A Response from My TRS Letter and Research on the Markets

I last posted to this blog on Sunday, October 19, and since that time I have been busy researching various items on the stock market, responding to e-mails from educators, and when possible... actually working.

A Response from My TRS Letter

On Monday, October 27, I received the following e-mail from State Senator Bill Heath, Chairman of the Senate Committee on Retirement:

Thank you for your correspondence concerning the proposal dealing with COLAs before the Board of Trustees of the Teachers Retirement System of Georgia (TRS). Time does not permit me to write an individualized response to each of you. I do understand this is an important issue to you. I hope this will help you understand what is taking place. This matter is not before the General Assembly and therefore I do not have a vote in this matter.

The Board of Trustees consists of ten trustees whose responsibilities include administration of the fund and to manage the fund so as to ensure the continued fiscal soundness for the current retirees as well as for the current and future members. To date the fund has been well managed and I commend the board for their actions. They have an increasingly challenging job as the make up of the members, their expectations and financial universe evolve. I trust the Board to continue to make wise decisions as they fulfill their responsibilities.

The Board consists of the ten trustees. The law requires a majority (six) to be active or retired members of TRS. One trustee is selected by the other nine and shall be a citizen of Georgia who is not a member of TRS but with experience in the investment of moneys. The other three trustees include the State Auditor, the director of the Office of Treasury and Fiscal Services and one trustee appointed by the Governor without restrictions.

At the September 24, 2008 meeting of the Board of Trustees, a proposal was made to consider changing the administrative rule that deals with the method by which the Board grants and funds the semi-annual cost-of-living adjustments (COLAs). The current policy, which was adopted in 1969, states that the Board will grant a 1.5% COLA on July 1st and January 1st provided there is an increase in the Consumer Price Index. The proposed amendment states that the Board will determine at its annual meeting each year the amount of COLA up to a maximum of 1.5% that may be granted for the following July 1st and January 1st.

It is possible that the Board will take up this proposal at its November 19, 2008 meeting if the Trustees feel they have had the necessary time to evaluate the proposal. If you would like to voice your concerns or ideas to the Board of Trustees before this is taken up you may do so by sending an email to Executive.Director@TRSGA.com.

I thank you for you interest in this matter. As Chairman of the Senate Committee on Retirement, I spend a great deal of time and energy working to ensure that the pensions of our employees are safe. It is the intent of the legislature to provide an environment that will allow the experts in finance and pension management to maximize the benefits available to those who have served our citizens so faithfully.

Well, at least I have received one response. Nothing much said, but it is a response.

Research on the Markets

I find it interesting that in the "dire" predicament the stock market is in that few people actually do any research on past markets, trends, and outcomes. This market is quite a bit different than many previous problems we have had before due to the issues of credit and globalization.

I read an article about Anna Schwartz who co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression. She is obviously a brilliant woman that has looked throughout history, but many believe that she may be missing the globalization of the market.

She says the issue is confidence and not liquidity (The Great Depression was caused by liquidity). This is true, but she does not feel the U.S. Treasury and Federal Reserve are handling the confidence issue. I think history will eventually show that the Treasury and Federal Reserve are working to resolve every single issue both before and after something becomes an issue.

When liquidity was a problem... they injected it. When money market confidence was an issue... they guaranteed it. When we needed worldwide coordination... they orchestrated it.

I think looking 2, 3, 5, 10 years out, we will look back and be amazed from where we have been. The markets are powerful machines that are like a cruise ship to turn... they do not turn on a dime.

Finally, anyone that started to believe the U.S. was now not the center of the financial universe simply needs to see where everyone looked and returned to for guarantees and leadership. We may not all agree on politics or policies, but it cannot be said that the U.S. Treasury and Federal Reserve have not stepped in to help Americans and foreign companies and nations alike.

The trip ahead will be bumpy, but the end should be good for those along for the ride. Just remember - your TRS pension is guaranteed by law, and your 403(b) account is not used on any single day. It is a retirement fund.

