Is It Too Late To Protect Your Financial Future?
Sharon L. Secor
September 22, 2008
Those of us watching the financial markets and the business sector have seen some dramatic changes occur recently. From outright bank failures to last minute bailouts of major financial institutions and lenders, the action in the financial sectors has been fast and furious of late. Current circumstances could easily lead one to question the security of their retirement plans and the safety of their savings and investments. Now is an excellent time to review your financial situation and take whatever steps possible to protect your assets and your fiscal future – before it actually is too late.
Retirement Planning Could Be Affected
As pointed out in a September 16, 2008, article in the Toledo Blade, the failure of the venerable, 158 year old Lehman Brothers Holdings Inc, a major investment bank, has the potential to negatively impact pension funds and 401 (k) plans. According to the article, "stock and bonds issued by Lehman, Merrill Lynch & Co., and troubled insurer American International Group are widely held by mutual funds, pension funds, and individual investors."
In addition to the dramatic failure of Lehman Brothers, Merrill Lynch & Co. just sold itself to Bank Of America to avoid collapse and AIG, on the very edge of succumbing to the economic pressures that forced them into a fight for survival, received a last minute, high emergency $85 billion bailout loan. Reuters reported on Wednesday September 17, 2008, that Morgan Stanley, the number 2 investment bank in the nation, is considering a merger as their stock value plunges. In fact, according to a September 19, 2008, Forbes.com article, Morgan Stanley shares have fallen 83.2% since last autumn. Goldman Sacs is seeing their stock drop significantly, as well, during this turbulent period.
Hard times have stuck the world of high finance and big business, and the American consumer is going to feel their pain, as the effects of the current multi-crisis market situation accentuates the difficulties already faced through rising food and energy costs. Retirement planning is one vulnerable area for many. For example, KETV.com reported on September 15, 2008, that Omaha, Nebraska, city workers "took a hit on their pensions, losing 7.5 percent of their value in the last quarter alone."
As stated by the Detroit Free Press on September 17, 2008, 401 (k) plans and mutual fund holdings are among the assets of the average person that can be affected by such failures as the Lehman Brothers. That is because, for example, "people with 401(k) retirement savings accounts may be unaware of their exposure to problems at Lehman and other firms swept up in the turmoil, especially if they are unfamiliar with the holdings of stock and bond funds in which the retirement stash is invested." The article also pointed out "the Fidelity and Vanguard families of mutual funds, as of June 30, were two of the largest owners of Lehman stock, holding 6% and 3%, respectively, and that several pension funds held Lehman. And, so it goes with the other major failures and struggles in the realm of big business and high finance.
What You Can Do To Protect Yourself
David Darst recently wrote an interesting article on the matter. In terms of investing, he highlights the importance of the diversification of investments, so that assets "don't all move in the same direction at the same time." Also essential to asset protection is to "pay attention to portfolio protection and risk management," something that makes it necessary to be familiar with the specifics of your investments, including "being mindful and vigilant of what could go wrong in an investment instrument or an investment plan" and developing investment specific strategies for loss mitigation and protection.
On September 18, 2008, the Wall Street Journal´s Market Watch published numerous tips from CPA financial planners on how consumers can protect their savings and investments. Among the usual advice – such as to make sure bank deposits are within the right amount, $100,000, to be FDIC protected and brokerage accounts are within the Securities Investor Protections Corp. (SIPC) protection limit of $500,000 – was some smart advice about arranging other aspects of your financial life to take up the slack if savings and investments suffer a temporary or not so temporary set-back.
For example, some of that advice included reconsidering retirement date and working "a bit longer than you had planned to offset the impact of lost portfolio value," as well as decreasing spending "to put less of a burden on your investment assets." When looking at the long-term picture, it wouldn´t be a bad idea to consider dealing with your existing debt burden, either. The longer you carry the debt, the more expensive it will be, as interest continues to add to the amount owed. Relieving yourself of as many burdens as possible, particularly debt, will leave you can leave you with more freedom to maneuver if the economic situation continues to become more troubled and more complex, as some economists fear.
