Bulletproof in America?  Not quite.

The first quarter of 2011 was amazing.  Not from the standpoint of the US equity markets having their best quarter in a decade, but from the standpoint of the markets moving higher while so many things have gone haywire.  The Arab Spring has brought us oil prices near $120 per barrel, adding to our already climbing food and energy costs.  Greek and Irish 10-year bonds are yielding more than 10% as investors fear that these countries will become deadbeats and not pay on their debts.  Japan suffered a catastrophe, which has been followed by a nuclear nightmare.  In the US, our Federal Reserve is nearing the end of its money-printing binge, which may or may not lead to financial instability.  In the face of all this, our equity markets shrugged and marched higher.  Amazing.  Is it warranted?  We'll soon find out.

There were some positive signs in our economy, no doubt.  We are not shedding jobs as we were in 2008 and 2009.  According to the Bureau of Labor Statistics we are currently adding around 200,000 jobs per month.  This is nice, but since our workforce is growing by roughly 100,000 per month, the extra 100,000 jobs created won't go far to alleviate the unemployment problem.  Profits are strong, but that is for corporations.  As people, our income actually fell a small amount in the last several months. 

The real test of how this year, and even this recovery from the Great Recession, will unfold is coming in the month of June.  It is then, June 30^th to be exact, that the recent round of money printing by the Federal Reserve is set to end.  When the Fed prints money, it ends up in banks as deposits, which overloads our economy with "cheap" dollars.  This is supposed to make lending easy, and therefore spur on economic activity, particularly in areas that involve debt, like housing and durable goods.  For the past two years the Fed has been cranking the printing presses, and will have created over $2.3 trillion out of thin air by the end of June.  What do we have to show for it?  A lightening run in stocks, a tepid recovery in our economic growth, a very mild recovery in employment with falling wages, and a housing market that has yet to bottom.  If this is what trillions of newly printed dollars will purchase, it will be interesting to see what happens when the printing presses stop.

So while it might have seemed like our equity markets could do no wrong, even in the face of tremendous headwinds and difficult events overseas, it is possible that much of that strength has come through the efforts of the Fed.  In the months ahead we will find out just how sustainable this recovery really is.  Keep a close watch on your investments, it could get very dangerous for your financial health!

April is financial literacy month and everyone from Google to the Federal Trade Commission is running promotions to remind you of the importance of saving for retirement.  For many federal employees, the Thrift Savings Plan represents a significant portion of their retirement savings and deserves a little extra consideration - at least for a month.

What are some of the things you can do to ensure your TSP will help you reach your retirement goals?  Here are a few to consider this month:

Know your risk tolerance - Planning for retirement would be so much easier if we could eliminate the risks that are trying to derail our plans.  Unfortunately, we cannot entirely eliminate risk; however, we can understand what the major risks are that could undermine the value of your TSP. 

Measuring risk is a difficult task.  It is not like we can take a blood pressure cuff and determine your tolerance for risk.  It's much more subjective than that. How much longer will you work? What do you plan to do in retirement?  What are realistic expectations for TSP fund returns and how much risk do you need (or are you willing) to take to get those returns?

These questions aren't easily resolved in a short newsletter, but you can check out a recent article that appeared in Federal Daily's "Mindshare" column titled "Risky Business" to help you get started thinking about the risks you face in the TSP. Click Here to access the column.

Think about fees - There are four key worries (another name for risk) that you face with any investment.  How will it perform? What are the tax consequences?  Will the return keep up with inflation? And, how are your returns eroded by fees?

One great argument for utilizing the Thrift Savings Plan is that the fees are extremely low. For 2010, the overall fees of .025%  (or 25 cents(!) for every $1,000 you have invested) went down from .029% in 2009. 

Use Magic - If you are in FERS, remember the importance of contributing at least 5% to TSP in order to get a 5% match.  If you want a 100% return on your investment this year, put in 5% and with the 5% matching funds - you just doubled your contribution.  Keep in mind this only works on the first 5%, but free money is free money.

This is not to say you shouldn't contribute more if you can.  Depending on when you began your TSP contributions, a rule of thumb is to save at least 10% for retirement.  No, the 5% you're contributing plus the 5% match does not constitute saving 10%.  Yes, you have to save 10% plus take advantage of the 5% match.  If you are closer to retirement and have saved less than 10% throughout your career, you may have to save more in the final years to reach your goals.

Use Financial Literacy Month as a reminder to re-evaluate your TSP strategies and make sure you're on track for a successful retirement.