As always, let me know if you have any questions.

Is It Time to Buy?

Frequently investors wonder if now is the time to buy. Most investors want to make sure that they buy when the market is going up. Interestingly though, most great investors think about 2, 5, and 10 years down the line.

In Friday's The New York Times, Warren Buffett, arguably one of the greatest investors in the history of the stock market, wrote an Op-Ed piece titled "Buy American. I Am." Below is the article for you to enjoy.

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

Source: The New York Times

What Now? 403(b) and Pension Comments

Last week I received numerous e-mails about 403(b) accounts and pensions. "How safe is my 403(b)?"; "Will it just go away?"; "If I take it all out what happens?"; "Is the TRS pension guaranteed?"

403(b) Safety

A 403(b) is much like any other type of retirement account - 401(k), IRA, Roth, SEP-IRA - when it comes to investing. Within most 403(b) accounts you have a fixed annuity option, a cash/money market option, and then various mutual funds that you can own.

• Fixed Annuity - This option allows you to put your money in a "fixed annuity" that generates a return somewhat along the lines of a CD. The exception here is that most fixed annuity investments only let you take 10-25% out of the investment at a time. This is usually not a good investment due to the constraints of taking the funds from the account - even when you are trying to get them out in retirement. While this does not lose money, it also generally only keeps up just above the rate of inflation.
• Cash/Money Market - This option allows you to park uninvested cash in a place that earns a rate of return that is along normal money market rates. It will not have the return that the Fixed Annuity has, but you can withdraw, reinvest, or hold it without fearing that you cannot touch it (unlike a Fixed Annuity). This is a good place to hold cash for future investments or distributions.
• Mutual Funds - This option is the one where you will buy shares of a "mutual fund" that owns usually 25-100 stocks. A mutual fund can make or lose money. It is an investment that can go up or down based on the underlying investments in the companies of the fund. Depending on the fund, you may invest in bonds, big, small, or even international companies. Some of the funds will correlate more with the Dow, S&P 500, or Nasdaq, etc. The custodian (AIG-VALIC, Fidelity, Lincoln National, etc.) is not to blame or get credit for the performance of the funds. The funds are run by fund managers that use your money to invest in companies.
  
  
  • For example - if you own the "Janus High Yield Fund," the fund is run by a manager from the Janus fund company that will use your money to invest in high yield bonds from various companies.

What I would like to stress here is that your 403(b) investments should depend on your age, risk tolerance, and goals. In coordination with your TRS pension, your 403(b) is a powerful tool when used correctly, and it can help you realize some of your dreams after you retire from education. There is a huge difference though between making sure you do not want to lose any money and making wise investments. Know your risk tolerance and expectations.

Also, rolling over your 403(b) to an IRA is fine (if you can), but taking all of your money from the 403(b) as a distribution creates a taxable event that can have huge tax implications. Do not take a distribution without first talking to an accountant or financial advisor. It could cost you 35-45% in taxes!

TRS Pension

There are many things to consider when you start thinking about your TRS pension benefits, but one of them is not if the fund will be there. As of June 2007, the pension fund was worth $53.3 billion, and it paid out about $2.2 billion with about $1.7 billion in contributions. Thus, only about $0.5 billion was taken from the fund in FY 2007.

The fund, as of June 2007, was "balanced" with about 62% in equities and 38% in cash and bonds. TRS has not yet released the June 2008 figures, but even with the declines in the stock market, the fund is viable and continues to be reevaluated every year by auditors and actuaries. In June 2009, the employee and employer rates of contribution will rise slightly due to past stock market performance. This increase is to insure the benefits that have been guaranteed to educators.

One important thing to remember is that the TRS benefit is guaranteed by Georgia law. It is not just a guideline but a law.

