What is your Strategy for your 401k or IRA?

As I write this article about 401k and IRAs, I have two recent copies of the Dallas Morning News, Business section on my desk.  The first one states “The Dow Jones Average turns positive for 2011.”  It goes on to state the Dow rose 166.36 points or 1.4%, to close at 11644.49.  The index shot up 9.3% after hitting 10665 on October 3rd, the lowest level of the year.  Why?  Did we win one of our wars, or did someone create 100,000 private sector jobs?  No – then why?

The article title next to this one is “Finance Chiefs debate tab for Europe’s Woes.”  So Germany and France decide to shore up the bailout for Greece and our markets go up 9.3%? Why?  Fast forward to Monday, October 17th, same paper, new headline “S & P staging a comeback, after falling more than 12%.  Index rallying behind stock values, increased confidence in Europe.”  Then by close of business the Dow was down 250 points.  Due to Germany’s leaders not all onboard with the bailout plans.

Some of you will remember 2008 and losing 30-45% or more of your retirement savings in one year.  It might have taken you 30 years to build that nest egg and then it goes down 10% and you say it will come back.  Then it goes down another 15%, now it is too far down to bail out, besides it’s only a paper loss!  Then another 20% down and you know you are riding it out.  If you are in your 40’s, 50’s or 60’s and ready to retire, now you can’t because of the loss, and you might have to work another 10-20 years.  Now the good news is lots of people who took that hit were back to almost where they were by the end of 2010.  So for two years they were just trying to get back to even.  But they probably didn’t count all the contributions from their hard work to make that comeback.  In reality they were still underwater on their accounts.

If you listen to the weekend radio talk shows, most if not all will go into great depths of how we are looking at another 2008 type drop in the markets.  Only this time our government won’t dump in the trillion dollar bailout to rescue the markets.  Many think it could drop 5000-6000 points.  What would that do to your retirement plans?  If you are 30 you can start over. If you are over 40 or 50 you’re not so lucky.  You need to start now to develop a strategy to protect and grow your retirement funds.  Remember Warren Buffet’s number one rule to investing – Don’t lose what you already have!

Buy & Hold (and Pray)
This is Wall Street’s investment philosophy, and while it is an investment strategy, it may not be in your best interest.  It certainly is in their best interest.  There are several newsletters and evaluation tools available today, but many do not cover the limited choices available inside your 401k.  Some companies offer advisor services to their employees and if your company does, you should at least see what they have to say.  But many companies don’t because of liability concerns.
If you are one of the 80% of 401k owners who pick a handful of funds the day they get hired and then forget about them for 25 years, it’s time to become educated about which choices to make, which funds to be in and when to get into them, and more importantly, when to get out!  This requires a strategy that I call ‘Protect and Grow’ where you might not get the entire up but you should miss most of the down market.  Not to be confused with trying to time the market, this almost always is a disaster.

Educating yourself on this matter has become increasingly more important in the last several years, especially with the elimination of many defined benefit pension plans, and the precarious position of Social Security and Medicare. If you are interested in more information on how you can access the ‘Protect and Grow’ strategy, please view a short video presentation at our website, www.dmgfinancial.info.  It will give you an overview to how you can add this strategy to your investment tools.

DMG Financial Services is a division of Deck Marketing Group.  Steve Deck can be reached at 940-382-4110, email Steve@Deckmarketinggroup.com

by Mark S. Stegman, Financial Advisor, Ameriprise Financial Services, Inc.

Have you dreamed of owning a lake home, a cabin, or a mountain retreat? Those who have weathered the recent recession and remain fiscally sound may be in a position to benefit from the current vacation home real estate market. In certain parts of the country, an oversaturation of real estate and a shortage of qualified buyers have resulted in lower median prices on vacation homes. Some areas have also seen a wave of foreclosures and short-sales.

Many foreclosure properties are due to individuals finding themselves underwater with ballooning mortgage payments. There also are a fair number of properties available that were held by developers unable to sell vacation homes on spec. As a result, in some areas you can find price-reduced vacation homes at the higher end of the spectrum along with a variety of modest cabins and lake homes.

Keep in mind, there are risks associated with buying a foreclosure property. Don’t be surprised to find broken windows or appliances or worse, since maintenance often falls to the wayside when a homeowner is unable to make payments. Be prepared to put additional money into repairs. If you aren’t handy yourself, you may want to enlist someone who is when you tour properties, to help you evaluate potential repair costs.

When you’re ready, consult a reputable realtor in your area to learn about available foreclosure properties in your area. If you prefer to do the legwork yourself, explore web and print resources for current lists of foreclosures, which become public when they are filed in your state. Some savvy buyers are contacting banks directly to express interest in purchasing a foreclosure property while bypassing the more lengthy purchasing process. Purchasing a bank-owned property tends to be less risky because you can be confident the property has been vacated and is available.

Do think carefully before you venture into second homeownership. The recent downturn showed how important it is to stay within your means and be prepared for unexpected changes in your earning capacity or the performance of your investments. Visit your banker and get preapproval for a second mortgage so you can act quickly if a desirable property becomes available. An experienced financial advisor can help you evaluate your financial health and determine if you can afford a second home and stay on track with your long-term goals. Make an appointment today and then take advantage of the opportunities that are out there to realize your dreams.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.

It’s been a rough few years for the American economy.  With all of the downsizing and layoffs, many people are turning to entrepreneurship.  Here are a few simple steps to help you get your business started:

1. Do Research – If you’re not an expert in your business, you’ll need to become one, or at least be able to talk like one.  Try finding people who have started similar businesses and learn from them.

2. Create a Business Plan – Writing a business plan is essential.  When you’re trying to find investors or get approval for a loan, people are going to need to see your business plan.  It will encompass the business’s information including financials, market analysis, and descriptions of your products and services.  You can find examples of business plans on the internet, or you can go to www.sba.gov for more information.

3. Register Your Business – Businesses can take many forms.  Sole proprietorships do not require registering with the state.  You can just file an assumed name certificate with the county in which you’re doing business.  While this is the cheapest and easiest way to set up a business, you will be personally liable for anything associated with the business.  Alternately, many people choose to register with the Secretary of State’s office.  Decide on the type of entity, pay your fee, and follow the instructions to register online.  It’s more expensive than a sole proprietorship, but many of the structures provide people with limited liability.  This means you’ll only be liable up to the amount that you’ve put into your business.

4. Get a tax ID number – You’ll need a federal tax id number.  Do this at www.irs.gov for free.

5. Set up your bank accounts – Visit your bank and set up an account in your business name.  This account will allow you to cash or deposit checks made payable to your business.

6. Get Help – Depending on the type of business you start, there could be many more steps that the city, county, or state will require.  If there are things you don’t understand, get help.  Having a good lawyer, accountant, or other business professional to advise you is invaluable.  It’s always cheaper and easier to do things right the first time than it is to get yourself out of trouble later on.