Business
Coping with the credit crunch: Experts answer your questions
Fort Worth/Tarrant County, Texas
The Star-Telegram asked a group of local financial planners and investment advisers to answer your questions on coping with the current ups and downs of the investment markets and the impact on your financial/retirement plans. The forum is closed to new questions, but please feel free to peruse their answers below.
THE PANELISTS:
Most Recently Answered Questions
Questions 1 - 30 of 34 (Page 1 of 2)Submitted by Laura from Arlington,Texas
Q: I put most of my money in fixed after seeing my portfolio disappear. I am four years from retirement. Is my money safe there. If not -- I was thinking of taking it out and pay off my house and other bills. Its better thn just watch it vanish. Please advise. Thanks
Answered 10/10/08 07:27:52 by Burk Rosenthal
A: If you moved from a diversified portfolio to fixed during this down market, you may regret your decision if and when the market recovers (like it always has in the past). However, if you are "fixed on fixed" and you don't have confidence in the market, here is my answer. Fixed usually means some type of fixed annuity or a fixed option within a variable annuity or 401k. All of these are offered or backed by insurance companies and are usually considered fairly safe. However, it is important to know exactly who is backing the fixed option you mentioned. Typically, your biggest risk with fixed investment options is that your rate of return may prevent you from keeping pace with inflation over the long run. If this money is in some type of retirement account, it may not be wise to withdraw the funds to pay off your bills unless the interest rates on the debt are really high, because large withdrawals from retirement accounts can be subject to substantial income taxes and possible early withdrawal penalties. It is usually best to use "after-tax" money to pay off debts if possible.Submitted by Stephanie Watkins from Fort Worth, Texas
Q: I am thinking of investing in stocks; however, I don't know if that would be a good idea. I believe in the buy low sell high philosophy. What's your take on investing in stocks right now? Or should it be put in something long term such as an IRA?
Answered 10/09/08 22:08:01 by Bryan Clintsman
A: First, it is important to remember that an IRA is a type of investment account, not an investment. You can put almost anything into an IRA account - stocks, bonds, mutual funds, etc. So having an IRA does not say anything about what the underlying assets are invested in, or what their projected returns will be. The decision to invest in stocks is based on several vairiables. For example, only long term investments (those assets you do not need to liquidate for at least 5-7 years) should be used for stock investments. In addition, a person's risk tolerance needs to be high enough to withstand the routine ups and downs of the stock market. Finally, stock investments should only make up a portion of a diversified portfolio - the exact portion depends on the factors mentioned above of time horizon and risk tolerance.Submitted by ann logan from ft worth, tx
Q: I would like to know if now is a good time to try and buy a home when you do not have a good credit score.
Answered 10/09/08 21:56:02 by Bryan Clintsman
A: It is true that home prices have softened in many parts of the country, including areas within DFW. In addition, mortgage rates are near historic lows. However, the best mortgage interest rates are only available to those with the best credit scores. So while it may be tempting to try and qualify for a home loan even though it has a higher interest rate, you will have to live with that higher interest rate for many years or even decades until that loan is paid off. Instead, I would suggest spending the next year or so working on improving your credit score and then applying for a home mortgage. This way, you will be able to enjoy that better mortgage rate for the remainder of your loan term.Submitted by Sharron Anderson from Benbrook, TX
Q: I do not understand how the tax situation works on invested money. If I close out my mutual fund,bond, or a CD renews etc. that are with my investment company and I take the money & put it into a CD at a bank of my choosing, will it be taxable? Or is it only taxable if you spend it?
Answered 10/09/08 20:40:37 by Bryan Clintsman
A: For individuals there are basically two tax methods in the U.S. Tax Code, each with their own set of tax rates and brackets. Ordinary income tax brackets are reserved for income items such as salary, interest, and some dividends. Capital gains tax brackets are reserved for income that was produced by investing money for a profit motive. This includes a broad variety of investments such as stocks, bonds, mutual funds, real estate, etc. This is one reason that people refer to the gains of investments that have not been sold yet as unrealized gains. So if you sell a mutual fund you will have to report either a gain or loss on that investment, regardless of whether you reinvest or spend the proceeds. This is opposed to income from a savings account, money market, and CD which have to be reported on your income tax return as ordinary income.Submitted by A.M. from Fort Worth, Tx
Q: I have some money to invest and was wondering what to do given the current market conditions. Should I stick with CD's at 3-5% APY until there is some upturn in the market? Or, are Treasury Bonds a safer investment at this time even though the yield is much less? Also, I would appreciate some information about financial planning services. Thank you.
