TSP Funds Fell in September 2026: What Federal Employees Should Consider Now

TSP funds fell in September 2026 across every core investment option except one.
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According to data published on TSP.gov and reported by Government Executive, the Thrift Savings Plan's (TSP) S Fund dropped 3.86%, the F Fund fell 2.59%, the I Fund slid 2.30%, and the C Fund finished 0.35% in the red. The G Fund posted a monthly return of 0.40%, the only core fund to gain ground.
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The Thrift Savings Plan is the federal government's tax-advantaged, 401(k)-style retirement savings program for federal employees and uniformed service members. The Federal Retirement Thrift Investment Board (FRTIB) administers it.
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This article explains what the September numbers show, which factors market commentators cited, how year-to-date returns look through the first three quarters of 2026, and what you may want to review. The figures below come from TSP.gov's rates-of-return data dated September 30, 2026, as reported by Government Executive, FedSmith, and FedTools.
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September 2026 TSP Fund Returns at a Glance
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Four of the five core TSP funds lost ground in September 2026. The S Fund, which holds small- and mid-cap U.S. stocks, posted the steepest monthly loss.
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The G Fund invests in special-issue, non-marketable U.S. Treasury securities created exclusively for the TSP. It was the only fund in the black.
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The comparison table below shows September returns, year-to-date (YTD) performance through September 30, and what each fund holds.
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Source: TSP.gov rates of return, data dated September 30, 2026, as reported by Government Executive on October 1, 2026.
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Despite the September pullback, four of the five funds remain positive on the year. Only the F Fund is negative year-to-date.
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Why TSP Funds Fell in September 2026
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Market commentators pointed to rising Treasury yields as one of the main factors associated with September's broad-based decline.
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According to FedSmith's September 2026 TSP returns coverage, the 10-year Treasury yield reached its highest closing level since May 2002. FedTools' compilation of market data pegged that closing yield at 5.29% on September 30.
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Rising yields can pressure both stocks and bonds at the same time. Stocks fall because higher discount rates compress valuations. Bonds fall because existing fixed-coupon securities lose price value when prevailing yields rise.
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Three factors may help explain the declines:
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Rate expectations shifted. Market expectations for Federal Reserve policy were one factor investors monitored during the month. The Federal Open Market Committee (FOMC), the Federal Reserve's monetary policy-setting body, kept markets focused on the pace of any additional easing in late 2026.
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Small caps led the losses. The S Fund's 3.86% drop occurred alongside broad weakness in rate-sensitive, smaller-company equities. Smaller companies can be more sensitive to borrowing costs than large caps, which some market analysts cited as one reason small-cap indexes often react more sharply to shifts in the rate outlook.
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Bonds did not offset stock losses. The F Fund uses the Bloomberg U.S. Aggregate Bond Index as its benchmark. The fund lost 2.59% during a month of rising yields. Intermediate-duration bond funds can decline alongside stocks when yields move higher, which limits the diversification bonds historically provided.
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The September decline followed an August in which all five core funds posted positive returns per Government Executive. Whether the September pullback persists or reverses depends on subsequent market conditions.
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How Each Core TSP Fund Performed in September 2026
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Each core TSP fund tells a slightly different story.
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G Fund: September 2026 performance
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The G Fund posted a monthly return of 0.40% in September 2026, bringing its year-to-date return to 3.41%, according to TSP.gov's monthly performance data.
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The G Fund invests in special-issue, non-marketable U.S. Treasury securities created exclusively for the TSP. The U.S. Treasury sets the interest rate each month based on the weighted average yield of eligible outstanding Treasury marketable securities with four or more years remaining to maturity.
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Because its unit value doesn't fluctuate with market prices, the G Fund's reported monthly return has not been negative in TSP.gov's published history. You still face inflation risk, though, and the opportunity cost of lower long-term returns compared with equity funds.
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F Fund: September 2026 performance
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The F Fund fell 2.59% in September 2026 and is now down 2.75% year-to-date, according to TSP.gov data reported by Government Executive.
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The fund uses the Bloomberg U.S. Aggregate Bond Index as its benchmark, a broad measure of U.S. investment-grade bonds that includes Treasuries, government agency debt, mortgage-backed securities, and corporate bonds. Rising interest rates during the month pressured bond prices across the index, which is one factor commentators cited in connection with the F Fund's loss.
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If you hold the F Fund as a diversifier, September is a reminder that bond funds can decline in rising-rate environments.
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C Fund: September 2026 performance
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The C Fund slipped 0.35% in September 2026, essentially flat but still negative, with a year-to-date gain of 12.73% through September 30, according to TSP.gov.
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Its index is the S&P 500, which tracks large-cap U.S. companies. Even after the September dip, the C Fund remains one of the strongest 2026 performers for TSP participants.
