By Kathryn Kretschmer-Weyland
November 9, 2009

In today’s market, many city employees are left feeling uneasy and insecure, and often times look to their mayor for guidance and leadership. When it comes to something as important as retirement savings, mayors throughout the country are encouraging their employees to resist reacting emotionally by moving investments to cash or discontinuing contributions, and instead adopt a longer-range “stick with it” strategy. Three reasons for city workers to stick with it, which mayors are choosing to include in various employee communications and forums, are:

Employer sponsored retirement plans like a 457(b) deferred compensation offer tax benefits that are not tied to the market. Contributions are pre-tax. That means that money goes into an account before the participant pays taxes. Beginning to contribute is the most important step, but continuing to invest as much as possible throughout the working years is equally important, even when markets are volatile. The tax benefits are not affected by volatility. Withdrawals will be taxed as ordinary income. Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.

There have been down markets before. Today, it’s easy for everyone’s emotions to reflect the market – they go up, they go down. And while past performance cannot guarantee future results– over the past 75 years, every down cycle has been followed by an up cycle. And while no one can definitively say when the market will upswing, most financial experts agree that the market will recover. And that’s something that no one wants to miss out on. When the market is down, investors who buy get more for their money when it rebounds. However, selling or waiting to invest until the market improves could mean an investor actually pays a higher price. Right now might actually be a good time to buy more while prices are potentially lower.

Even though planning for retirement is a long-term goal, many investors think short-term, especially in times like these. There are strategies, such as asset allocation, that may help deal with a volatile market and reduce market risk without having to miss out on potential returns. Investors can drive commitment to a long-term investment discipline by understanding their own comfort level with market risk, how long until they will actually retire, and when they will start spending their retirement assets. And in turn, this can help determine what asset allocation strategy to use. It’s important to remember though that asset allocation does not guarantee returns or insulate against potential losses in a declining market.

A good strategy is a good strategy, regardless of market conditions. Many city employees are in for the long-term and should not make investment decisions based on short-term drops or gains. City employees participating in the Conference of Mayors deferred compensation plan can talk with Nationwide representatives to discuss their specific situation and to find out which strategies may help reach long-term goals by calling 1-877-677-3678. Learning tools are also available online at www.nrsforu.com.

City employees should know that finding creative solutions for employers has been a hallmark of Nationwide’s service to the public sector, and especially the Conference of Mayors. For more information on what Nationwide is doing to help participants succeed even during difficult economic conditions, contact Louie Watson, Vice-President of Strategic Relationships by e-mail: WatsonL2@Nationwide.com or by phone: 614-854-8895.