Answered 10/07/08 23:10:26 by Bryan Clintsman
A: In many ways the current market events have not changed the cardinal rule of investing which is to have a diversified portfolio. This means that the money that you might need in the next 5 years or so needs to be parked in very safe investments such as treasury bills or bonds. Money that is not needed for, say, 5-10 years needs to be in a mixture of stocks and bonds. And money that is earmarked for a long-term horizon should include even a little more in stocks. It is for this reason that all this discussion about the current stock market is not quite as important because we have plenty of time for the stock market to recover until we need access to that money. CD's can play a small role in a portfolio, but in many cases they force you to commit your money for many years in order to lock into a certain rate. In many cases before you have finished your commitment in that CD, rates have already risen well above your locked in rate and you will wish you had your money back out. Finally, before deciding on financial planning services from anyone, I would decide on the answer to three questions. First, do I want a specialist like an insurance agent or stock broker, or do I want a comprehensive financial planner that can look at all necessary financial areas of my life. Second, what type of revenue model do you agree with? Commission-based financial planners only make revenue when you buy something from them, whereas Fee Only financial planners simply charge a fee for providing advice to you. And third, what sort of relationship are you looking for? Some financial planners welcome your involvement in the process, while others are happy for you to just turn things over to them and they will periodically let you know how things are going. Having the answers to these questions will help you decide what services are best for you.Submitted by Stephen from Keller, Texas
Q: My wife and I are retired with a Federal pension, life annuity, both on social security, and our total income is $47,000. We sold a home (keeping about $40,000) early 2007 and moved into an apartment. We have been wanting to buy another home in areas where we could buy for about $110,000 or less (we already pre-qualified with our bank). All of this financial turmoil has us a little scared. Question is - should we go on and buy something - or hang tight for a while? And, how long to wait?
Answered 10/07/08 22:18:28 by Bryan Clintsman
A: To start with you dont mention why you sold your previous house, but I think an important question is why you want another house. For example, many people think they need to own a house to obtain an income tax deduction, but the truth is that at your income and house size you would likely not benefit from any itemized deductions; the standard deduction which is available to even non-homeowners would likely be more beneficial to you. Also, it is important to know how far you are into retirement. Just as in the early part of people's life their circumstances are often changing rapidly (getting married, having children), in the later part of our lives our circumstances also change rapidly. We can go from working, to retired, to wanting to move nearer grandchildren, to even being widowed or not able to do normal upkeep on our home within several years. For those reasons I am a fan of keeping your options open during retirement - including renting until you think there will be stableness in your life for many years to come. One last thing: I would have one more possible concern about you purchasing a house. Your fact pattern indicates that your income stream will have very little increase as the years go on. This means that as the years go on and inflation increases your normal cost of living, you will be less and less able to afford a house payment. Your goal should be to live as far below your current fixed income stream as you can, so that even after years of inflation you should be able to pay all your bills.Submitted by Leon Gilbreath from Fort Worth, Texas
Q: It seems like this huge increase in the national debt from the bailout is likely to be inflationary. How may one protect themselves from the ravages of inflation? Which investments have historically beaten inflation?
Answered 10/07/08 12:11:28 by Burk Rosenthal
A: I believe the best way to fight inflation is to use investments that have historically outpaced inflation. Stocks have been one of the best ways to accomplish this over time. The only problem with stocks is they are very unpredictable in the short run (like we are experiencing now). I think it is important to ignore the short term fluctuations in the market, by realizing this is simply "part of the deal" when investing in stocks for the long term. It is also important to make sure your investments are highly diversified across various asset classes. A common way to accomplish this is to utilize mutual funds. You could also consider exchange traded funds (ETFs).Submitted by Terry Wright from Kennedale, Texas
Q: For those that have money with a financial planner and the portfolio has gone down, would it be wise to leave it and take a chance on the market going down further or take it out and get an annuity or other instrument with four or five percent interest to preserve the remaining amount? Of course this depends on the time involved that the person is investing the money in.
