Dana is 58 and works for the Social Security Administration. In early 2009, she moved her entire TSP balance into the G Fund and never moved it back. She isn't careless. She's careful, and she's been burned once. Her balance today is steady, safe, and a good deal smaller than it would be if she had stayed even partly invested in stocks for the last fifteen years.

Her coworker Marcus, 31, has the opposite story. He picked the C Fund and S Fund on day one because a friend said "stocks for the long haul." He's never rebalanced and never looked at the I Fund. He's fine so far, but he'd be shaken by a 35 percent drop in a way he can't yet predict.

Both are typical. Federal employees tend to hold allocations that reflect their first big decision, their worst market memory, or the default they were handed, more than any deliberate plan.

What the participant data generally shows

The Federal Retirement Thrift Investment Board (FRTIB) publishes participant demographics and fund-usage reports at tsp.gov. Exact percentages shift every year, so check the latest rather than trusting any number you read in an article, including this one. But a few patterns have held up for years:

  • Lifecycle (L) Funds have become the dominant choice for newer participants. Automatic enrollment sends new hires into the L Fund closest to their expected retirement date, and most of them stay there.
  • Older, longer-tenured participants lean on individual funds. Many built their accounts before the L Funds existed (they arrived in 2005), and they never switched.
  • The G Fund holds more than its share of older balances. It's the second-largest destination for money after the L Funds in many years, and it's heavily weighted toward participants nearing or in retirement.
  • A meaningful group of participants hold 100 percent in a single fund, often the G Fund or the C Fund.

Those patterns tell you what people do. They don't tell you what you should do. Keep that distinction in mind as we go through the age bands.

Under 35: the default does most of the work

If you started federal service in the last decade or so, there's a good chance you're in an L Fund and haven't thought about it much. That's not a bad outcome. An L 2065 or L 2070 holds a heavy stock allocation (spread across C, S, and I Funds) with a small slice in bonds and the G Fund. For someone with 35 years to go, that's a reasonable posture.

The people who stray from the default at this age usually go one of two ways. Some build their own all-stock mix, typically heavy in the C Fund. Others pick the G Fund because "it can't lose money." Both choices deserve a second look.

Take a GS-7 earning $50,000 and contributing 5 percent to get the full agency match. That's $2,500 a year from the employee plus $2,500 from the agency match, so $5,000 total. Over 30 years, the difference between an average 3 percent return and an average 7 percent return is enormous: roughly $245,000 versus $505,000 on those contributions alone, ignoring raises. These are illustrations, not forecasts. But they show why a young person parked in the G Fund pays for that comfort with decades of lost growth.

Ages 35 to 49: the drift years

This is where allocations get messy. Mid-career employees have more money, more opinions, and more distractions: a mortgage, kids, a promotion. Many have a mix of old fund choices layered on top of newer contributions. Someone who set 60 percent C, 20 percent S, 20 percent G in 2012 may still be holding those numbers, whether or not they still match their goals.

If you're in this group, check two things. First, how your contribution allocation and your current balance compare. They're separate settings in the TSP, and people often update one and forget the other. Second, whether you're duplicating exposure. Holding an L Fund and also a chunk of C and S Funds just means you've built your own custom lifecycle fund, usually without meaning to.

Ages 50 to 59: where fear and catch-up collide

This is the decade when the gap between plans and habits becomes expensive. People in their 50s are often earning the most they ever will, eligible for catch-up contributions (the limits change annually, so confirm the current figures at irs.gov), and acutely aware of how close retirement is.

Two behaviors show up here.

The retreat. After a market drop, some participants move heavily into the G Fund and stay there. That's Dana. If she retires at 62 and lives to 92, she has a 30-year horizon. That's not a short-term money problem. A portfolio built for a 30-year retirement still needs growth.

The stretch. Others, realizing they're behind, swing toward aggressive stock allocations to catch up. Higher risk can work out. It can also land you with a major drawdown at 60, right when you can least afford one.

Neither is a plan. A plan is picking a stock-and-bond mix you could hold through a bad year without selling, and then keeping it.

Retirement and beyond: the G Fund gravity well

Once people separate from service, their TSP behavior tends to split. Some leave money in the TSP and draw it down. Some roll it to an IRA. Many do a bit of both.

Retirees who stay in the TSP often become heavy G Fund holders. It's stable, familiar, and doesn't require decisions. For a portion of the portfolio, that's sensible, especially the portion you expect to spend in the next few years. But a retiree with a pension (FERS or CSRS), Social Security, and a TSP balance often has more capacity for risk than they feel. Guaranteed income sources work like a bond cushion, which can allow the portfolio itself to hold more stocks.

Consider a retired couple with a combined $70,000 a year from FERS annuities and Social Security, and a $600,000 TSP balance. If their spending is $75,000, they only need to draw about $5,000 a year from the TSP. Holding all of it in the G Fund is a bet that they'll never need that money to last longer than they expect, or to outrun inflation.

The IRA side of the picture

Federal employees who also have IRAs show similar habits, with one difference: the IRA has no default. Nobody enrolled you, and nobody picked a fund. So IRA allocations tend to reflect either a brokerage's suggestion or the owner's own improvisation. A surprising number sit in cash or money market funds longer than intended, waiting for a "better time" to invest.

If you hold both a TSP and an IRA, think about them as one portfolio. Look at your total stock-to-bond split across both, not each account in isolation. You might use the TSP for low-cost core exposure and the IRA for pieces the TSP doesn't offer, but only if you have a reason.

What to do with this

Benchmarks are mirrors, not instructions. Seeing that most people your age hold the L Fund doesn't mean you should. It means you should know why you hold what you hold.

A few practical steps:

  1. Log into tsp.gov and look at both settings. Your current balance allocation and your contribution allocation can differ. Know both.
  2. Name your reason for each fund. If the answer is "I picked it in 2009," that's a prompt to revisit.
  3. Check your total mix across accounts, including any IRA or spouse's accounts.
  4. Revisit once a year, not once a crisis. A calendar reminder works better than a headline.

Dana, for what it's worth, moved about 40 percent of her balance back into a mix of C and I Funds last spring. It felt uncomfortable. She told me it was like turning the thermostat up after years of living in a cold house. She's still careful. She's just no longer paying for the caution with her retirement.