Get great financial advice on debt, savings and loans.

Seasonal Trading Strategy for Stock Funds and US Federal Employee TSP 401k Retirement Accounts

Sell in May and Stay Away Words to live and invest by? I dont know who coined the phrase but I did a bit of research and yes this strategy would have worked out for you is you had implemented it over the life of the TSP retirement account. Of course we know past performance does not guarantee future results but there is something here that makes this investor think that just maybe there is something more to the story this time.

There are five funds available in the Thrift Savings Plan.

The C Fund is based on the S&P 500
The F Fund is designed to match the bonds in the Lehman Brothers U.S. Aggregate (LBA) index.
The G Fund invests in short-term U.S. treasuries
The S Fund follows the Wilshire 4500 index
The I Fund follows the EAFE index

From its inception in 1988 through the end of 2005 the C Fund (based on the S&P 500) has averaged 12.61556% per year. In the months October through May it averaged12.87611%. From June through September it averaged -0.26056%. For the same 18 year period, the F Fund averaged 3.356111% for the four months June through September. Had you sold all of your stock C Fund on May 31 and moved all your money into the F Fund and then moved all of your money from the F Fund back to the C Fund on September 30th, you would have realized a 3.616667% per year increase in your rate of return over 18 years. Let me repeat this, a 3.616667% annual increase based on only two trades per year.

From 2001 through 2005 the C Fund (based on the S&P 500) annual average was only 2.22%. Its average gain October through May was 9.24% while its June through September average was an appalling 7.02% loss. Utilizing the same strategy as above, our average rate of return would have jumped from an anemic 2.22% to a healthy 11.38%. That is an amazing increase of over 9% based on just two trades per year.

Since its inception in 2001 the S Fund (based on the Wilshire 4500 index) has averaged 9.314% and the I Fund (based on the EAFE index) averaged 6.56%. They show the same pattern of gains October through May, with gains of 14.05% for the S Fund and 10.368% for the I Fund annually during those eight months. They also continue the S Fund pattern of losses Jun through September, a 4.736% loss for the S Fund and 3.808% loss for the I Fund. Using the same strategy of eight months in the S and I funds and four months in the F Funds, you would have realized additional gains of 6.336% for the S Fund and 5.378% for the I fund brining your rate of return to 15.65% for an S+F strategy and 11.938% for an I+F strategy.

What do you think about this? Join the TSPcenter forum and let me know. My gut tells me we are in for a bad summer. Of course that could be a result of the pepperoni pizza I just ate.

Related posts

• Refinance & Mortgage Tips: Down Payment From 401k Or 403b (0)
• Tax Credits for Retirement Savings (0)
• Retirement Planning Tip-How To Achieve Your Retirement Goals And Get (0)
• Retirement Investments–Act Now For Security Later (0)
• Retirement Income Planning: Mutual Funds (0)

Refinance & Mortgage Tips: Down Payment From 401k Or 403b Retirement Annuities

If you are purchasing a home and have a substantial portion of your assets inside of a retirement account such as a 401K, 403B or other retirement product or annuity, you may choose the increasingly popular option of tapping those funds to make a down payment on your new home. Like any other accounts you may have in your name, such as brokerage accounts and bank checking, savings and money market accounts, most popular retirement accounts qualify as assets to be counted toward your reserves, a measure used by mortgage lenders to determine how many months of payments you must have in order to serve as a buffer covering payments you might miss if there were any interruption of your income.

Retirement accounts such as 401(k) or 403(b) annuity accounts are generally administered or sponsored in whole or in part by your employer. In addition to serving as excellent documentation of your earnings and savings, your 401K or 403B accounts can be used in a variety of ways to help finance your new home purchase. Depending on the specific restrictions applied to your account, you may have the option of withdrawing money directly from the account or borrowing money in the form of a loan (against your own funds) which is repaid at a generally low rate of interest. Regardless of whether you cash money out of your account or take a loan against it, be sure to thoroughly document any details of the transaction, including any withdrawal or loan application paperwork, demand drafts, cashiers checks, deposit tickets, etc. for the purpose of substantiating this source of funds to your lender.

Lenders do treat down payment money from retirement accounts differently from program to program and state to state, sometimes from case to case. In particular, borrowing money in the form of a loan may increase what the lenders perceives as your monthly debt obligations, because even though you are borrowing money from your own account, you are still obligated to make a payment every month which you wouldnt have to make otherwise, and lenders will often consider this to be detrimental to your qualifying DTI or Debt to Income Ratio, making it harder to borrow as much money as you may need. On the other hand, cashing out any type of retirement account will always create a taxable event and sometimes also a penalty fee, which generally accounts to more than the nominal interest rate common to the loan option. Speak with your loan officer about the requirements of your individual program and weight the options with him/her or another trusted financial professional.

You may also consider speaking to your employer about any down payment assistance programs which may be available to you as part of your benefits package. These can come in many forms, but it is important to clarify with your employer that any down payment assistance granted does not amount to a loan and that there is no expectation of payment. Why would an employer want to help you make a down payment? Call them old fashioned, but most companies do want their employees to stick with them, and if your employer helped you achieve ownership of your dream home, how would you feel about them? As with the 401K, 403B or other retirement account options, down payment assistance from your employer should be documented in detail and all copies of communication, checks, deposit tickets and statements of account, along with signed records stipulating that the funds are given freely and not to be repaid, should be kept for submission to your lender.

Related posts

• Seasonal Trading Strategy for Stock Funds and US Federal Employee (0)
• Tax Credits for Retirement Savings (0)
• Some Retirement Strategies For All Ages: A “To-Do” List (0)
• Planning For Retirement (0)
• Personal Finance Issues After Retirement (0)

When looking towards retirement many people just think about the joy of not having to work anymore. Unfortunately, even though a person retires they still have bills to pay. The need for careful planning is perhaps the most overlooked part of retirement. Having a set plan in place before retirement will help to ensure the golden years are golden.

