Peach State Reserves news [2nd quarter, Apr.-June 2008]

In this issue
Plan News

SECOND QUARTER
2008
news

No Guts, No Glory
The Financial Dynamic Duo: Asset Allocation and Diversification
Retiree Corner

Recession Lesson

Build your Savings or Cut Your Debt?

How to Enjoy Your Family Vacation on a Budget

Both are Important. So Set Your Priorities and Take Action.

Is it better to increase your savings or decrease your debt? It's a classic question that, for many families, is becoming more urgent than ever. The solution lies in setting priorities and attacking both issues in a smart, focused way.

Tackle Bad Debt -- Pay Down Those Credit Cards! High-interest credit cards may be the worst debt of all, imposing a heavy burden on any family budget. If you just pay the minimum each month, your debt situation will only get worse. So make reducing all revolving credit card debt a top priority.
Next, target other debt, like high-interest car loans or personal loans that don't provide any tax benefits on the interest. In contrast, the interest on mortgage and home equity loans is usually taxdeductible; so stretching your budget to make extra payments on those should be your lowest priority.

Save What You Can -- It'll Add Up Over Time Sometimes it's good to take a little pain with the gain. Even as you pay down debt it's a good idea to continue contributing -- even a small amount -- to your Peach State Reserves Plan account. You'll continue to receive the pre-tax benefits of contributing and your contributions will have the continued advantage of tax-deferred growth. Then, when you've paid down your "bad credit card debt" you should consider increasing your contributions to the maximum you can afford.

The answer depends on several factors, particularly the size of your credit card debt. If it's a huge amount that's just dragging you down deeper month after month, some experts will tell you to focus on that first, even if it means suspending your contributions for a while. Others argue that totally forfeiting the tax benefits of participation to pay off a high-interest-rate credit card doesn't make sense. Especially when you factor in how much those savings can grow over time. So you need to look at the trade-offs when making your decision.

Most experts would agree that these steps are good ways to begin getting your financial house in order. But what if you can only afford to do one?

One thing is certain: debts don't repay themselves, and good saving habits don't just happen. So determine your priorities, make a plan to achieve your goals, and stick with it -- no matter what.

Choosing Beneficiaries: What You Should Know

The money in your PSR account belongs to you. But no one can predict the future. So it's very important that you name a beneficiary: the person or persons who will receive your account assets after your death.

Prior to the transition to CitiStreet in 2006, beneficiary information was maintained in paper format. While those records are still valid, they are not available online. Now is a good time to update your designation by creating a record online. This will replace any prior designation, and give you access to the information as well as the ability to change your designation at any time. 457 Plan participants can name anyone as their beneficiary; 401(k) Plan participants who are married must designate their spouse as their beneficiary in order to make the designation online. However, if you wish to designate someone other than your spouse as the beneficiary of your 401(k) account, you must complete a Designation of

Beneficiary Form and written spousal approval is required. The form is available online in the Forms section.
Even if your will addresses your wishes about your PSR account, Plan rules take precedence. If you have no beneficiary on file, your account would be distributed to your estate (or, for married 401(k) participants, to your spouse).
To create your new beneficiary record online, go to http://myGApsr.csplans.com. Select Personal Information, then Beneficiary Information, then Add/Edit Beneficiary.
You may also call 1-866-694-2777 to make your designation or request a form be sent to you.

Stable Value Fund Quarterly Range of Return
For the current quarter ending September 30, 2008, the projected range of return for the Stable Value Fund is expected to be between 4.3% and 4.8% annualized until the end of the quarter. The actual annualized rate of return for the previous quarter was 4.91%.

Announcement
On May 2, ING announced it intends to acquire CitiStreet, your Plan's recordkeeper, from State Street Corporation and Citigroup in a deal that is expected to take place by the end of the third quarter 2008. ING is one of the world's largest and most respected financial institutions and a leading provider of retirement and wealth management services. This change does not affect your Plan or your account, including your investments. You will continue to access your account as you do today.
866.694.2777 http://myGApsr.csplans.com

CustomSolutions FROM SMARTMONEY
No Guts, No Glory
An Olympic pole vaulter uses strength and momentum with every attempt at soaring over the highest crossbar. Retirement savings plan participants also have to be willing to assume some risk in seeking attractive returns over the long term. They know they can't have the reward without taking some risk.