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Large-cap stocks held up better than small-cap stocks during September. The 0.35% C Fund loss compared with the S Fund's 3.86% drop reflects that gap.
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S Fund: September 2026 performance
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The S Fund dropped 3.86% in September 2026, the worst monthly performance of any core fund. It is still up 11.62% year-to-date per TSP.gov.
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Its benchmark is the Dow Jones U.S. Completion Total Stock Market Index, which captures small- and mid-cap U.S. stocks not included in the S&P 500. September was the S Fund's third negative month of 2026, following declines in March (-4.58%) and July (-4.12%) per FedTools' September 2026 compilation of TSP.gov data.
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I Fund: September 2026 performance
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The I Fund fell 2.30% in September 2026 but remains the top-performing core TSP fund year-to-date at 16.45%, according to TSP.gov data.
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Its benchmark is the MSCI ACWI IMI ex USA ex China ex Hong Kong Index, which covers large-, mid-, and small-cap stocks in developed and emerging international markets. International stocks led the TSP for most of 2026. Market reporting attributed part of the strength to a weaker U.S. dollar earlier in the year and a rotation away from U.S. mega-cap technology names.
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L Fund Performance in September 2026
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Every TSP Lifecycle (L) Fund posted a negative return in September 2026, according to Government Executive's reporting of TSP.gov data.
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The L Funds are target-date-style portfolios that blend the five core funds. They automatically shift toward more conservative allocations as the target date approaches.
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Source: TSP.gov Lifecycle Fund returns, data dated September 30, 2026, as reported by Government Executive.
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The L Income Fund, designed for participants already drawing down their accounts, holds the highest allocation to the G Fund and F Fund. The longer-dated L Funds (L 2055 through L 2075) hold more equities. Their stronger year-to-date gains reflect that heavier equity exposure during a year in which the C, S, and I Funds all delivered positive returns.
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What Federal Employees Should Consider Now
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A single negative month doesn't by itself call for a change in your long-term allocation. Here is what often makes sense to review. Your situation differs from the next person's, and any allocation decision should reflect your own time horizon, risk tolerance, income needs, and tax situation.
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Review your allocation against your time horizon. A Federal Employees Retirement System (FERS) participant who is 20 years from retirement experiences September's drawdown differently than someone retiring in the next 12 months. FERS generally covers civilian federal employees first hired on or after January 1, 1984, though specific eligibility can depend on prior federal service, breaks in service, and other transition rules.
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Your TSP is the defined-contribution part of a federal retirement that also includes the FERS basic annuity and Social Security.
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Consider the value of continuing contributions. Monthly TSP contributions during a market decline purchase more shares at lower prices than they would at the prior highs. That's the mechanical effect of dollar-cost averaging, though it doesn't guarantee a profit or prevent losses if markets keep falling.
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Pausing contributions during a drawdown removes those purchases from your account. Whether that proves costly or beneficial depends on how markets perform afterward. For most long-horizon participants, maintaining a steady contribution schedule removes the need to time the market.
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Weigh the opportunity cost of moving to the G Fund after a decline. Moving money from stock funds to the G Fund after a decline shifts the reduced balance into a more stable investment option. If the stock market subsequently recovers, you may miss some of that rebound.
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The G Fund returned 3.41% year-to-date in 2026 compared with 16.45% for the I Fund and 12.73% for the C Fund per TSP.gov. Consider any change in light of your time horizon, withdrawal needs, and overall allocation.
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Rebalance if you are off-target. If September's decline pushed your actual allocation meaningfully away from your intended allocation, a rebalance back to target is a disciplined response. It differs from reactive repositioning based on recent performance.
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Coordinate with your FERS annuity and Social Security. Your TSP is one component of your federal retirement. Decisions about allocation, Roth versus traditional contributions, and eventual withdrawals are more useful when made in the context of your projected FERS annuity, Social Security benefit, and any Civil Service Retirement System (CSRS) component.
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CSRS generally covers employees first hired before January 1, 1984, with exceptions for later employees who had prior CSRS-covered service.
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2026 TSP Contribution Limits: A Reminder While Markets Are Volatile
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Market declines are often a useful prompt to review your contribution level. Each dollar you contribute during a drawdown purchases more fund shares than it would at the prior highs.
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According to IRS Notice 2025-67, the 2026 TSP contribution limits are:
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Source: IRS Notice 2025-67 and FRTIB bulletins.
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One important distinction on the annual additions limit: the $72,000 figure includes your elective deferrals, agency automatic (1%) contributions, and agency matching contributions. According to the IRS, eligible age-based catch-up contributions sit outside that $72,000 cap.
