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A Newsletter for the State of Connecticut Deferred Compensation Plan

May 2003

	Since some State employees have been retiring under the State's Early Retirement Incentive Program (ERIP), questions have come up about the program. In this issue of Getting There, we discuss some of the options available under this program. In addition, there is an article that focuses on understanding stocks and the stock market, and how stocks can help you build a financially secure future.
State Comptroller Nancy Wyman

What Happens to My Retirement Money

If I Take Early Retirement Under

the Early Retirement Incentive Program (ERIP)?

If you are thinking about taking Early Retirement under the ERIP, here are the options for your:

• Pay for Unused Vacation and Sick Time.

• Deferred Compensation Plan Account Balance.

Investment Fund Performance & Operating Fees

For the Period Ending
March 31, 2003

You may invest your contributions with any one of the plan'sthree financial services organizations: The Hartford, ING Financial Advisers, LLC (member SIPC), 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, 2003.

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.

Results are historical and not intended to portray future performance. Current performance may be less than figures shown.

Please note that investment benchmarks may differ from the benchmarks provided in the funds' prospectuses.

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.

1 The Declared Rate is credited through the close of the calendar year on contributions received during the designated quarter. The rate for the second quarter 2003 is 4.15%. For contributions received prior to January 1, 2003, the Declared Rate is 4.15%. Rates quoted are effective annual yields.

2 The Declared Rate, as of April 1, 2003, is 4.50%, expressed as an annual effective yield, and is guaranteed not to drop below 4.20% through December 31, 2003.

Understanding the Stock Market

What Are Stocks? 

Let's start with the basics. When you buy shares in a stock, you are buying units of ownership (called equity) in a company. Companies sell stock so they can raise money to expand, invest in research and development, and pay off debts. In return, the stockholders have a claim on the company's future financial performance, whether it's good or bad. Most stocks also provide stockholders with voting rights, which give them a proportional vote in certain business decisions. 

Why Buy Stock? 

You buy stock because when the company you have invested in makes money, then you may make money, too. There are several ways you can share in the wealth. If the company has been profitable, it may pay dividends, which are usually quarterly payments, to each shareholder. Or, you will share in the wealth if you sell your shares at a higher price than you paid for them. This is called appreciation of the stock's value. Of course, if the value of the stock goes down, you lose money, but only if you have to sell while the stock price is down. If you can hold on to your stock, you may be able to ride out the decrease in the stock price. That's one of the reasons why stocks are known as good long-term investments: as long as you can leave the money where it is, you have time to ride out stock market declines. Overall, investors generally buy stock because stock returns usually outperform other types of investments, such as bonds or Treasury notes, over long-term periods. The downside to the more impressive returns, however, is that the risk of losing money is usually greater when invested in stocks than in bonds, for example. 

Why Do Stocks Gain or Lose Value? 

There are many reasons why stock prices rise and decline. A company's stock may rise in value if the company is thought to be a well-managed company with a solid future, or if the company is about to introduce a new product that many think will be a success. On the other hand, a stock may lose value if the company is thought to be poorly managed, or if the company is in a market sector that is being pummeled (for example, stocks of Internet start-ups). In addition, there are a variety of other factors that can affect stock prices, even though they have little to do with long-term business growth and performance. The political climate, such as a new administration in Washington, or the threat of political unrest or violence at home or abroad, can weaken stock prices. But basically, stock market fluctuations are the result of investors - like you - reacting to facts and circumstances. This is what drives market volatility and can make the ups and downs so unpredictable at times.

Should I Invest in Stocks?

No one can answer that question except you - only you know your financial and personal situation, and how comfortable you are with the level of risk associated with stocks. But, keep in mind that industry experts recommend diversifying your portfolio, and that includes investing a portion of your savings in stocks. By evaluating your investment mix from time to time, you can ensure that your investments are diversified; that is, spread among different types of investments, so that if one type of investment is doing poorly, another type may be doing well, balancing your investment returns.

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