Answered 10/07/08 09:41:03 by Burk Rosenthal
A: For your long term goals, a diversified portfolio is probably still the best place to be. Something more stable such as money markets or CDs is very appropriate for funds you will likely need in the near future. However, these "safe havens" are usually not appropriate for your long term money. Although you may not have risk to your principal, you will likely suffer from "purchasing power" risk due to inflation. I believe over the long term this is likely to be a bigger risk than market fluctuation. Remember that historically, market downturns have always been temporary. As long as you are comfortable knowing that this market could get worse before it gets better, I would not let what has happened in the market recently affect your long term goals.Submitted by Shar Miles from Fort Worth, TX
Q: At age sixty-three and retired, everything I have saved is tied to indexing with the S&P 500 with American Equity Investment Insurance Company. How safe is my life savings? I can only withdraw ten percent annually without extremely high penalties. I am so concerned and would appreciate your advise.
Answered 10/07/08 08:13:59 by Burk Rosenthal
A: This sounds like an equity index annuity. I'm not a big fan of these annuities due to the restrictions in many of them. Typically, the returns are capped, they have relatively long surrender charge periods, the surrender charges can be quite high, many force annuitization, etc. However, with all of that being said, you are safe from market fluctuations, because you aren't actually "in the market" but instead you likely receive interest credits based upon the return of the S&P 500. If the returns are negative, you typically receive little to no interest, but don't incur a loss. One of your risks with this type of annuity is that the money is in the insurance company general account, which could be subject to the claims of creditors, should they fail. Although this is not a common occurrence, it is a possibility. It is important to look at the ratings. American Equity's ratings are not extremely strong, but not overly alarming either. Of course, as you've seen in the news lately, things can change rather quickly. I believe these are their current ratings: AM Best = A- (Relative financial strength) Moodys = A- (Financial strength) Standard & Poors = BB+ (Claims paying ability) Fitch = BB- (relative ability of an entity to meet financial commitments).Submitted by Linda from Fort Worth, TX
Q: Please give me your thoughts on Janus Funds, JAFIX, and JMCVX. I have both in an IRA, and have not been seeing positive things. Will retire shortly. Thank You
Answered 10/06/08 20:02:28 by Kathy Moore
A: JAFIX is and intermediate bond fund and JMCVX is a mid cap value stock fund. Both are decent funds which have kept up with or surpassed their peers. The question for someone approaching retirement is how much do you have in each? The amount of stock relative to the amount of fixed income and cash in a portfolio is the single most important decision you will probably make. The closer you get to the time when you will need to spend an account, generally the less you should have in stock so that you don't have to sell the equity in a down market.Submitted by Betty Youngman from Omaha, NE
Q: My husband recently died so I am sitting on a large amount of cash (rather my broker is sitting on it). Am I lucky to have cash rather than equities? And, I'm considering using more than one broker in order to diversify my liability should things get worse. I am comfortable finncially right now, but????
Answered 10/06/08 19:51:22 by Kathy Moore
A: You are very lucky to be in cash at the moment. Before you do anything else with the money, make sure you have a plan. Talk to your broker about your needs, both short term and long term. Questions to consider are things like; How much income do you need from the portfolio, What is your tax situation and what are your long term goals for this money. These are just a few of the questions that you should discuss along with your personal feelings about risk. For example, how would you feel if you saw the value of the account go down 10% or 20%? Using more than one broker is not really a way of diversifying liability. You could have 5 brokers who all end up buying the same stock. Part of managing risk and creating a portfolio that does what you want and need it to do is making sure that all of the parts are working together.Submitted by Chad from Grand Prairie, TX
Q: I have read a lot about people pulling their money out of the stock market. I would like to put some back in. What stocks should I consider?