Of course, most of us aren't cut out to be gold medalists. And you probably don't want the high anxiety that comes with aiming for the highest possible investment return. However, you have to be prepared to take some risk when you invest in your retirement plan if you want your money to grow enough to vault over inflation's bar.
In fact, the biggest risk for a long-term investor may be to take no risk at all. That's because if an investment is unlikely to lose value it's also unlikely to gain value, and may not be able to keep you ahead of inflation.
So, how do you aim for inflation-beating growth in your retirement plan without taking on more risk than you can tolerate? The key is to consider investing in a diversified selection of assets. Different kinds of stock funds, bond funds, balanced funds, money-market and stable value funds are subject to different kinds of risk. Therefore, they tend to behave differently under the same economic conditions.

With diversification, there's a better chance that at least one or two of your retirement plan investments will be doing well, even if the others aren't. Also, the consistent returns of some can offset the losses of another.
Balancing different kinds of risk may still sound kind of risky to you. But remember: you may not be able to avoid risk completely in your retirement savings plan and still expect to achieve your goal of securing your financial future.

did you know?
Inflation is a continuing rise in prices while the value of money goes down.
?

The Financial Dynamic Duo -- Asset Allocation and Diversification

A time-tested strategy for managing risk
When you think of dynamic duos you may think of Batman and Robin, Abbott and Costello, or Laverne and Shirley. But do you ever think about asset allocation and diversification? This duo just might be the most important one for you to get to know as you plan for a successful retirement.

Asset allocation is the process of choosing in which of the asset classes to invest (stocks, bonds, and cash) and how much to invest in each.
Diversification is when you spread your savings across various types of investments (stocks, bonds and cash) and in different types of investments within those asset classes (large-cap, small/ mid-cap, international, and domestic funds).
By spreading out your investments, you avoid the pitfall of having all of your investments react to market changes the same way. The idea is to combine different investment types to create a portfolio that helps to lower your risk and increase your chances of success over

the long term. The investments you select should reflect your long-term goals, your ability to tolerate risk, and your time horizon.
When it comes to investing for retirement, risk and reward go hand-in-hand. What many people have learned is that if their time horizon is longer, they are more comfortable taking on more risk and investing more aggressively since they have time to wait out the inevitable fluctuations of the markets. But, if you're nearing retirement and have a shorter time horizon, just the opposite might be true. Determining your asset allocation mix and diversifying your investments are important steps to take toward reaching your financial goals.

SECOND QUARTER 2008

retiree corner

Recession Lesson
Q What is a recession? AThe government relies on a private group --
the National Bureau of Economic Research (NBER) -- to make the official call on when recessions start and when they end. NBER defines a recession as a significant decline in activity spread across the economy, lasting more than a few months and marked by widespread contractions in many sectors of the economy. What NBER looks for are steep declines in both factory production and jobs, in consumer income, and in sales by wholesalers and retailers. If there are sharp declines in all those indicators, the economy is most likely in a recession.With substantial declines visible in all those indicators, NBER determined that the economy fell into the first recession in 10 years in March 2001. The recession ended in November 2001.
Q How long does a recession typically last? AThere's no such thing as a typical recession.
There have been 32 recessions since economists first started tracking them in 1854. The worst lasted 65 months, from 1873-79. The recession of 1980-81 lasted just six months. The Great Depression involved two recessions -- one from August 1929 to March 1933, and another from May 1937 to June 1938. The average recession since 1854 has lasted 16.7 months -- and since World War II, the average has been 10.4 months.
Q What are the signs that a recession is over? AIf NBER concludes that sharp declines in
factory production and jobs signal the start of a recession, it figures that gains in factory production and jobs indicate that the recession has ended.
Since NBER also watches consumer incomes and spending with wholesalers and retailers, it also figures that gains in both are further evidence that the recession is over. But the easiest way to look over the economic horizon is to follow the leading economic indicators: A private economic group called The Conference Board reports on 10 economic indicators that typically react before the overall economy does.If the indicators gain for three straight months, it's a good sign the recession is ending. One leading indicator is stock prices, as measured by the Standard & Poor's 500 Stock Index. Once the stock market stages a strong and sustained rally that lasts more than a few weeks, it's likely the recession is about to end.

