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A Newsletter for the State of Connecticut Deferred Compensation Plan

May 2001

	This issue of "Getting There" discusses how important it is to stay calm and carefully think through your retirement savings strategy when the stock market appears shaky. This issue also explains how to make sure you save as much as you possibly can in the State's Deferred Compensation Plan.
State Comptroller Nancy Wyman

Keeping Calm in a Jittery Market

It's only natural that when the stock market goes on a roller coaster ride, as it has recently, many investors become concerned. First-time investors, in particular, may be tempted to move money out of their current investments, as a way to"cut their losses." But the experienced investor knows to keep calm, and that making a snap decision is not the answer.

Financial Markets Are Cyclical by Nature

During those times when the stock market is in decline, it's important to remember a basic fact about investing: Financial markets always go up and down - that's their nature. When you're investing for retirement, however, you usually have more time to recover from poor investment performances.

For example, when the stock market crashed in October 1987, it lost 20.5% of its value. That is, the S&P 500 declined 20.5% in value. The S&P 500 is an index of 500 stocks and is considered to be representative of the overall stock market. But the market rebounded over the next two years. People who panicked and sold their stocks immediately after the crash probably lost money. But, in general, those who stayed invested probably recovered their losses.

Limit Your Risk by Diversifying Your Savings

You just received your quarterly statement. Due to the stock market's performance since the beginning of the year, you may feel a bit nervous. Now is the time to revisit your investment strategy and your attitude towards risk.

As always, when saving for retirement, it's important to diversify your savings. That means it's best to invest in several different types of investment vehicles - such as stocks, bonds and money markets. By doing so, you protect yourself against the possibility that one type of investment's weak performance will greatly affect your overall savings portfolio. Your financial services organization can provide you with complete information regarding their organization's products.

Investment Fund Performance & Operating Fees

For the Period Ending March 31, 2001

You may invest your contributions with any one of the plan's three financial services organizations: ING Aetna Financial Services, Hartford Life Insurance Company and Phoenix Investment Partners.

The following charts will help you evaluate your investment choices - both mutual funds and annuity options. They show the historical rates of return for each financial services organization's available investment options and the various operating fees that may be assessed against these options for the period ending March 31, 2001.

The rates of return columns are"net of expenses" and reflect the actual returns that would be applied to your account. This means that they already exclude the operating fees a financial services organization may charge you for managing, investing or marketing a particular investment option. Operating expenses appear in separate columns.

About Your Fund Choices

To help you identify between these two types of options, variable annuities appear in italic print. When comparing two similarly styled mutual funds or annuity options, be sure to:

• Recognize that while a fund's past performance may help you understand how well or poorly it has performed over a period of time, it's no guarantee of future results.

• Consider the total expenses each fund charges as well as the kinds of services or benefits it provides. Keep in mind that you can reduce your overall investing costs by monitoring these expenses and taking them into account in your investment selection process.

Since each financial services organization offers similar investment opportunities, it's a good idea to review the materials from each of these organizations before you make your decision as to where to invest your money. Then, select the one financial services organization that offers the investment options and products that best match your personal financial goals.

* After the close of business on November 26, 1997, the PPI MFS Emerging Equities fund replaced the Alger American Small Cap fund and the PPI Scudder International fund replaced the Scudder VLIF International fund. The five-year rate of return includes performance for the Alger American Small Cap and the Scudder VLIF International funds from 4/1/96 to 11/26/97 and the current funds from 11/27/97 to the present. For more information, please call your ING Aetna representative.

How to Make Sure You Contribute

The Maximum Amount to the Plan

It's a good idea to carefully monitor your contributions to the State's Deferred Compensation Plan if you want to contribute the maximum amount for the year. Otherwise, you may end up contributing less to the plan than the Internal Revenue Service (IRS) maximum. For 2001, the maximum is $8,500.

For instance, in 2001, let's say you're paid biweekly and you contribute $350 per pay period to the plan. After your 24th payroll deduction, you will have contributed a total of $8,400 ($350 x 24 pay periods = $8,400) of pre-tax pay to the plan. Because your next $350 contribution would put you over the plan limit of $8,500, the State automatically stops your contributions.

What You Need to Do

You can, however, still contribute the annual maximum amount to the plan for 2001. Just request a Participation Agreement/Beneficiary Designation Form CO-783 from your financial services organization. On the form, be sure to indicate the amount you want deducted from your pay in order to reach the annual plan maximum. Remember that if you want to split your final contribution among two or more providers, you must submit a separate Form CO-783 to each financial services organization.

If the State stops your contributions at the end of the year because you will be over the annual IRS limit, they will not automatically begin again in the following January. To start contributing to the plan again, you must submit another Participation Agreement/Beneficiary Designation Form CO-783.

If you submitted a Form CO-783 in order to make that last partial contribution (in our example above, the partial contribution is $100), your contribution rate for the next year would be $100. If you wanted to continue to contribute to the plan at your old rate of $350, you would have to submit another Participation Agreement/Beneficiary Designation Form CO-783 and state the amount you want to contribute.

Please keep in mind that it will be about three to four weeks from the date the financial services organization receives a properly executed Form CO-783 before you see the change in your paycheck.