L Funds vs. DIY Portfolio: Are You Really Getting a ‘Set It and Forget It’ Deal?

Every federal employee has seen the L Funds menu inside the TSP.

L 2025. L 2030. L 2050. For many people, it feels like the easy button:

But what if that’s not really what’s happening?

What if the L Fund is only doing part of the job you think it’s doing — and quietly ignoring the rest of your real-life situation?

The Comfort of the “Easy Button”

Let’s start with what most people think they’re getting when they choose an L Fund:

You pick a date. You trust the professionals. You move on with your life.

Under the surface, the mental promises sound like this:

• “It’s adjusting my risk for my age.”

• “Someone smarter than me is managing this.”

• “It’s tailored to my retirement plan.”

• “It’ll protect me from big mistakes.”

There is some truth in each of those.

But the gap between what you think you picked and what you actually picked can be surprisingly wide.

What an L Fund Really Is

In plain English, an L Fund is just a pre-built recipe using the core TSP funds:

• G Fund – special government securities

• F Fund – bond index

• C Fund – large U.S. stocks (S&P 500)

• S Fund – small/mid U.S. stocks

• I Fund – international stocks

The L Fund starts you with a certain mix of these, rebalances automatically, and gradually shifts more into G/F and less into C/S/I as time goes on.

That’s it.

It is not:

• Looking at your FERS or CSRS pension

• Reacting to market conditions

• Personalizing to your risk tolerance

Think of it as a “good default template,” not a custom retirement strategy.

What You Think You’re Getting vs. What’s Actually Happening

Let’s line up perception vs. reality.

1. “It’s tailored to federal employees.”

The L Funds are designed for TSP investors, but the glide path doesn’t “know” you have a pension.

A strong, inflation-linked pension can justify more growth in TSP for some people.

For others, early retirement might mean they need less risk than the L Fund takes.

2. “It keeps me from making big mistakes.”

It can protect you from obvious allocation errors (like being 100% C Fund forever).

But it cannot stop you bailing out in a downturn because the volatility feels worse than you expected.

3. “It’s a full retirement plan.”

It’s an investment mix inside one account. A real retirement plan includes:

• Timing of your pension and Social Security

• Tax planning (Traditional vs. Roth)

• How you’ll actually withdraw money

• What other accounts (IRAs, 401(k)s, savings) look like

The L Fund doesn’t see any of that.

When L Funds Actually Do a Great Job

L Funds are not “bad.” In fact, for many federal employees, they’re a big improvement over what they’d otherwise do.

They can be a strong choice if:

• You’d otherwise park everything in the G Fund for decades out of fear.

• You don’t want to think about rebalancing or adjusting allocations.

• You’re earlier in your career and just need a reasonable, diversified starting point.

• You know you tend to tinker too much and want a guardrail against over-managing.

What the L Funds get right:

➡ Diversification in one click.

You get U.S. large-cap, small/mid-cap, international, and bonds/G in a single fund.

➡ Automatic rebalancing.

You don’t have to log in and manually reset your percentages.

➡ Gradual shift toward safety.

The glide path moves more into G/F as your target date approaches.

➡ Low costs.

The L Funds inherit the TSP’s extremely low expenses — there’s no extra “wrapper” fee like many private target-date funds.

If your choice is between randomly guessing at C/S/I/G/F allocations and never touching them again or using an L Fund…

Then the L Fund is often the safer default.

Where a DIY Portfolio Wins

On the other hand, a simple “DIY” portfolio (you choosing your own mix of G, F, C, S, and I) can be better when your life doesn’t look like the “average investor” the L Fund is built for.

Here are key situations where DIY can shine:

1. You have a strong pension and can afford more growth.

If your FERS or CSRS pension will cover a large piece of your retirement income, you might decide:

In that case, you might want more C/S/I and less G/F than your age-based L Fund is giving you.

2. You plan an early retirement.

If you want to leave federal service in your 50s and live partly on your TSP before Social Security, you might actually want to:

• Set aside several years of spending in G/F, and

• Invest the rest for longer-term growth.

That “bucket” style is easier to implement with a DIY mix than with a single L Fund.

3. You and your spouse are a team.

Maybe:

• You’re a Fed with TSP and pension,

• Your spouse has a 401(k) with more investment options,

• You both have IRAs.

Your “household portfolio” might call for TSP to be either more conservative or more aggressive to balance everything out.

An L Fund isn’t looking at any of that context.

4. You have a very clear risk tolerance.

Some people simply cannot sleep if they see a 20% drop in their account.

Others are unbothered.

So your emotional reality matters more than a textbook allocation.

With DIY, you can say:

• “I’m comfortable at 60% stock / 40% bond until 55,”

• Or, “I want no more than X% in the G Fund until I’m actually retired.”

So… Are You Really Getting “Set It and Forget It”?

With an L Fund, you’re getting set it and forget it mechanics:

• Automatic rebalancing

• Automatic glide path

• Simple, diversified mix

But you’re not getting:

• A personalized retirement plan

• A strategy tailored to your specific pension, spouse, taxes, and timing

• Protection from the emotional side of investing

Your Next Step

As you think about your own situation:

1) If you’re in an L Fund by default:

Take 10–15 minutes to look at the fund’s current stock/bond mix and ask, “Does this actually fit my timeline, my pension, and my comfort with risk?”

2) If you’re considering a DIY portfolio:

Don’t wait for a perfect, complex strategy.

Start with a simple, written target allocation (stocks vs. bonds, G/F vs. C/S/I) and commit to checking it once or twice a year.

Your TSP doesn’t need to be complicated.

It just needs to be intentional.

Best,
—FWR