One additional item on your pension benefits - TRS is proposing a change to the Cost of Living Adjustment (COLA). It is absolutely imperative for all educators - current and retired - to write a letter to TRS asking them to NOT change the wording as the proposal requests. The wording that would change could and most likely would ultimately change your pension benefit. GAE and PAGE are both against this action, and I cannot imagine an educator that is for the change. My post, TRS Board of Trustees to Vote on Cost of Living Adjustment (COLA) Change, on the proposed change includes a my comments and a copy of the letter that I sent to Jeffrey Ezell, Executive Director of TRS, last week.

I hope your school year is going well, and please e-mail me if you have any questions.

Are We Hitting the Bottom?

There have been several questions e-mailed to me over the past couple of weeks, and one that continues to be asked is "Are we hitting the 'bottom'"? There is one thing that I have learned from reading history books, economic books and articles, and listening to people... the bottom is never "the bottom" until a few months later.

In October 2002, the market hit "the bottom", but no one knew it until 3-6 months later. The reason is pretty simple to understand but hard to see.

We have all heard the expression "he can't see the forest for the trees", and this is the perfect time for it. It is relevant here because all of us see only what is in front of us. We cannot tell if the market's last drop will be the last one or if we should head for the door.

History

If we look to history, it will tell us some about "bear" markets:

• March 2000 to October 2002 (somewhat long) - Decline of 49%
• August 1987 to December 1987 - Decline of 34%
• January 1973 to October 1974 - Decline of 48%
• November 1968 to May 1970 - Decline of 36%

Our current bear market from October 2007 to present leaves us down about 42% from the high. Thus while we may not be at the ultimate bottom, we are somewhere near it.

Future

The next few months could be choppy in the markets, or there could be the "V" bottom that sometimes happens. The main thing to do is keep your emotions in check and have your allocations at what you feel comfortable with. If you sold some assets (hopefully not all) to cash because you are worried, look to keep it, and slowly put it back in. Going all in may be brilliant or it may not, so the diversification and long term aspect is something to remember when markets start to act crazy in the future.

Let me know if you have any questions.

TRS Board of Trustees to Vote on Cost of Living Adjustment (COLA) Change

UPDATE - October 14 - TRS has placed a memo on their website regarding the proposed change. Please read the memo.

On September 24, 2008, the Teachers Retirement System of Georgia (TRS) Board of Trustees held a scheduled meeting with members of various educator advocacy groups (GAE and PAGE) present. During the meeting, the Chief Financial Office in the Governor's Office, Tommy Hills, proposed a change in TRS board policy regarding the semiannual Cost Of Living Adjustment (COLA) for both current and future retirees.

The current policy has been in place since 1969, and it states that TRS “shall give” its members a 1.5% COLA in January and July of every year. The Governor's office wants to change that policy to “may give” a 1.5% COLA in January and July. Under the new plan, the Board of Trustees for TRS would vote each May on changing the COLA and possibly how much the COLA should change. From what Mr. Hills said, this would bring the TRS in line with other Georgia retirement boards.

After a discussion, a vote was taken by the seven members who were present. Three members supported the measure and three opposed it. Acting chairman Russell Hinton broke the tie by voting in favor. The proposed change must be “on the table” for 30 days before any action can be taken. The TRS does not meet in October and the next meeting will be November 19th when they will vote on the proposed change.

Based on this information, I personally wrote a letter to Mr. Jeffrey Ezell (Executive Director of TRS) asking him to have the Board of Trustees not change the current wording of the policy. Please see my letter below - click on it to enlarge it.

I would like to ask each of you to please do the same and write TRS to let them know that you are not in favor of any change to the policy. Hopefully together with GAE and PAGE, we can all make a difference so Georgia does not alter the semiannual COLA.

To e-mail all of the important individuals (Jeffrey Ezell - Executive Director of TRS, Governor Perdue, Lt. Governor Cagle, Speaker Richardson, Tommy Mills - CFO, Senator Heath, and Representative Maxwell) with just one click - please click here.