Answered 10/06/08 15:27:40 by Bryan Clintsman
A: Historically the stock market has always moved in an up and down movement, but over the long term it has tended to be in more of a "four steps forward, one step back" cycle over a period of years. Despite claims and solicitations from some financial advisors, nobody can accurately predict when the "one step backward" part of the cycle will occur. The answer, therefore, is to participate in all phases of this forward and backward cycle so that over the long term your portfolio will not only have the best chance for a positive return, but maybe more importantly will also give your portfolio a chance to stay ahead of inflation which will eat away at your purchasing power later in retirement. My personal view is that individuals have no business owning individual stocks and bonds because the amount of actual research necessary to invest in an individual company's stock is truly overwhelming - something most individuals do not have near enough time for. To be honest, many stock brokers do not actually do much of that research themselves either, but rather rely on computer models of market trends, etc. For all those reasons I recommend a handful of very diversified mutual funds that will give your portfolio the best chance of at least some exposure to the most important asset classes without putting risk in any one company. Mutual fund managers come as close as anyone to doing the real research and due diligence required to make an investment in individual companies. So for a very small fee you can get the benefits of their professional research, as well as critical diversification of your investment dollars at the same time.Submitted by R. Scott from Hurst, Tx
Q: I have a rollover I.R.A. with $435000 in a money market fund not covered by fdic with Fidelity [at 2 1/2%] & $100000 in a fixed annuity at 5% .My wife is 76 and I am 78. What will our average MRD be for the next 10 years.
Answered 10/06/08 13:11:07 by Burk Rosenthal
A: Using the Uniform Life Expectancy table, which is most common, the distribution rate is approximately 4.93% at age 78 and progresses to approximately 8.33% at age 88. Of course this is based on your prior year's December 31 balance each year.Submitted by Mitch Walker from Colleyville, TX
Q: I have a variable rate annuity with Fidelity bought with after tax dollars. It is invested in the stock market. I can cash in with no penalty or surrender charges. It's now worth less than my original investment. If I cash out and put in CD's can I use the loss to offset capital gains? I was told that if I cash out and it has earnings (gains) I would have to pay 10% penalty and taxes on the gains.
Answered 10/06/08 12:47:28 by Jim Lacamp
A: Yes. You can write off a loss in an annuity, but if you have gains, they will be subject to taxation. The penalty applies to withdrawels before age 59 1/2Submitted by Roy Bertelmann from Ft. Worth, TX
Q: My wife and I own a joint account with Vanguard and have two Index Funds in the account. How will the recent FDIC bailout rule affect our portfolio? Will the joint account be insured for up to $100,000. or $250,000.00 or will each index fund be insured seperately and for what limit?
Answered 10/06/08 12:45:18 by Jim Lacamp
A: Index funds are not covered by FDIC.Submitted by joyce broyles from arlington, texas
Q: I need three questions answered despertly. I realize that there is now insurance coverage by the Treasury if you have money in a money market account with a brokerage, is that insured up to 250,000 like FDIC is? If not and you have more in there than 250 and it is a IRA rollover, would you roll the rest over to another firm? If your bank is in trouble would you withdraw and how do you find one that is safe! Thank you for your time
Answered 10/06/08 12:44:18 by Jim Lacamp
A: Brokerages are insured against fraud or default by SIPC, not FDIC and usually have higher limits. If you buy CD's from a brokerage, then they will usually be covered by FDIC. I would contact the brokerage firm you are with and ask them what their coverage is and what it does and doesn't cover.Submitted by Bill Crawford from Pantego, Tx
Q: Can someone explain why it is advisable to hold diminishing investments in a downward moving market rather than sell off and go to cash? I understand the argument that it may seem to force the holder into more risky investments in order to recoup but that choice is the option of the holder. I also understand that it will take him longer to recoup because of diminished investment principal to work with but additional time will compensate for that. In light of all the above, why not "stop the bleeding" and preserve profits?
