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Keys to Protecting Your 401(k) If Your Employer Ends Contribution Matching

Filed under: Investments, Saving
Tags: , — Written by: Simos
June 25, 2010

Photo by: Sanja Gjenero (Stock Exchange)

In a previous post, we introduced 401(k) retirement savings plans. If started early and kept growing with a good rate of contribution from both employee and employer, the 401(k) can be one of the best ways to keep the bills paid after leaving the workforce.

But there’s the catch: the vitality of the 401(k) and its ability to stand up to big post-retirement challenges is built largely on employer contribution matching, where “the boss” chips in a quarter or more for every dollar an employee draws into his or her plan.

What happens when, after years of plugging along on your investment, an employer suddenly withdraws their support for contribution matching? Today, we’ll talk about what to do. (more…)

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Demystifying Finance: What is a 401(k)?

Filed under: Budgeting, Family Finance, Investments, Saving
Tags: , , , — Written by: Simos
May 13, 2010
Retiremnt money

Retirement money
Photo by: Billy Alexander (Stock Exchange)

Every time there’s a dip in the stock market or a big company falls into dire straits, you can hear people fretting about three things: debt, the mortgage, and the value of their 401(k). For many, a 401(k) is a critical part of retirement savings. For others, especially young folk entering the workforce or professionals for whom retirement is a long way away, the 401(k) is something else entirely: a mystery, off in the unforeseeable realm of the future.

But, as with any long-term savings goal, the sooner you start saving for retirement, the sooner you can plan to enjoy it. Since retirement can mean many years of your life – and there’s just no telling what kind of Social Security protections or other government programs will be healthy twenty, thirty, or forty years down the line – it’s important to start thinking about it now. So we begin with an introduction: just what is a 401(k)?

(more…)

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Should I Invest in Gold

Filed under: Banks, Investments
Tags: , , , , — Written by: Lyuda
March 3, 2010
South African Krugerrands

South African Krugerrands
Photo By Lyudmila Green

The stock market has been as volatile lately as a poker table at Las Vegas casino. Many traditionally conservative investments have seen unheard of volatility. Savers have begun asking the question, “What can I invest in to make sure I at least keep the principle of my investment?” For many investors, gold has come up on the list of options.

Before buying a boat load of gold, one should consider the reasons gold is valuable and what gold is useful for in terms of investments. Gold has industrial value, but there is frankly plenty of gold that is already mined and available for industrial purposes; so much so that you can easily find 30$ gold plated 2 foot S-Video cables at your local electronics supplier. Gold is useful either to preserve an investment, or as a hedge against falling currency. If you feel currency is unsafe, or your portfolio is overexposed to a specific currency, adding gold to your portfolio could be wise.

(more…)

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Is Now A Good Time To Spend Money?

Filed under: Investments
Written by: UWSA Staff
December 8, 2008

Christmas is fast approaching and nervous retailers are reporting the weakest sales figures in 35 years. Auto sales in November were at their lowest rate since 1982. That said, consumers, who haven’t gotten themselves in over their head in debt, lost their jobs, or otherwise suffered from recent economic bad times may wonder if it is a good time to spend. Auto companies are offering rare opportunities for low or no interest debt to entice buyers, and retailers are offering deep discounts to clear inventory. Here are some things to consider before jumping on board?

  • Can you really Afford it?
  • Is it worth the price tag?
  • Will the Terms Change?

Can you really Afford it?

Lenders are right now offering very low rates, often for the life of the loan. Still you have to make sure that you can really afford the extra monthly payment in an economy where food prices are still high, and while gas prices are low right now, it may not be the time to buy a Hummer. Inflation is still high and undertaking a large new bill could be taking away from cost of living expenses in years to come. It is important to consider where to put the extra cash if you are fortunate enough to have extra. Low interest rates, and enticing terms may make important purchases more affordable, and tough times for retailers mean lower prices as well. It could be a great time to put on that new addition, upgrade your appliances or buy a new car.