Direct Links to additional information on the proposed change:

• From GAE - Georgia Association of Educators - You must be a member.
• From PAGE - Professional Association of Georgia Educators

Sources: GAE, PAGE

Georgia TRS Contribution Rates to Rise in July 2009

In September, the Georgia TRS announced that the employee and employer contribution rates would rise starting July 1, 2009. The new rates will be:

• Employee - 5.25% from the old rate of 5.00%
• Employer - 9.74% from the old rate of 9.28%

While this may be news, the actual contribution change will be very, very small.

For example, under the current rates (5.00% and 9.28%), an educator making $50,000 a year would make contributions of $2,500 (annually), and the employer would contribute $4,640.

Under the new rates (5.25% and 9.74%), an educator making $50,000 a year would make contributions of $2,625 (annually) - only $125 more. This would have a net effect on your paycheck of about $7.30 per MONTH. The employer will have contributions of $4,870 - $230 more.

The reason for the change goes back to the performance of the stock market since 2001. TRS has an actuary determine the liabilities versus assets of the plan and calculate the difference that must be made up. The raise in contributions will help bring the plan back in line.

If you wish to know more, please read the letter from the TRS Executive Director Jeffrey L. Ezell by clicking here.

Next on the agenda... writing letters about the proposed TRS Cost of Living Adjustment (COLA) change...

403(b) Safety - Helping You Sleep at Night

I have been e-mailed several questions over the last few days, and one of the main points that everyone wants to know is "Is my 403(b) safe?"

While I have written about the safety of the 403(b) from a bankruptcy point of view (specifically AIG VALIC), I have not written anything specific about the actual account and its investments. What I have tried to preach in this blog is simply diversification.

This market is actually somewhat the exception and not the rule. During any "bear" market, there are usually areas in the market that are down, and there are some that are up. Diversification usually allows you to make sure to grab some of all of the areas to help you in an up and down market. The 3rd quarter was different because every area of the market was down... even bonds.

The main thing here is that diversification is your friend because most of you do not watch the market every single day, but as the saying goes, you need to be able to sleep at night. For example, a few years ago, I had a couple of clients call me that had several million dollars invested, but for them, safety was the $100,000 in cash in the money market that I held. This "let them sleep at night."

A 403(b) account is just like any other account that invests in the stock market. You CAN lose money, but the issue is not to make your account 100% safe, but to invest it for the long term. At the same time, if you need to feel better and have some in cash "to sleep at night," then by all means, go ahead. The market and economy do look rough in here, and a 20% cash position or so in the money market seems to be a decent place to hide. I would not use the fixed annuity since it locks up your money. Everyone is different though, so you need to do some research, and understand your options rather than just trying to jump on something hot.

If you go to cash in the entire account and wait for the market to get better, then you may miss a golden opportunity.

I will close this post with several quotes from the "Oracle of Omaha" Warren Buffett. Remember, he just bought stakes in Goldman Sachs and GE. He is not looking for today or tomorrow, but for years from now... He has billions though, so you want some safety (cash in the account) and do not go overboard.

"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

"You only have to do a very few things right in your life so long as you don't do too many things wrong."

Good luck, and keep e-mailing me with questions.

VALIC to be Sold - AIG Press Release

On Friday, AIG Retirement seems to have released a press release from its President and CEO Bruce R. Abrams explaining that VALIC would be one of the properties sold by parent company AIG. This news does seem to fit in with the previous press release e-mailed to me directly by AIG and posted on the website on Friday.

This does not mean that anything will change with VALIC or the investment options you have in your 403(b) accounts, but it is worth noting that a change does seem in the cards. As I have previously stated, the change should most likely be nothing more than a "branding" change with AIG Retirement's name changing to that of the purchasing company. This is similar to a bank being purchased by another bank, and it is no reason to be alarmed.

You can find the press release that was e-mailed to me by a visitor to the website by clicking here.

As information becomes available, I will post more information about changes.

