|
|
Economics 101
Punxsutawney
Phil, the Pennsylvania groundhog, saw his shadow on February 2 when he
emerged from his burrow. This means that we have six more weeks
of winter in front of us-an unfortunate fact, unless you happen to be
in the business of selling heating oil.
This provides a
useful allegory to the present state of the economy. There are
several "groundhogs" out there who will determine over the next several
months whether our economic winter will be bitterly cold or
comparatively mild.
The first is the
American consumer. As you are no doubt aware, consumers snapped
their wallets shut in late 2008 and kept them closed tight until the
end of 2009. But even now, wallets are cracked open just enough
to let the occasional dollar slip out; consumers have certainly not
returned to their pre-bust free-spending ways.
One of the
reasons-and this brings us to the second groundhog-is that unemployment
remains at generational highs. The official unemployment rate
quoted by the U.S. Bureau of Labor Statistics is 10%. But this
doesn't tell the whole story. The Bureau has an alternative
measure, U-6, that includes "total unemployed, plus all marginally
attached workers, plus total employed part time for economic
reasons." By this measure, unemployment is over 17%.
If you include workers that are underemployed-i.e., working in
full-time jobs below their skill level for lack of better
alternatives-the number would no doubt be higher, though this is hard
to quantify.
With more than 1
in 6 workers classified as unemployed or underemployed even by
government estimates (which many private economists consider far too
rosy), it's difficult to see consumer spending mounting a sustained
recovery.
The President
knows this, which is why he has made job creation a toppriority.
But will Mr. Obama's efforts be successful? Again, we
unfortunately have to say no. The President has proposed a $5,000
tax credit per new worker hired. But does it make sense to hire a
$50,000 employee in order to get a $5,000 credit? Unless your business
already has enough demand to justify a new hire, Mr. Obama's plan is a
money-losing proposition.
Meanwhile, the
economy needs to create more than 125,000 jobs per month just to make
room for the Echo Boomers currently leaving high school and college and
joining the workforce. Bottom line: the unemployment rate could
remain elevated for quite some time.
There is one final
groundhog we'd like to mention: the American homeowner. Deutsche
Bank estimates that 48% of Americans with mortgages will be
"underwater" by 2011, meaning that their mortgage is larger than the
value of the house. This raises the specter of a large, new wave
of "strategic defaults" in which homeowners who can afford to continue
paying their mortgages simply choose not to. Even if this wave
does not happen-and it probably will-the fear that it could happen is
significant enough to make banks worry. This is another factor
that will likely lead banks to continue their tight lending
policies.
So, with consumers who don't
have the means or the desire to spend, workers who are unemployed or
underemployed in high numbers, and a financial system that is still
highly at risk due to the housing bust, it looks like economic winter
is likely to continue. Punxsutawney Phil may just prove to be a
good indicator.
|
Steps to Retirement Planning
The thrill of victory - the agony of defeat. This tagline
from ABC's "Wide World of Sports," might be just as appropriate when
discussing investing for retirement. This issue will review growth and
savings, exciting investments (and some boring ones, too), and the risk
of getting skewed advice.
Your portfolio's growth is driven, more than anything, by how much
you save. The next key contributor is how you divide your money
between stocks and conservative investments (G, F, C, S and I Funds
within the TSP). Your savings rate depends on your ability to delay
gratification. Your stock allocation depends on your risk tolerance.
Before throwing darts at the TSP allocation dartboard, you may want to
review simulations of how various scenarios perform over time.
Looking for excitement? What you should consider is that if an
investment is exciting, it probably won't be especially profitable.
Let's face it. We all would love to buy the next hot growth company or
take a chance on an initial public offering that hits it big. The
reality? For the common investor, your odds are better in Vegas than of
cherry picking the next Microsoft. Think about how many paychecks it
might take to recoup your losses.
And finally, the agony of defeat. For most of us, huge losses are
our biggest fear of having our money in the "market." But you also need
to consider that those losses can be exacerbated by large fees and
expenses inside your investment choices. There may be a good reason to
pay higher fees inside an investment if it is a good match for your
risk tolerance, or it helps soften the blow from losses. Just make sure
you know what you're giving up for the privilege of being in the
investment. One of the great benefits of the TSP is the low costs which
were just .028% for 2009.
|
Federal Employee Financial LiteracyTraining for Federal Bureau of Investigation Employees
Tuesday, April 27, 2010
8:00-11:30 a.m. CSRS
12:30-4:00 p.m. FERS | |
|
Alphabet Soup
Making a Redeposit to Your Retirement System
A redeposit is required if you ever left federal
service, took a refund of your contributions to the retirement system
and later returned to the federal workforce. How your previous
time is credited for the computation of your annuity depends on when
the service occurred and whether you pay the amount that was refunded
to you - plus interest - back.
CSRS - If the service in question
(what you took the refund for) is prior to March 3, 1991, and you do
not make a redeposit of the contributions plus interest, you get to
count the time for eligibility for your annuity and the time is used in
the computation of your annuity, but the amount is then actuarially
reduced by the amount owed at the time of retirement. If the
service is after March 3, 1991 and you do not make a redeposit, you
still get credit for the time for eligibility, but none of the time
counts toward the computation of your annuity.
Obviously, if you make the redeposit, the time counts
for both eligibility and the computation of your annuity as if you'd
never taken the refund.
We'll look at how FERS go about making redeposits in next month's column.
|
|
Unthinkable
WE ARE SAVING MORE - The national personal savings rate in the USA
was 4.6% as of 12/31/09, the highest year-end rate since
12/31/96. As recently as 3/31/08, the national personal savings
rate was 1.2%. As of 12/31/84 (i.e., 25 years ago), the rate was
10.4% (source: Bureau of Economic Analysis)
|
|
TSP Returns
February
G Fund
February: .24%
YTD: .53%
F Fund
February: .39%
YTD: 1.93%
C Fund
February: 3.00%
YTD: (.60%)
S Fund
February: 4.77%
YTD: 2.35%
I Fund
February: .06%
YTD: (5.11%)
LIFECYCLE FUND RETURNS
L Income
February: .74%
YTD: .29%
L 2010
February: .81%
YTD: .23%
L 2020
February: 1.58%
YTD: ( .45%)
L 2030
February: 1.89%
YTD: (.60%)
L 2040
February - 2.11%
YTD: ( .77%)
Returns courtesy of :
|
And The Answer Was...
Last month's quiz asked which city had hosted the Super Bowl the
most times and how many times they'd hosted the NFL's biggest
event. The correct answer was Miami who counting this year has
hosted the Super Bowl 10 times.
The winner with the first correct answer last month was Terry Gouger with DHHS/OIG, Omaha. Congratulations, Terry!
|
March Madness....
Every
year, as winter wanes, a curious ailment spreads across the country.
The thump of basketballs, the squeak of sneakers, and the roar of the
crowd are sure signals that basketball fever is with us. It's a
condition called "March Madness," and it afflicts millions of people
with no known cure.
The
original term goes back to 1908 in the state of Illinois where it was
used to describe the state's high school boy's basketball
tournament. For a great prize, what year was the "March Madness"
moniker first used to describe the NCAA men's collegiate basketball
tourney?
For quickest response, send your answer to:
federal.info@sklenar.com |
Contact Us
202 W. 7th Street
Carroll, IA 51401
Email: federal.info@sklenar.com
Website: www.sklenar.com
Telephone:
(866)792-6668 Toll Free
(712)792-6400 Local
(712)792-6670 Fax
| |
