And the Biggest Loser Is...

Tuesday - 5/26/2009, 4:00am EDT

The stock market is down about 40 percent from its 2007 high point. But you probably knew that.

While it is perfectly human to personalize things, especially when we take a hit, the fact of the matter is that most of us with 401(k) plans have seen them shrink from the level of the good-old-days.

At the end of April, the average Thrift Savings Plan account balance for investors under the Federal Employees Retirement System (FERS) was $61,154. For employees under the older Civil Service Retirement System (CSRS) the average was $59,344. For members of the military the average TSP balance was $8,559.

Workers under the old CSRS program get a more generous civil service annuity than a comparable FERS employee. CSRS employees get full cost of living adjustments (as in 5.8 percent last January) when they retire. FERS employees get a diet-COLA, which begins at age 62. This year their COLA was worth 4.8 percent.

FERS employees get an automatic 1 percent contribution (from the government) to their TSP accounts, even if they contribute nothing. They are also eligible for a total match (including the automatic one percent) of up to 5 percent from the government. Because of the different retirement computation formulas, investing in the TSP is a must for those under FERS.

Experts who monitor the TSP say that older investors who had all their money in the C, S and I funds (which are indexed to the U.S., and international stock markets) saw their funds shrink 30 percent, or more. But those who had their money in the Lifecycle funds (which automatically rebalance on a daily basis) lost less. Those in the L-current income fund, which has the least amount of exposure to the stock market, "lost" about 10 percent.

Contributions to 401(k) plans are off, slightly, in both the government and the private sector. A recent Fidelity investment report (based on a survey of 17,500 corporate 401(k) plans) showed that 97 percent of all participants were still investing. In many cases they were investing slightly less, but still investing. The May 13 report said just over "51 percent of new contributions to 401(k) plans are going into equities, including domestic, international and company stock." Obviously many of those investors think the market is on sale, and they hope they are buying low.

The Biggest Losers

In general, people who have been investing in 401(k) plans (like the TSP) the longest have gained the most over the long term, but lost the most since the market decline. A report by the Employee Benefits Research Institute notes that the impact of the stock market "varies by age and job tenure" and that investors "on the verge of retirement (ages 56-65) had average changes during this period that varied between a positive 1 percent for short-tenure individuals (one to four years with the current employer) to more than a 25 percent loss for those with long tenure (with more than 20 years.)" Among other things, their contributions to their smaller balances sometimes erased the losses they had taken.

Fear & Greed

Many experts say those two emotions determine and drive the investment strategy of many people. And most of them say that's a bad thing. If that sounds like you, or somebody you know, you might be interested in a recent Fidelity column by James B. Stewart. To read it, click here.

From Bad Bosses to Long Term Care Insurance

Tomorrow's Your Turn with Mike Causey radio show (10 a.m. EDT right here on federalnewsradio.com) covers the waterfront. We'll start out talking to Andrew Case, an authority on office politics. He'll reveal the secrets of (legally) disposing of your boss.

After that, financial planner Ed Zurndorfer talks about LTC in general and then the premiums, benefits and changes coming in the federal LTC program.

If you've got questions or comments for either guest, email them to me at: mcausey@federalnewsradio.com

Nearly Useless Factoid
by Suzanne Kubota

A recent study of sleep and activity finds overweight people tended to sleep less and be more active than their skinnier counterparts, reports UPI.

To reach me: mcausey@federalnewsradio.com

Tags: P&B, TSP, 401K