Fed Retirement Update: Loan Rules, Funds Change, More Millionaires
Some updates to report on retirement benefits for federal employees including a rule change on loans, some new fund options, and more feds becoming retirement millionaires.
First, a new rule published in the Federal Register will make some adjustments for workers who take loans from their retirement plans and are seeking to reamortize the loan.
The rule will allow borrowers to combine the accrued interest and loan principal into a single amount that is repaid directly to the participant’s account. Previously, accrued interest had to be paid before any current interest and/or principal was paid.
Federal employees may reamortize their loans if they are shifting payrolls systems or returning from non-pay status like military service or family leave.
The rule change will affect about one percent of all loans made from the Thrift Savings Plan (TSP).
TSP Lifecycle Changes
The TSP is adding some options for the youngest federal employees with its Lifecycle funds, which are targeted toward specific retirement dates.
Just launched was the L 2075 fund, designed for workers born after 2009, or those planning to withdraw from their TSP account in the year 2073 or later.
Also, the L 2025 reached its target date and was rolled into the L Income Fund.
There are currently 11 life cycle funds on offer. They automatically adjust (except the income fund) their allocations every quarter.
Federal Retirement Millionaires Rise
And it appears that those target funds are paying off for more federal employees.
The number of federal employees with at least $1 million in their TSPs is on the rise. As of June 2025, 171,000 federal employees have $1 million or more in their TSPs, equating to about two percent of all TSP accounts.
More than 24,000 federal employees crossed the million-dollar threshold in the last three months.
Time is key here. Participants with million-plus accounts have been contributing for an average of 28 years. Out of the 7.22 million total participants, 4.2 million have less than $50,000 saved. The average contribution time for those with less than $50k is six years.