Out of the Blue - AIG Press Release?

Whenever I write anything on this blog, I do try to research it as thoroughly as possible. I do searches, watch interviews, etc. I have never had a company or someone just e-mail me something... until this morning from AIG.

The following is the press release sent to blogs like this one from AIG.

We apologize for sending this to you as a mass e-mail distribution, but we thought you would want to receive this as soon as it came out, since you and your readers have been following this story closely.

AIG TO REFOCUS AS WORLDWIDE PROPERTY AND CASUALTY COMPANY WITH CONTINUING PRESENCE IN FOREIGN LIFE

Ongoing Business Expected To Have Significant Earnings Power
NEW YORK, October 3, 2008 - American International Group, Inc. (AIG) today indicated its intent to refocus the company on its core property and casualty insurance businesses, generate sufficient liquidity to repay the outstanding balance of its loan from the Federal Reserve Bank of New York and address its capital structure. AIG had drawn $61 billion on the Fed credit facility as of September 30, 2008.

AIG plans to retain its U.S. property and casualty and foreign general insurance businesses, and to retain a continuing ownership interest in its foreign life insurance operations. AIG's worldwide property and casualty businesses generated $40 billion in revenues in 2007. The company is exploring divestiture opportunities for its remaining high-quality businesses and assets.

AIG is also actively at work on a number of alternatives for its Financial Products business (includes VALIC) and its securities lending program.

AIG Chairman and Chief Executive Officer Edward M. Liddy, said, "We are refocusing on our traditional strengths in property and casualty underwriting. We have a number of remarkable businesses with leading market positions and significant competitive advantages that could not be recreated today."

"To realize our objective we will sell a number of extraordinary businesses that are already proving to be highly attractive to buyers," Liddy said. "We have already been contacted by numerous strong, stable parties, and we expect the buyers will recognize the value of these properties, be a good strategic fit and offer the greatest potential for growth, profitability, and continuing opportunities for employees. Our goal is to emerge from this process as a smaller but more nimble company that is solidly profitable and has good long-term growth prospects."

AIG's global coordinators for the divesture program are The Blackstone Group and J.P. Morgan.

We hope this information is useful.

All the best,

AIG Blog Relations

What Does This Mean for AIG-VALIC Retirement Accounts?

Well, at the moment nothing. It does seem to point to the fact that AIG may be selling its VALIC unit, but to who we do not know. I would agree with the statement that AIG does in fact have several very profitable lines of business. In fact, it was only due to the mortgage related securities that AIG was even effected at all.

AIG is working with two of the most respected names in industry to work out its issues with JP Morgan and The Blackstone Group. I would imagine that there have been and will continue to be numerous discussions about what business units may be divested (sold).

I will continue to look for information on AIG and especially VALIC, and as I receive it, I will post it and comment as necessary.

Today's big story... get the financial bill passed in the House.

How to Look at Your Entire Portfolio - Pension, 403(b), Real Estate, etc.

Whenever a new client comes to my office, I always ask them to bring any relevant account statements, tax returns, etc. We discuss each one and make a list of assets and debits. From there, we can start to really get a picture of the financial portfolio of the client.

I think that sometimes it is hard for many people, including educators, to understand that their pension has a current value beyond just the monthly payout in retirement. This is something that I am frequently asked about by educators, so I hope this post helps explain it.

Let me give you an example. Let's say that you are set to retire after 30 years, and the last two years you made $65,000 each year. In Georgia, your pension payout would be $3,250 ($39,000 annual) a month with a 1.5% cost of living adjustment every 6 months. Since this is essentially an annuity, let's estimate that you will live for 40 years. Factoring in 480 payments, the $3,250 to start,the 1.5% increase every six months, and the TRS return of 4.5%, you would need to purchase an annuity for $1,159,396 today. Yes, that is more than $1 million.

Now that we have the value of the annuity, let's look at the other assets - a little 403(b) of $175,000 plus a paid for house of $250,000. Without knowing it, you have a net worth of $1,584,396. See the chart below (click it to enlarge).

