It's tough to stay upbeat in the midst of the carnage on Wall Street. You see the value of your nest egg dropping at warp speed. In that mental list of things you dream of, you've put retirement somewhere behind winning the next "American Idol" competition. And every time you step into your local savings bank, you can't shake the image of that scene in "It's a Wonderful Life" where Jimmy Stewart faces panicked depositors in a run on the Bailey Building & Loan.

How bad are things, really? On the same day the Dow Jones Industrial Average would close down a record 777 points, state Comptroller Thomas DiNapoli was already predicting the Wall Street upheaval could cost New York state — the center of the nation's financial industry — up to $3.5 billion in tax revenues by March 2010.

The securities industry could lose up to 40,000 jobs, DiNapoli said, with each job loss on Wall Street potentially costing as many as three jobs lost elsewhere.

Despite the grim prognosis, financial analysts urge investors to remain calm and look at the long term. Forbes echoes many of its fellow financial publishers in declaring the situation "desperate — but far from hopeless."

"The nation has come back stronger from every financial disaster of the last 80 years," the company declared on its Forbes.com Web site. "It may take awhile, but we'll dig out of this one, too."

In the meantime, New York Teacher has polled some experts inside and outside of NYSUT to answer some of the questions members have been asking and, hopefully, to alleviate some of the concerns.

Q: I'm a teacher who is planning to retire soon. How badly has the market upheaval hurt the pension system?

A: While the various pension funds that serve NYSUT members have been affected by the ongoing turmoil, none of them report significant holdings in any of the companies at the heart of the crisis. The New York State Teachers' Retirement System and the separate TRS of the City of New York both subscribe to a philosophy basic to anyone investing prudently for the long term: maintain a well-diversified portfolio.

"When one company or asset class underperforms, the stability of the other asset classes offsets that negative performance," said Sheila Salenger, one of three NYSUT teacher-members on the state TRS Retirement Board. "Our initial estimated loss from the recent news represents less than 1 percent of the TRS holdings."

New York City Comptroller William Thompson said that over the past six years pension trustees have been diversifying the fund's holdings into such areas as private equity and real estate, "helping us withstand the tough times" and "ensuring the long-term health of our portfolio."

Q: What about the pension systems for School-Related Professionals?

A: "We don't place all of our investment eggs in one basket," said state Comptroller DiNapoli, the sole trustee for the state's Common Retirement Fund. That fund includes the New York State Employees' Retirement System, to which some 90,000 NYSUT SRPs outside of New York City belong. In the Big Apple, they're covered by the New York City Employees' Retirement System. The Common Retirement Fund faces losses from what DiNapoli describes as relatively small holdings in some of the financial institutions that have made recent headlines. For instance, the fund's recent holding of 5 million shares of common stock in the troubled Lehman Brothers represents a fraction of 1 percent of the total fund.

Q: The current losses to these funds may be relatively small, but how long will it take to recover from them?

A: DiNapoli points out that during the stock market downturn from 2000–03, the Common Retirement fund lost $31 billion in value, but a disciplined, diversified approach to investing helped it recover in less than two years.

Q: I'm retired, collecting a pension and worried. What could happen to my monthly check?

A: Your checks are secure today and into the future. All of the pension funds that cover NYSUT members (see chart below) remain adequately funded to meet their obligations to current and future retirees.

In addition, the New York State Constitution guarantees no public retirement allowance will be reduced once it is implemented.

"We are very concerned about the financial situation facing New York state and the nation as a whole," said NYSUT President Dick Iannuzzi. "At the same time, we take some comfort in having helped build provisions in the retirement system to protect the hard-earned benefits of current and future retirees."

Q: Many of us in higher ed are not in one of the state or city retirement systems. Where do we stand?

A: While some NYSUT higher education members may belong to one of the TRS or ERS plans, others — including some adjuncts — are covered by an Optional Retirement Plan. Often, that plan is provided through TIAA-CREF, the Teachers Insurance and Annuity Association–College Retirement Equities Fund.

CEO Roger Ferguson said the financial giant remains on solid footing. "We believe that a consistent, sound and disciplined approach to investing is the path to financial security," he said. "Our commitment to this philosophy has helped us minimize our exposure to risky investments such as subprime securities."

Concerned investors can call the firm's telephone counseling center at (866) 681-0602 or speak with your TIAA-CREF adviser directly.

Q: I have a 403(b) supplemental retirement plan through the New York City TRS. Is it in trouble?

A: The overall performance of these variable-return Passport Funds has been affected by the ongoing turmoil in the markets, TRS officials note. However, they stress that holdings in firms such as AIG or Lehman Brothers range from zero to less than 1 percent of any of the individual funds.

Q: How do the problems at AIG (American International Group) affect my various insurance policies?

A: As the Wall Street Journal pointed out recently, the AIG that's in crisis and the one that wrote your insurance policy are, to a large degree, separate companies. The AIG on Wall Street is an umbrella company that owns stock in a lot of smaller insurance subidiaries. Your policies are held with your in-state subsidiary, which is tightly regulated.

According to state Insurance Superintendent Eric Dinallo, AIG's insurance companies have substantially more in assets than they need to pay all valid present and projected claims. "Don't worry and don't make any rash decisions if you have a policy issued by an AIG insurance company," Dinallo said.

AIG provides some of the insurance programs endorsed by NYSUT's Member Benefits Trust, including voluntary term life insurance and catastrophe major medical insurance plans.

"Members with AIG coverage can rest assured that Member Benefits will continue to act as an advocate to make sure that all eligible benefits are paid," said NYSUT Secretary-Treasurer Lee Cutler, who chairs the NYSUT Member Benefits Trust.

Q: I got a telephone call from an insurance agent who says I should replace my AIG policy because of the problems at the parent company. What should I do?

A: If someone suggests you replace any policy because an AIG insurance company is in trouble and may not be able to pay your claim, that is not only untrue, says Dinallo, it is against the law. Call the Insurance Department's hotline at (800) 339-1759 to report any calls like this.

Q: Worst case — what would happen if one of the AIG subsidiaries got into financial difficulties?

A: Policy-holders still have two levels of protection. "Your state insurance commissioner would step in, take over the company and run it in the interests of policy-holders," the Wall Street Journal's Brett Arends explains. Under the law, policy-holders must be repaid ahead of other creditors. As a last resort, all states maintain a guaranty fund — a pool of money put together by the insurance companies — to provide a financial backstop if all else fails.

Q: It seems that every day there is another bank failure. How safe is my money in a bank account or a CD?

A: Whether it's a traditional bricks-and-mortar bank down the street or one of the many Internet banking sites, if your funds are in an institution insured by the Federal Deposit Insurance Corporation, you're basically covered for up to $100,000 in deposits — $250,000 for IRA accounts — if your bank fails. That guarantee extends to savings and checking accounts as well as certificates of deposit, FDIC says.

Congress last week approved a $700 billion Wall Street bailout bill that will raise the basic insurance cap to $250,000. President Bush was certain to sign it.

Still worried? The FDIC's "Depositors' Bill of Rights" reminds insured customers that "since the creation of the FDIC 75 years ago, no depositor has ever lost one penny of insured deposits."

Q: My money-market account isn't FDIC-insured, but aren't these funds pretty stable in value?

A: The U.S. Treasury Department has announced it will guarantee the money shareholders have invested in a money market fund on or before Sept. 19 if the fund's net asset value falls below $1 per share.

- John Strachan

Watching over your retirement plan