When markets feel uncertain, many federal employees instinctively move a large portion of their TSP into the G Fund. It feels like the safest place to be, especially when retirement is getting closer and volatility makes headlines. And in many ways, that instinct makes sense. The G Fund offers stability, predictability, and peace of mind. But safety alone doesn’t always mean security.
Before defaulting to the G Fund as your long-term strategy, it’s worth understanding both what it does well and where it can quietly fall short.
What Makes the G Fund Unique
The Government Securities Investment Fund (G Fund) is unlike any other TSP option. It invests exclusively in special short-term U.S. Treasury securities issued to the TSP. Your principal is guaranteed, and you will never experience a negative return.
That guarantee is powerful, especially for federal employees nearing retirement. As of the end of 2025, the G Fund earned 4.125% and held more than $240 billion in assets, reflecting just how popular it has become during periods of uncertainty.
Why Federal Employees Gravitate to the G Fund
The appeal is simple: you cannot lose money. For funds you expect to use in the next few years, that reliability can be extremely valuable. Many retirees also use the G Fund to stabilize income planning during the early years of retirement, when sequence-of-returns risk matters most.
In some cases, Roth TSP balances invested in the G Fund are used as a supplemental safety bucket, offering stability while maintaining tax-free access. Used intentionally, the G Fund can play an important role.
The Tradeoff Most People Underestimate
The cost of safety is growth. While the G Fund often keeps pace with inflation, it rarely outpaces it by much. Over a retirement that may last 25 to 30 years, relying too heavily on the G Fund can slowly erode purchasing power.
This becomes especially important when coordinating income from a FERS pension, Social Security, and TSP withdrawals. If too much of your portfolio sits in low-growth assets for too long, you may need to draw more aggressively later or adjust your lifestyle to compensate. The risk isn’t losing money. It’s outliving the growth your retirement plan depends on.
The Smarter Question to Ask
The real decision isn’t whether the G Fund is good or bad. It’s whether your current allocation supports both your short-term income needs and your long-term retirement goals.
Before making the G Fund your default destination, it’s worth confirming how it fits into your broader strategy. A Federal Retirement Consultant (FRC®) can help you evaluate whether your TSP allocation, tax planning, and withdrawal strategy are working together or quietly limiting your future options.
