Investments Important Even In Hard Times
By MidWeek Staff
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Del.icio.us52nd Fighter Wing Public Affairs
SPANGDAHLEM AIR BASE, Germany (AFNS) - The Thrift Savings Plan is a government-managed, 401k-type payroll-deduction program designed to provide tax-deferred retirement plan for servicemembers and federal civilian employees.
Members can contribute any whole percentage of basic pay, as long as the annual total doesn’t exceed $16,500 for the year. If they contribute from basic pay, Airmen can also invest all or part of their bonuses, special pay or incentive pay. Those serving in tax-free combat zones are allowed up to $49,000 in annual contributions for the year. The $49,000 total includes tax-exempt combat zone contributions and regular deferred contributions.
“One of the benefits of the TSP is the management fees,” said Jason Gunnar-son, Airman & Family Readiness Center community readiness consultant. “The federal government has made those fees almost zero, at .02 percent.”
Servicemembers have five TSP fund programs to choose from.
These include:
* The Government Security Investment, or G Fund. Considered the safest of the five TSP funds, it consists of treasury bonds and federal-backed investments. The other funds offer riskier investment strategies, but potentially higher yields.
* The Common Stock Index Investment, or C Fund. The C Fund offers the opportunity to earn a potentially high investment return over the long term from a broadly diversified portfolio of stocks of large and medium-sized U.S. companies. The objective of the C Fund is to match the performance of the Standard and Poor’s 500 Index, a broad market index made up of stocks of 500 large to medium-sized U.S. companies. There is a risk of loss if the S&P 500 Index declines in response to changes in overall economic conditions. Earnings consist of gains (or losses) in the prices of stocks and dividend income.
* The Fixed Income Index Investment, or F Fund. The F Fund offers the opportunity to earn rates of return that exceed those of money market funds over the long term, with relatively low risk. The objective of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Index, a broad index representing the U.S. bond market. The risk of nonpayment of interest or principal is relatively low because the fund includes only investment-grade securities and is broadly diversified. However, the F Fund has market risk and prepayment risk. Earnings consist of interest income on the securities and gains in the value of securities.
* The Small Capitalization Stock Index Investment, or S Fund. The S Fund offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of small and medium-sized U.S. companies. The objective of the S Fund is to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index. There is a risk of loss if the Dow Jones U.S. Completion TSM Index declines in response to changes in overall economic conditions. Earnings consist of gains (or losses) in the prices of stocks and dividend income.
* The International Stock Index Investment, or I Fund. The I Fund offers the opportunity to earn a potentially high investment return over the long term by investing in the stocks of companies in developed countries outside the United States. The objective of the I Fund is to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. There is a risk of loss if the EAFE Index declines in response to changes in overall economic conditions or in response to increases in the value of the U.S. dollar. Earnings consist of gains (or losses) in the prices of stocks, currency changes relative to the U.S. dollar and dividend income.
* The Lifestyle Fund option, or L Fund. The L Fund takes all the diversification work out of the contributor’s hands. It distributes money among the five funds and adjusts the distribution over time. The L Fund automatically places money in the risky, but potentially higher-yield funds, early on and moves them to more secure, conservative investment options as the participant nears retirement.
Finance professionals advise that, even with the current weak economy, servicemembers shouldn’t shy away from contributing.
“It’s all about opportunity, the opportunity is right now. Now is the time to act because you are buying more shares because the prices are so low,” Gunnarson said.
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