Answered 10/06/08 12:41:45 by Jim Lacamp
A: This is a very tough question. Timing the market is very difficult because you have to time out, then back in at appropriate times. Furthermore, missing out on the biggest up days, which tend to occur at the end of down markets, has a big overall impact on your returns. For individual stocks, I usually recommend a "cry uncle" or stop-loss point, because they can and often do go to zero. For funds, I usually recommend staying invested, but each investor is different, with different time frames and risk tolerances, so I treat those on a case by case basis.Submitted by Debbie from Arlington TX
Q: I have/had an ira with Merrill Lynch; which got bought out by Bank of America. Do I call my broker or who do I call for consultations now and how long do I wait for the switchover to take place?
Answered 10/06/08 12:33:25 by Jim Lacamp
A: I would call your broker, your relationship with him or her should remain the same.Submitted by Willadene Chapman from Forot Worth, TX
Q: Is the Texas Teacher's retirement sound or has it lost assets in this market? Will my monthly amount be reduced?
Answered 10/06/08 12:22:57 by Barbara Shields
A: It is possible that the investments of the Teacher Retirement System of Texas have been impacted by recent financial events. However,according to the TRS website, there will be a conference call this afternoon at 4:00 PM CDT to discuss these. As stated by the TRS: "While uncertainty remains about our government's plans to avert a financial crisis, TRS wants to make sure our members understand the current financial environment and potential implications to the TRS fund. You are encouraged to submit questions via email prior to the call at chalktalk@trs.state.tx.us " The conference call number is 877-757-0918, and the Passcode is 446725 . The replay will be available for 5 days at 1-888-348-4629, Passcode 446725 .Submitted by kay bing from fort worth, tx
Q: Know nothing about muni bonds tax free. have two. Aspen CO. Sales tax 5% due in 2021 and Denver Citi @6.125% due 2025 bought 15 year ago. Retired and wondering what to do. The first has lost 4500.00 in two week, and second 2300.00. The first bond started at 100,000. Please explain and advise. Thank You
Answered 10/06/08 11:02:50 by Jim Lacamp
A: Thanks for asking. Muni bonds can fluctuate for a variety of reasons. They will move up and down in value with the direction of interest rates. If there are any questions about the issuer, or the company that insures the bond in the case of insured bonds that will affect the value as well. Lately, as the real estate market has soured, the muni bonds for several states have traded down in value. Vallejo California and Jefferson COunty Alabama have been in the news about credit problems and the State of California has money problems. The entire muni market has been under pressure as news of the stifled credit markets heightens. I will do some research on your bonds and follow up.Submitted by Phillip Breedlove from Fort Worth, TX
Q: My retirement investments are entirely in 401(a)/403(b) funds through my employer that are set to become progressively more conservative until 2035 (the year I turn 68). I'm inclined to follow traditional advice and to leave the funds alone since I still have a good amount of time to recover from this current downturn. However, I have heard a couple of financial advisors promoting the virtues of using stop loss orders since any percentage of loss requires a greater percentage of gain to return an investment to the point that it was at prior to the loss. It seems to me that this recommendation is too simplistic though and must have some sort of drawback that I am missing. Can you explain to me whether there is any wisdom in this sort of investment strategy in my situation? Thanks for your thoughts.
Answered 10/06/08 10:54:36 by Scott Reasor
A: It sounds like to me that your 401(a)/403(b) is invested in whats called a age based mutual fund. Mutual funds like this automatically adjust the asset allocation the closer you get to retirement. A stop-loss order is designed to limit an investor's loss on an indvidual stock position by selling that stock once it reaches a certain price. Stop-loss orders do not apply with mutual funds.Submitted by Norm from Arlington, Tx
Q: We have our IRA with Merrill-Lynch and have taken a $25,000 hit since 9/01/08. Supposedly we only have 20% in mutual funds, the rest in bonds, money market & CD's. I don't know the right thing to do. They tell me to ride it out & see what the bailout does. What do you think?