The following list gives some great points on how to plan for retirement.

1. Save money. Before retirement setting up a savings account or 401K will get a person prepared for life without a steady paycheck. A 401K is usually sponsored through an employer where the employer matches contributions the employee makes. Money put into a 401K also goes untaxed which can mean immediate savings. IRAs are also another way to save for retirement. These accounts are also not taxed.

2. Determine your expenses after retirement. A person should have a fairly good idea what monthly expenses they expect to have after retirement. Having a rough idea will help a person determine how much they need to save to be able to make it. Then considerations also need to be made for special purchases like cars and trips.

3. Working after retirement. Many people chose to take on a part-time position after retiring. Most often it is to supplement their income, but for others it is a way to socialize and gives them something to do with all the spare time they now have. If a person is not planning on working anymore at all then they should have some idea what they do want to do with their time. Many retirees find that retirement can be boring after years spent in the work force.

These three points will give a person something to think about when planning for retirement. Getting a good financial plan is the first step. It is also important to consider what life will really be like once the daily work schedule is gone.

Related posts

• Retirement Planning for where you Will Live (0)
• Retirement Planning And Employee Benefit-tips To Help You Reach Your (0)
• Planning Food Cost For Retirement-How To Achieve The Money You (0)
• Tax Credits for Retirement Savings (0)
• Serious Considerations for Financial Retirement (0)

Most parents want to pay for their childrens college education, or at the very least help pay for college. While it would be great for your children to be able to start like after college without student loans to pay off, the cost to parents may be too high.

The average annual cost of a 4-year public college is $12,127 (source: The College Boards Annual Survey of Colleges, 2005-2006), with 4-year private schools averaging $29,026 a year. College costs have been outpacing inflation by rising over 5% per year.

On the other hand, saving for retirement has become even more important as companies have started freezing or eliminating pension plans, and the future of Social Security continues to be uncertain.

Paying for both college and retirement will be challenging for most parents. Here are some suggestions to help you to achieve both goals:

Have a plan. You should determine how much you will need for retirement and how much you anticipate your children will need for college.

Start saving as soon as possible. Time is your greatest ally, whatever your savings goal. Figure out how much you are able to save each month, and setup an automatic plan as soon as possible.

Prioritize if you cant afford to save for both goals, retirement should take priority over saving for college. Your children can always borrow for college or earn scholarships; you can not borrow money for retirement.

Save for both. Ideally, youd like to be able to save for both goals at the same time. If youre able to, allocate money to both goals. You may wish to visit with a financial planner to determine how much should be allocated to each goal.

Research there are several different types of college savings accounts available. Find out which type of account will benefit you the most before you invest.

Use retirement accounts to save for retirement and college. Retirement accounts can be tapped into to help pay college bills (IRA withdrawals can be taken penalty free for college expenses; Roth IRA contributions can be taken penalty and tax-free). However, you should only do this if it will not sacrifice your retirement savings.

The bottom line to getting the most out of your savings – prioritize your savings goals, have a plan in place, and start early.

Related posts

• Read This If You Cant Possibly Save Enough for Retirement (0)
• Im Too Young, Im Too Old, Im Almost Old Enough, (0)
• Tax Credits for Retirement Savings (0)
• Saving for Retirement in the New Economy (0)
• Property Investment for Retirement (0)

If you find yourself getting close to retirement age without a nest egg, do not despair. There are still things you can do during your 40s and 50s to get yourself prepared for retirement. They include figuring out how much money you will need during retirement, income sources like social security or retirement pensions, setting goals, start contributing to your 401 (k), be aggressive, downsize, and eliminate debt to name a few.

The first thing you should do if you find yourself close to retirement with no savings is to calculate the amount of money you will need during retirement as well as what age you plan on retiring. You will find many resources online that will help you come up with this number such as retirement calculators.

Once you have a general number you will need for your retirement, then you should figure out the income you will receive each year in social security benefits, pensions, other retirement accounts, 401(k) plans and the like. Be conservative when figuring this number because you do not want to overestimate. Then, you can subtract what you will be earning each year from what you need to live comfortably and that will give you the money you need to save.

Now that you know how much money you will need on average you can set some savings goals for yourself. There are plenty of ways you can save money from shopping with coupons to taking your lunch to work with you to not buying a new car every year. Wherever you are spending money and can scale back, do. It will mean the difference between a happy retirement or a stressful one.

Next, if you have a 401(k) plan and are not using it, start! Start depositing the maximum allowed so you can get your retirement account beefed up and prepared for your years of relaxation. Also, see if your employer has a match program as well, this is free money and will help your nest egg grow that much quicker.

If you have some investments, consider getting a little aggressive with them. The stock market and mutual funds are a good place to start, and with the help of a stock broker you can likely turn a little money into a lot pretty quickly.

If you are still concerned about making it during retirement consider downsizing to a smaller home, less expensive car, fewer vacations, and less shopping sprees. This might take some effort, but it will be worthwhile to be able to retire happily and not continue working when you are 75 years old.

And finally, eliminate any debt you have. Do this as quickly and aggressively as possible because the longer you wait the more money you will have to pay. So, if you pay it off quickly it might be difficult, but it will allow you to save more money for retirement in the long run.

Related posts

• Free Money for Your Retirement? (0)
• Early Retirement: What You Should Know (0)
• Reverse Mortgages Funding Retirement (0)
• Retirement Calculator: How Much Will It Cost You to Retire? (0)
• Retirees Should Use Stocks For Retirement Income (0)