Finding Happiness in Retirement
Recent surveys show that many baby boomers plan to work after retirement. The majority plan to work part-time -- some in new careers and others as volunteers. What's key is staying active and involved. The benefits can be significant. Researchers have found that people who work at least a few hours a week during their retirement years live healthier and longer than those who don't.
Here are some resources that may help you find your niche:
SeniorCorps.org: The Corps taps the skills, talents and experience of those over age 55 and connects them with the people and organizations that need them most. Ninety-four percent of Corps volunteers report that their service has improved their knowledge, health, or social connectedness.
Seniors4Hire.org: A job-search site that offers job seekers age 50 and older access to jobs from businesses that actively recruit and hire older workers and retirees.
RetirementJobs.com: A job-search site that brings together mature workers with companies who seek them. You can also post your resume online for companies to find you.
RetiredBrains.com: A job-listing and resume-posting site for older workers and retirees looking for jobs and volunteer opportunities.
My Next Phase (www.mynextphase.com): This fee-based retirement counseling firm provides a personality test as well as coaching, seminars and Web-based programs to help retirees find their passions.
NOTE: If you're thinking about re-employment, be sure to ask your employer if there are any policies or restrictions to your retirement benefits if you continue working.
Recession or not -- Maintain contribution consistency
Stopping your additional contributions because times may be tough right now could end up being costly in the long run. Every day out of the market is a missed opportunity that could impact your chances of reaching your retirement goals. By staying disciplined you have a better chance of balancing investments made during periods of rising prices with those made when prices are lower. If history does repeat itself, the markets will bounce back. In fact, this might be the time to increase your contributions to accumulate more shares during a time when prices are lower.
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1 Recession Dating Procedure, NBER, October 21, 2003 2 U.S. Business Cycle Expansions and Contractions, NBER, November, 2003 3 The Conference Board press release, October 20, 2003

Articles by SmartMoney and CitiStreet. Not intended to provide tax or investment advice.

CustomSolutions FROM SMARTMONEY
How to Enjoy Your Family Vacation on a Budget
The ideal family vacation meets at least three criteria: It's fun, it's memorable -- and it's affordable.
A well-conceived vacation budget can put you on the road to achieving all these goals. "Every trip has unexpected costs," says Dorothy Jordan, editor of Family Travel Times, a magazine that helps parents identify destinations and travel bargains suitable for families. "A little planning can help you keep those expenses under control." Your budget needn't be a very strict one. Instead, it should reflect a realistic compilation of your family's vacation wishes and the best way to balance those wishes with other financial priorities.

Begin before the beginning
A good vacation budget begins with a family meeting. Have the meeting well before you set out on your trip, and include all family members who are old enough to express an opinion. Let everyone talk about the type of activities he or she would enjoy, and take those wishes into account when you make your vacation plans. The next step is to list the types of expenses you're likely to encounter, including airfare, car rental, gas, hotels, food, and recreation. Do some research to find out the likely costs of each item, starting with the most expensive ones. Guidebooks to a particular area may help you to estimate some expenses related to sightseeing and recreation.
Dig into the details
Be as precise as you can in your expense categories so that you will end up with more accurate estimates. Break food costs down into breakfast, lunch, dinner, and snacks. Some pursuits might require you to invest in special clothing or equipment, which might range from swimsuits to a camping stove. Don't forget to include costs you may incur on the home front: anything from hiring a pet sitter to paying someone to cut the grass while you're away.

Swap out, save more
Carefully consider how much you are willing to spend and look for ways to stay within those limits. For example, you might be able to save significant sums if you fly during off-peak times. You can trim a few days off your trip to save on lodging and food or perhaps go camping for a few nights. Also shop around at different hotels in your destination city to find less costly rooms.
Stick to your guns (but still have fun)
You may be tempted to let your financial guard down when you're tired or the kids are cranky. Stick to your spending itinerary. "If your children are old enough, you can give them a fixed amount for souvenirs," suggests Jordan. "That puts a clear limit on how much the kids should spend on keepsakes." Jot down each day's expenses and take note if you exceed your budget in one or more categories. Then take action: If restaurants are killing your budget, look for opportunities to have picnic lunches. Whether you are planning a luxurious vacation or a modest one, your vacation budget is an essential planning tool that can help you avoid spending more than you can afford. The result will be the relaxing and rewarding vacation you've earned.

Plan Information Line: 1.866.MY.GA.PSR (1.866.694.2777)
Plan Web site: http://myGApsr.csplans.com
Field Office: Two Northside 75, Suite 300 Atlanta, GA Available MondayFriday 8:30 a.m.5 p.m.

In-state Plan Consultants:

*

Richard Crippen, Plan Manager

Kadir Edghill

Kadrina Jackson

Melanie Matabhik

This newsletter is not intended to provide legal, tax, or investment advice. For such advice, participants should contact their legal, tax, or investment advisors.

2008 CitiStreet, LLC. All Rights Reserved.

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