Answered 10/06/08 08:01:12 by Scott Reasor
A: Your question resembles a question I answered previously. I believe it's in the best interest for investors to review their portfolio with their advisor's, especially during times like this, to ensure that their asset allocation meets their long term goals. If you and your advisor at Merrill-Lynch feel that an allocation of "20% in mutual funds, the rest in bonds, money market & CD's" is aligned with your long term goals than don't change a thing. During times of uncertainity many investors make the mistake of getting out by trying to time the market. In essence investors are letting their short term emotions manage their portfolio and are ignoring their goals. History has shown that diversification, asset allocation, and periodically rebalancing your portfolio are the necessary tools to weather roller coaster rides like this one. This does not mean that the value of the portfolio will not go down, but it balances the risk and reward based on your long term goals.Submitted by Bob Phillips from fort worth tx
Q: I am 56 years old.My only retirement will be my 401.I have half of it in stable fund and the other half in fidelity contrafund.I have lost $20,000.00 this year.Should I put it all in stable?
Answered 10/05/08 22:48:30 by Bryan Clintsman
A: You are among a growing number of people in this country whose only retirement assets will be in the form of whatever they were able to save themselves. This is due to the increased use of 401(k) plans over traditional pension plans by employers. This means you need to do everything possible to save the maximum allowed $20,500 (in 2008 for those over age 50) pre-tax dollars in this 401(k) plan each and every year until retirement. Next, you must ensure that you have a properly diversified portfolio, especially being within 10 years of a traditional retirement date. As of now you basically have ½ of your retirement assets in a money market-type of fund (stable value), and the other ½ in large U.S. stocks (Contrafund). A properly diversified portfolio should have about 10 different asset classes represented, not just 2. History has shown that many of these other asset classes that are not currently represented in your portfolio (such as small cap U.S. stocks, international stocks, bonds, real estate, commodities, etc.) are a critical part of absorbing the volatility of market gyrations. Your next step should be to get your 401(k) assets allocated into a more diversified mixture of asset classes that matches your risk tolerance and investment time horizon.Submitted by Dora Sloan from Fort Worth, Texas
Q: Some of our retirement investments are with A.I.G. Annuity and I understand they are in trouble. Is our investment FDIC guaranteed up to $l00,000? It is past the maturity date, therefore can it be withdrawn and receive full value? We have been unable to contact A.I.G. Please advise.
Answered 10/05/08 22:33:55 by Burk Rosenthal
A: Annuities are not protected by the FDIC. It would be important to know if this is a fixed annuity, which pays a stated interest rate or a variable annuity, which has investment options, called sub-accounts. AIG fixed annuities as well as fixed options within AIG variable annuities may be subject to the claims of creditors, should AIG fail. But, in some instances certain protection may be provided by the state department of insurance. Personally, I don't believe AIG will fail, given the assistance AIG has received from Uncle Sam, but technically at some point they could. The variable annuity division of AIG, which is supposedly well-capitalized, may be sold to another insurance company. If you are invested in the subaccounts within a variable annuity, those are not subject to the claims of AIG creditors, should AIG fail, because they are considered part of a "separate account." You are however, subject to market fluctuations. It sounds like you are past the "surrender period" with your annuity, but you may want to get some help should you decide to withdraw the funds, because a transfer to another institution could help prevent any IRS tax or possible penalties if done correctly.Submitted by Patty Lattin from saginaw, texas
Q: I am 66, have just retired this summer, and have $1150 from Social Security. I was planning on using the interest and dividends to add to my SS for living expenses. I have a mortgage with a monthly payment of $389, not including taxes. I don't owe any credit card bills, or have any car payments. There is close to $200,000 in IRAs, Money Markets, Janus, Vanguard, and savings CDs. Should I look to replace some of these for a better interest rate, or more safety? I just want a fairly steady income without having to use the principal.
