Since the beginning of this year, federal workers with accounts in the 401k-style Thrift Savings Plan have moved nearly $6 billion out of the main stock market fund (C Fund) and into the funds that invest in bonds (F Fund) and government securities (G Fund). That drawdown mirrored the stock market's yearlong troubles and reached a crescendo in September as the terrorist attacks shocked the market. Federal investors yanked $1.4 billion out of the C Fund in September. But the C Fund is still by far the most popular of the TSP's five investment funds. It holds 54 percent of federal workers' TSP assets. It takes in more of workers' monthly contributions than the other four funds combined. And the C Fund is still home to $45 billion of federal workers' retirement nest eggs. The behavior of the TSP's 2.3 million participants offers some investment lessons for military personnel interested in opening TSP accounts. For starters, most investors are thinking long-term. Investment advisors urge people to remember that the TSP and similar programs are for retirement savings. Most people under the age of 45 are not going to draw on their TSP accounts for at least a decade. Trying to move money in and out of the stock market to take advantage of ups and downs is not something most people are good at. So-called market-timers tend to miss out on market rebounds. When the market is low, investors have more buying power, so TSP investors who stick out market drops wind up with more shares or units, and more money down the road. Advisors generally urge investors to diversify their money by putting some money in the C Fund, some in the F and G Funds, maybe dabble in the new international stock fund (I Fund) and the small- and mid-sized stock fund (S Fund), and then to stick with their choices for the long haul. That's what most TSP investors are doing right now. At the end of May, 31 percent of TSP investors' assets were in the G Fund, 7 percent in the F Fund and 61 percent in the C Fund. At the end of September, 35 percent of the assets were in the G Fund, 10 percent in the F Fund and 54 percent in the C Fund. Conversely, advisers urge people to protect their investments as they near retirement, telling them that if they plan to draw on their retirement savings within the next three to five years, they should put their money in safe holdings. The safest holding in the TSP is the G Fund, which invests in government securities and always returns between 5 percent and 9 percent a year (compared with annual returns of as high as 37 percent and as low as minus 9 percent for the C Fund). With so many federal employees near retirement-almost 40 percent are age 50 or older-it's not surprising to see federal workers shifting $6 billion of their previous contributions and earnings from the C Fund to the G Fund. While people are protecting their previous investments, they're continuing to invest new money in the C Fund, with 60 percent of monthly contributions going into the C Fund in September. That's down from 67 percent of monthly contributions in May, but still shows an understanding that new money is buying more units at a lower price. And it's worth noting that since May, federal investors have been able to change, at any time, how their monthly contributions are divided among the five funds. Previously, investors could make those changes only twice a year, during the summer and winter TSP open seasons. Military in the TSP Have a military colleague who might be interested in participating in the Thrift Savings Plan? Let them know about the TSP Web site at www.tsp.gov, which has a section for "uniformed services." You can also point them to GovExec.com's TSP Guide at www.govexec.com /careers/thrift/tsp.cfm. The open season for military personnel to set up Thrift Savings Plan accounts runs from Oct. 9 to Jan. 31. Civilian Open Season The next open season for civilian TSP participants runs Nov. 15 to Jan. 31. The most important change federal employees will be able to make during the next open season is how much money they contribute to their TSP accounts. For the last half of 2001, the maximum contribution for employees in the Federal Employees Retirement System has been 11 percent of pay per pay period, up to the annual IRS limit of $10,500. In 2002, the maximum contribution will be 12 percent per pay period, up to the annual IRS limit of $11,000. For Civil Service Retirement System enrollees, the limit will rise from 6 percent to 7 percent. Return to Paybanding Next week, Pay and Benefits Watch will return to the topic of paybanding, and look at what some of you have to say about it.