It seems that the bottom line on protecting your assets is to be well-informed not just about your own personal financial and investment situation, but also about what is going on in the world beyond. Doing so can help you to stay ahead of serious market downfalls or, at the very least, ensure that you have as much knowledge as possible to help you to make the best financial decisions possible in order to secure your fiscal future. Choosing to take a proactive role in your finances by becoming as knowledgeable as you can can help you to protect your assets before it is too late.
Retirement Planning Could Be Affected
As pointed out in a September 16, 2008, article in the Toledo Blade, the failure of the venerable, 158 year old Lehman Brothers Holdings Inc, a major investment bank, has the potential to negatively impact pension funds and 401 (k) plans. According to the article, "stock and bonds issued by Lehman, Merrill Lynch & Co., and troubled insurer American International Group are widely held by mutual funds, pension funds, and individual investors."
In addition to the dramatic failure of Lehman Brothers, Merrill Lynch & Co. just sold itself to Bank Of America to avoid collapse and AIG, on the very edge of succumbing to the economic pressures that forced them into a fight for survival, received a last minute, high emergency $85 billion bailout loan. Reuters reported on Wednesday September 17, 2008, that Morgan Stanley, the number 2 investment bank in the nation, is considering a merger as their stock value plunges. In fact, according to a September 19, 2008, Forbes.com article, Morgan Stanley shares have fallen 83.2% since last autumn. Goldman Sacs is seeing their stock drop significantly, as well, during this turbulent period.
Hard times have stuck the world of high finance and big business, and the American consumer is going to feel their pain, as the effects of the current multi-crisis market situation accentuates the difficulties already faced through rising food and energy costs. Retirement planning is one vulnerable area for many. For example, KETV.com reported on September 15, 2008, that Omaha, Nebraska, city workers "took a hit on their pensions, losing 7.5 percent of their value in the last quarter alone."
As stated by the Detroit Free Press on September 17, 2008, 401 (k) plans and mutual fund holdings are among the assets of the average person that can be affected by such failures as the Lehman Brothers. That is because, for example, "people with 401(k) retirement savings accounts may be unaware of their exposure to problems at Lehman and other firms swept up in the turmoil, especially if they are unfamiliar with the holdings of stock and bond funds in which the retirement stash is invested." The article also pointed out "the Fidelity and Vanguard families of mutual funds, as of June 30, were two of the largest owners of Lehman stock, holding 6% and 3%, respectively, and that several pension funds held Lehman. And, so it goes with the other major failures and struggles in the realm of big business and high finance.
What You Can Do To Protect Yourself
David Darst recently wrote an interesting article on the matter. In terms of investing, he highlights the importance of the diversification of investments, so that assets "don't all move in the same direction at the same time." Also essential to asset protection is to "pay attention to portfolio protection and risk management," something that makes it necessary to be familiar with the specifics of your investments, including "being mindful and vigilant of what could go wrong in an investment instrument or an investment plan" and developing investment specific strategies for loss mitigation and protection.
On September 18, 2008, the Wall Street Journal´s Market Watch published numerous tips from CPA financial planners on how consumers can protect their savings and investments. Among the usual advice – such as to make sure bank deposits are within the right amount, $100,000, to be FDIC protected and brokerage accounts are within the Securities Investor Protections Corp. (SIPC) protection limit of $500,000 – was some smart advice about arranging other aspects of your financial life to take up the slack if savings and investments suffer a temporary or not so temporary set-back.
For example, some of that advice included reconsidering retirement date and working "a bit longer than you had planned to offset the impact of lost portfolio value," as well as decreasing spending "to put less of a burden on your investment assets." When looking at the long-term picture, it wouldn´t be a bad idea to consider dealing with your existing debt burden, either. The longer you carry the debt, the more expensive it will be, as interest continues to add to the amount owed. Relieving yourself of as many burdens as possible, particularly debt, will leave you can leave you with more freedom to maneuver if the economic situation continues to become more troubled and more complex, as some economists fear.
It seems that the bottom line on protecting your assets is to be well-informed not just about your own personal financial and investment situation, but also about what is going on in the world beyond. Doing so can help you to stay ahead of serious market downfalls or, at the very least, ensure that you have as much knowledge as possible to help you to make the best financial decisions possible in order to secure your fiscal future. Choosing to take a proactive role in your finances by becoming as knowledgeable as you can can help you to protect your assets before it is too late.
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