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If you are age 50 or older and eligible for the standard catch-up, your maximum combined annual addition may reach $80,000. Participants ages 60 to 63 who use the "super" catch-up may reach $83,250. Whether you actually hit those totals depends on your pay, your agency match, and your eligibility for the age-based catch-up.
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One significant 2026 change: under the SECURE 2.0 Act of 2022, participants age 50 or older whose prior-year FICA wages from their TSP-sponsoring employer exceeded $150,000 must make catch-up contributions as Roth (after-tax) rather than traditional (pre-tax). This threshold uses wages from the employer sponsoring the plan, generally your federal agency, not total household income or adjusted gross income (AGI).
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According to FRTIB guidance to TSP participants, the TSP generally handles the transition from traditional to Roth catch-up contributions automatically once a covered participant's traditional contributions reach the $24,500 elective deferral limit. You should still verify your payroll elections and your traditional-versus-Roth contribution mix with your agency payroll office to confirm your contributions are routing correctly.
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Working With a Federal Benefits Specialist
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Federal Pension Advisors, a retirement planning firm specializing in federal employee benefits, works with FERS and CSRS participants to align TSP allocation with time horizon, risk tolerance, and projected income needs. Schedule a retirement planning consultation to discuss your retirement strategy.
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Months like September 2026 are a useful prompt to revisit your plan rather than overhaul it. If you are within five years of retirement, that often means a closer look at sequence-of-returns risk, FERS supplement eligibility, FEHB (Federal Employees Health Benefits Program) continuation into retirement, and the interaction between TSP withdrawals and taxable income.
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If you are further from retirement, the conversation is more often about contribution strategy and keeping an age-appropriate equity exposure through market cycles.
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What September Means for Your TSP Strategy
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TSP funds fell in September 2026 against a backdrop of rising Treasury yields and broad equity weakness. Several equity-oriented funds remained substantially positive year-to-date, though, with the I Fund up 16.45% and the C Fund up 12.73% per TSP.gov.Explore your retirement savings with the TSP retirement calculator.
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A single negative month is a useful prompt to review your allocation and contribution level against your own time horizon and goals. It isn't a signal to make reactive changes.
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If you want to review your TSP strategy in the context of your full federal retirement, schedule a consultation with a federal retirement specialist at Federal Pension Advisors, a retirement planning firm specializing in federal employee benefits.
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Frequently Asked Questions
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What did TSP funds return in September 2026?
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In September 2026, the G Fund gained 0.40%, the C Fund fell 0.35%, the I Fund fell 2.30%, the F Fund fell 2.59%, and the S Fund fell 3.86%, according to TSP.gov data reported by Government Executive. The G Fund was the only core fund to post a positive monthly return. Every Lifecycle Fund also finished the month lower.
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Why did TSP funds fall in September 2026?
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Market commentators cited rising Treasury yields as one of the main factors associated with September 2026's declines. FedSmith reported that the 10-year Treasury yield reached its highest closing level since May 2002, with FedTools pegging that close at 5.29% on September 30. Rising yields can pressure stock valuations and reduce the price of existing bonds at the same time.
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Which TSP fund performed best in September 2026?
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The G Fund performed best in September 2026, with a 0.40% monthly return, according to TSP.gov. It was the only core TSP fund in positive territory for the month. On a year-to-date basis, the I Fund leads at +16.45%, followed by the C Fund at +12.73% and the S Fund at +11.62% through September 30.
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Should I move my TSP to the G Fund after September 2026?
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Whether to shift TSP allocations after a decline depends on your time horizon, risk tolerance, and need for near-term stability. Moving from stock funds to the G Fund shifts your reduced balance into a more stable option, but you may miss some of any subsequent recovery. Participants nearing retirement may have different considerations than those decades away.
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What are the 2026 TSP contribution limits?
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According to IRS Notice 2025-67, the 2026 TSP elective deferral limit is $24,500. If you are age 50 and older, you can add $8,000 in catch-up contributions for a $32,500 total. Those age 60 to 63 may use an $11,250 "super" catch-up for a $35,750 total. Participants with prior-year FICA wages above $150,000 from their federal employer must make catch-up contributions as Roth under SECURE 2.0.
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Did all L Funds lose money in September 2026?
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Yes. Every TSP Lifecycle (L) Fund posted a loss in September 2026, according to Government Executive's reporting of TSP.gov data. All L Funds remain positive year-to-date, ranging from +6.04% for the L Income Fund (the most conservative) to roughly +13.86% for the longest-dated L 2055 through L 2075 Funds through September 30.

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Disclaimer 

This article is for informational and educational purposes only and should not be considered financial, investment, tax, or retirement advice. TSP fund performance and market conditions can change. Investment decisions should be based on your individual financial situation, risk tolerance, and retirement goals. Consult a qualified financial professional for personalized guidance.