Thursday, May 19, 2011, AM | 1 Comment
A volatile stock market, falling property values, rising prices, mounting unemployment and credit crunch have shaken even the most indifferent Americans.
Many wonder if their nest eggs are safe, how to stretch their budgets as health costs rise, and whether they should delay retirement and keep on working – or for some, may be return to work – to meet their everyday life expenses.
Americans are mostly worried about the following:
The market worries me. My nest egg is worth a lot less. How do I handle my savings and my investments?
It depends on your age. If you are retired or closed to retirement or have about more than 30 years to retire, your overall investment will be affected.
However, for people over 55, an increasingly diminishing value of their investment will affect their financial security in the short-term.
But for folks who still have some years to go to retirement, they will be financially affected in short-term but in the long-term, they might be able to regain some value close to or perhaps more than before the market meltdown.
If this age group is heavily invested in stocks, experts tell us to stay put and don’t panic.
As you approach your retirement age, your best bet, the consensus of experts is, to invest where you can preserve your capital, and generate income with less risk involved. Money market comes to mind in this regard.
Are my bank accounts, including IRA and 401(k), insured?
The Federal Deposit Insurance Corporation – commonly known as FDIC – a couple of years ago raised the insurance limit for individual bank deposits, from $100,000 to $250,000. Joint accounts held by a husband and wife would be covered for up to $500,000 ($250,000 each.)
Now if you have $250,000 or less in Individual Retirement Account (IRA), checking, or savings account, and your FDIC-insured bank goes under, you would be covered against your loss. As the name suggest, IRA cannot be a joint account.
Sadly for American workers, 401(k) is not protected against market losses, not till this writing anyway.
However, if your employer or the firm managing your account goes broke, you are protected under the Employee Retirement Income Security Act (ERISA). The amount in your 401(k) account cannot be claimed by creditors of the failed firms.
Is my money market fund safe?
With the words money market, there are two kinds of distinct concepts involved. FDIC insures money market deposit accounts (MMDA) but does not insure money market funds (MMF). MMDA is considered savings account whereas MMF is a mutual fund.
Is my brokerage account safe?
But your account is insured against fraud. That means, if your broker disappears overnight – don’t some of us know that – the Securities Insurance Protection Corporation (SIPC) would insure your account up to $500,000. For this reason, you should make sure that your broker is SIPC-insured.
In light of market meltdown, should I bail out from the market?
Experts advise to stay put and stay the course you had selected. In the best of market and in the lousiest market, diversifying your investment is always your best bet.
The allocation of your assets should match your goals for the money and for the time period you are investing for.
In general, you will come out ahead if you avoid panic selling and panic liquidation of your assets.
Will my car insurance go up? What if I have been late on my mortgage and credit card payments and thereby my credit score has gone down? Would this affect the cost of a new policy?
Most likely, it will. When your credit score goes down, your insurance premium goes up. The insurance companies derive their insurance score from your driving record, your age, and your credit score.
Beyond that, you can try to explain your specific situation to your insurance company. However, it is under no obligation to reduce your premium.
What if I cannot sell my house?
If you can’t sell your house for more than you had originally bought, just stay put if you possibly can. If you bought another house without selling your old house, the next option for you is to rent it out.
Renting out your house takes patience, common sense and a price that reflects what comparable properties are bringing in each month in the neighborhood you are living in.
You can check out websites like Rentometer.com to compare prices.
Screen applicants when you are looking for a good tenant. Check with their previous landlords for their payment history as well as they cared for the home.
Make sure they have a stable income and job history.
The Landlord Protection Agency offers free landlord forms as well as a tenant screening document for a small fee.
Be sure to get landlord insurance.
Require your tenant to get renter’s insurance.
Is it better to use credit card or debit card?
I did a post on comparison of the two for the case when a person goes to college. The same thing can apply to everyone in this lousy market. Read the post credit card vs debit card in college.
In a Nutshell
Americans sure have good reasons for worrying about their future. Experts tell us that the economy is not going to get better as long as the unemployment rate is way too high.
As always when investing, consult a financial adviser. Click on U.S. Securities and Exchange Commission and do research on brokers and investment advisers. Follow their guidelines.Facebook.com/doable.finance