The stock market is up and the DOW stock market index has recovered from its low of 6629 in March of 2009 to over 15,000 recently. Interest rates and yields on CDs, treasuries, and savings have remained historically low. The government has artificially maintaining interest rates well below norm to stimulate the economy and to encourage savers to spend and dive into high yielding and higher risk investments like stocks and housing. Most of this nation’s Gross Domestic Product (GDP) is based on consumer spending since we lost much of manufacturing years ago. I discussed in Size Matters, Especially in Retirement how the government is taxing all of us, especially retirees on fixed incomes, by maintaining artificially low yields on safe and secure CDs, savings accounts, and treasuries.
The dilemma that we face now is do we continue to suffer with miniscule yields on our savings or dive back into higher risk investments such as stocks to take advantage of the upswing. Unfortunately the ship has already sailed; the market is up over 100% and a correction may be in sight. Nothing goes straight up forever and many experts anticipate a market correction while other suggest the market will continue on this trajectory at least until the end of the year.
Many jump back on the band wagon long after the gains have been made. Some panicked in 2007 and jumped totally out of the THRIFT stock funds into the G Fund and stayed there after losing a good portion of their savings. Too often we ride the wave of sentiment and that means we sell low and buy high and lose both ways. Federal employees in their early to mid careers have time to recover and are still contributing to their TSP accounts. Many financial planners suggest those in early to mid career stay invested in a diverse mix of stock and bond funds until you are close to retirement. The closer you are to retirement the more you have to play defense and PROTECT what you saved for a lifetime.
If you’re close to retirement or now retired ask yourself if you can afford to lose a significant portion of your TSP, IRA or other 401K funds if the market takes an unexpected and undesirable turn? Retirees have time against them to recover their losses. If you will need these funds to live on you may have to accept the lower returns and you will sleep well at night. If you can take some risk look for a market correction and jump back in with a conservative lower risk level you can live with. The Life Cycle L TSP funds do moderate the risk and as you approach the target date of the fund the mix becomes more conservative until the majority of your TSP is in the bond fund. In retirement many consider the L Income fund that still keeps a small portion of your account invested in stocks to help you keep up with inflation.
For other savings and investments retirees may wish to pursue a conservative approach such as I discuss in When CDs Come Due Earn Higher Yields. If you are unfamiliar with investing in general you may need to consult a professional for help. Managing retirement funds isn’t easy and it does take time and even with understanding there is always risk no matter what you are invested in.
Recent Forum Host Articles:
- The Sequester’s Many Faces – Furloughs, Pay Freeze, & Fewer Resources by Dennis Damp
- Maui is calling Me – Taking a Winter Break by Nancy Holston
- A Roth IRA’s many Benefits by Paul Risser
- TSP Annual Statements and Highlights by Dennis Damp
Request a FREE Retirement Benefits Summary & Analysis from a local adviser. A sample analysis is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.
Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at http://fedretire.net to read all forum articles.
Visit our other informative sites
- Federal Government Jobs & Career Center
- FREE Federal Employee’s Retirement Planning Guide
- Federal Employee’s Career Development & IDP Center
- Post Office Jobs & Career Center
- Job Search – All Sectors
- Environmental Health & Safety Jobs Center
- Nuclear Jobs & Careers – High Paying Jobs
- Stolen Car Plates & Recovery Guide
- Take Charge of Your Federal Career
- The Book of U.S. Government Jobs
Distribute these FREE tools to others that are planning their retirement
- 2013 Excel Leave Chart (target 2013 retirement dates and determine exact leave balances for each date)
- How to be Emotionally and Physically Prepared When You Retire
- How to be Financially Prepared When You Retire
- Master Retiree Contact List (Important contact numbers and information)
- Survivor’s Guide
- Estate Planning Guide (An 11 part series that will help readers prepare for retirement, understand basic estate planning techniques, and compile their personal “Survivor’s Guide” binder.)
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
Leave a Reply
You must be logged in to post a comment.