Now that we have valued your pension and totaled your assets, you can start to see why your 403(b) being invested is a smart move. The pension portion is considered "fixed income," thus it is very stable and predictable. The real estate portion (your house) does not generate income, but it is also a substantial asset that has a significant value.

Your 403(b) - which you should rollover to an IRA - is actually your least valuable asset, and it is one which it should be used to complement your pension. By leaving it invested in equities and slowly drawing it down, you allow the 403(b) to weather any moves in the market and to continue to gain in value for our future use.

You can read in many books about moving your assets to fixed income as you approach retirement, but this is generally meant for 401(k) participants. Since the vast majority of your assets (your pension) is already considered fixed income, you are looking at only 11% of your assets being invested in equities. This is well within a range of acceptability.

Keep investing, keep asking questions, and keep wanting to learn more about your financial future.

Is My 403(b) Safe? - Part 2

Since my previous "Is My 403(b) Safe?" post, there have been hundreds and hundreds of visits to the website and numerous e-mails asking questions - I hope I have helped. This is obviously an important topic, so I decided to add a second section to the blog.

It was not even two weeks ago that I wrote the previous blog discussing 403(b) accounts held at AIG VALIC. In that time, the financial world has continued to change, and on Monday, the Dow had its largest one day point drop in history with 777 points. What I want you to remember now is that this account is for your retirement and the rest of your life, not today.

There are several dozen vendors that have 403(b) accounts, and I have not heard of one going out of business. As for the case of AIG-VALIC, the company could change soon. I am not sure it will, but the VALIC accounts may be a one of those assets that is purchased by another company as AIG is sliced up and sold off. This does not mean that you are losing your account!! It just means that someone else will be the company you do business with. This is just like your bank being bought by another bank - i.e. Wachovia purchased by Citigroup. Your money and accounts do not disappear, but the name will change.

If you have left teaching or the county you started the 403(b) in, by all means please rollover that 403(b) to an IRA. In an IRA, the asset choices are better, the fees lower (annuities charge about 1.35% per year with NO additional services), and the services you can receive for your account make it all worthwhile. If you have not, look at the various options you have.

Going Forward

This is not the time to stop contributing to the account, but it is a good time to look at your investments (tomorrow I will discuss how to value your TRS and 403(b) together). Remember your pension from TRS is guaranteed and should be considered a fixed income security when looking at your overall portfolio. If you are young with 10+ years to retirement, the diversification, time, and your continued contributions will be enough to help you weather any momentary blip. If you are less than 10 years from retirement, then this is something you should really talk to someone about - your goals, feelings, level of risk, etc. I would not transfer money into the fixed annuity side - this just locks it up for the next 4+ years - this is not a good investment. The money market is better than that since you can move it back to the equity investments at any time.

The main thing here is that your account is safe as to the possibility of losing all of your assets based on a company going under. You are invested in mutual funds that are regulated by the SEC that own dozens of companies within each. This does not mean that you cannot lose money, but just as the market goes up sometimes it will go down. The long term benefits though have been tremendous.

A quick glance back at history shows that as we have reached the current "modern era" of investing, the recessions and bear markets have become shorter with bull markets that have become longer. No one knows when the bottom will be, but if you sell out now, you are locking in losses with no potential for gain. The only people that lost money on October 19, 1987 were the people that sold out. The market rebounded over the next 6 months, and the economy and markets had a tremendous bull market rising 650% over the next 21 years.

I cannot say that we will have the same return, but if you look at your pension as the foundation of your retirement and the 403(b) as the "extra" money, you can benefit from being invested. Just stay diversified (have I preached it enough?), get advice (from a professional - not your neighbor), be smart about your money (rollover old 403(b) and 401(k) accounts to an IRA), and you will be much better for it.

If you have any questions or just want to chat, always feel free to e-mail me.