Is it worth the price tag?

A deal isn’t a deal if the product isn’t worth the price tag. There are places to invest in your home where you will always get a return on your investment. Upgrading your kitchen with granite counter tops, new cabinets and stainless steel appliances are always a smart buy, provided you don’t over improve your home for the neighborhood. Research the marketplace on the Internet, or check with a local real estate professional. Spending for a home improvement that will overprice your home for the location is a bad investment. Automobiles are always a bad investment, but for most of us they are a necessity. Compare prices and interest rates. You may be able to get a great deal on a “new” 2008 model, but you must remember that the vehicle is a year older than a “new” 2009 model, so at trade in time it will be worth less, no matter how many miles it has been driven.

Will the Terms Change?

You must also consider the terms on the loan. If it’s an introductory rate, then it is important to consider if you will be able to afford the payments after it changes. You will also want to consider if the lender has provisions to change the terms if you are late on a payment. Always read the fine print, and always make sure you can afford any debt you take on.

Summary

Irresponsibility caused the recent financial crisis. Some of that was irresponsible consumers, some was irresponsible bankers, some was irresponsible government overseers. In bad economic times it is vital to make smart choices with money. Using good judgment is always a smart policy.

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Safe Investments in a Recession

Filed under: Investments
Written by: UWSA Staff
October 21, 2008

While the Federal Reserve is being tight lipped about whether the US is currently in a recession or will be average folks are certainly feeling a bit different about their wallet. A lot of people are wondering exactly what to do with their retirement savings, or what’s left of it, in the midst of what certainly seems like economic hard times. So what investments are safe in a recession?

What is a Safe Investment?

Some people are of the opinion that with any possibility of loss no investment is safe. Even in that sense though, there’s certainly safer and less safe. Most investors aren’t looking to be billionaires they’re looking to have a normal standard of living in retirement which means making enough money that will continue accumulating throughout retirement to afford that it. That means choosing investments aggressive enough to attain that goal but, especially depending on one’s age, not choosing ones that put your retirement at excessive risk.

Kinds of Risk

To accomplish the above we have to look at the different kinds of risk. Most people worry about what is called market risk; that’s risk that your investment might lose money for a period of time or permanently. While that’s certainly a concern it’s not the only concern, another kind of risk is called inflation risk. That is the risk that no matter what the return on your investment inflation may make the cost of living so much greater that your gains will amount to nothing at all or in fact a lost when compared to the cost of living in retirement,

The True meaning of Diversification

Most investors have heard of the idea of diversification. Essentially don’t put all your eggs in one basket. The problem is a lot of folks don’t really think about what one basket means. A truly diverse investment portfolio should contain both foreign and domestic investments, and those investments should not just be mutual funds but also things like cash, bonds, and potentially even investments such as real estate. Further they should be in diverse industries which are unlikely to experience economic troubles together. The reason behind this is generally if one of these areas is down some of the others are likely up. This reduces the chance for major loses in either category to wipe out one’s savings.

Examples of Safe Investments

There’s a few types on investments which are generally considered safe, even in times of economic strife. Treasury Inflation Protected Securities (TIPS) are issued by the US Treasury, and offer both appreciation as well as protection against inflation. Certificates of Deposit (CDs) are issued by banks but are protected by the FDIC up to 250,000 dollars. Money Market accounts invest in very short term investments, generally ones with very low risk. They are not guaranteed by the Federal Government however they
are usually insured by the SPIC up to 100,000 dollars.

Summary

In general what makes an investment safe is the likely-hood of return on investment. Even with safe investments however one much always diversify. Many regarded municipal bonds as a safe investment before the mortgage crisis. Also, though it’s unlikely, if the US Treasury were to default most of the safe investments backed by it would be in question. For that reason one should always be diverse not only in terms of kinds of risk, but aware of risk in a global market.

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