Fund rolling into L Income a taxable event?

No. It's an internal conversion inside your tax-deferred account. No taxes are triggered, and your traditional or Roth treatment is unchanged.

I'm still working and my money is now in L Income. Is that a problem?

It depends on your distance from retirement. L Income holds 72% G Fund and 22% stocks, a mix built for someone already drawing down. With 10 or more working years ahead, an age-appropriate L Fund or custom mix has historically offered far more growth. Within 5-7 years of retiring, a conservative tilt can be a reasonable choice.

When does the L 2030 Fund retire?

July 2030, per TSP's lifecycle fund documentation. The process mirrors L 2025: balance converted, elections redirected, notice sent beforehand.

If I do nothing after my L Fund retires, where do new contributions go?

To L Income. TSP changes your investment election automatically, so both your existing balance and all new contributions land there unless you act. They do not go to the G Fund, a common misconception on Reddit.

How do I actually change my TSP allocation?

Log in at tsp.gov. "Change investment elections" redirects future contributions. "Fund transfer" or "Fund reallocation" moves your existing balance. They're separate actions; you likely need both.

Sources: TSP Bulletin 25-1, TSP Lifecycle Funds, TSP L Income Fund, tspdatacenter.com annual returns, tspfolio.com fund data (August 2026).