Answered 10/05/08 21:21:02 by Bryan Clintsman
A: Even before someone retires, we feel it is critical to get a detailed handle on the monthly expense requirements to make it through the month – fixed, variable, necessary, and discretionary expenses. Only once you have this total expense number can you begin to understand how much extra income (over Social Security) your investments need to generate, and be able to answer your overall question of how your investments should be allocated. Then your next step is to allocate your investments into an allocation that is designed to produce enough interest and dividends to cover most of the remaining part of your monthly expenses. The older a person gets, the more it is usually o.k. for them to also dip into a little of the principal of their assets as well – many experts agree that 4% is a safe annual total withdrawal rate in order to ensure your portfolio lasts a long lifetime. Because you are still young and very early in retirement, you cannot afford to have no money in stocks because inflation will eat away at your purchasing power over the next 15-20 years. Therefore, your next step should be to get an exact number for your required monthly expenses, then get a summary of exactly what the overall allocation of your current investments is, and make any changes necessary to make sure it is properly diversified for your risk tolerance and income goals.Submitted by Jenisse Linebarger from Ft. Worth,Texas
Q: We were getting ready to build a new home. We would be using our savings. Should we wait? Is this a good time to build? Please advise, Thanks, Jenisse
Answered 10/05/08 16:51:17 by Burk Rosenthal
A: I think this primarily depends on your current circumstances. If you will deplete your savings, I'd hold off. If you will still have the equivalent of several months income in savings after building the home, then I'd look at your current sources of income. If you will be using the savings for a down payment and carrying a mortgage on the rest, then you want to make sure your income is likely to be there for you should the economy get worse. If you are employed, have there been layoffs? Are there any rumors of layoffs, etc. If you will still have several months of income in savings and you feel good about your sources of income, it may not be a bad time to build. The housing market is suffering right now and this could work to your advantage.Submitted by John Lee from Roanoke,TX
Q: Our goal is not to outlive our money. We are in our early seventies. Our retirement portfolio is divided in a 401K and a IRA. Would we be smart to go to the sidelines in cash or stay the course in our current 50/40/10 asset allocation?
Answered 10/05/08 16:38:46 by Burk Rosenthal
A: It sounds like you have a good blend of stocks, bonds and cash, but you want to be sure that your stocks and bonds are broadly diversified. Assuming that is the case, you should probably stay the course - as long as you are comfortable with the fact that things [the market] could get worse before they get better. I believe there is a good chance if you move to cash now, you may later regret your decision. Whatever you do, don't let your emotions drive your decision. Make sure that any changes you make are based your overall goals and objectives and not just what is currently happening in the market.Submitted by scott loveton from arlington, texas
Q: Regarding the bailout plan, please explain how this will be funded. Sounds to me like the US is simply printing more money, increasing the national deficit and depreciating the value of the dollar. Your thoughts?
Answered 10/04/08 18:02:06 by Bryan Clintsman
A: The bill signed into law by President Bush authorizes the appropriation of government funds for the use in purchasing the “bad” credit debts that many large financial institutions own. The plan calls for the government to take over these distressed investments and attempt to sell them over the next few years as the credit markets improve. Therefore there is a chance that much of the $700 billion invested could be recouped, in which case the American taxpayer will recover some (or possibly all) of their investment. In order to pass this law the final bill had to include language that authorized the government to increase our national debt from its current $10 trillion to $11.3 trillion – about $40,000 for every American. Our national debt has increased by almost 10% in the last year alone, with 25% of that debt owned by foreigners. Unfortunately, a little partisan politics did sneak into the bill before it was passed, including such things as financial support for fishermen & other victims of the Exxon Valdez accident, and a few other special interest groups. However, the good news is that the bill also includes many good things, such as the creation of an oversight board to monitor the distribution of the bailout money in pieces over time, a requirement that any financial institution which has some of its bad debts purchased by this plan also give up some equity in its own company in return, a limitation on executive compensation, and finally a “patch” that should reduce the number of people caught in the AMT tax trap this year.Submitted by Robert Myers from Arlington, TX
Q: Are credit union deposits now covered to $ 250,000 by NCUA or are only FDIC deposits covered?
Answered 10/04/08 15:40:24 by Kathy Moore
A: NCUA deposits are also covered to $250,000.Submitted by joyce broyles from
Q: Thank you for your help...is a charles Schwab bank safe? They have a high yield checking account they are offering. Thank you so much for any help you may have to give me.Thank you again
Answered 10/04/08 15:25:12 by Barbara Shields
A: The Charles Schwab Bank is a member of FDIC, so deposits are insured,up to the limits described in the FDIC rules. The limits have been increased (generally speaking, from $100,000 to $250,000 per depositor) by the bailout bill just signed into law.