There is no question that in today’s economic climate, lots of people have lots of different questions. In my own family and among my own friends, I hear the same recurring questions being asked. So, here with the help of my friends in the financial planning/services community, are some answers you might consider telling your clients. Naturally, there might be a difference of opinion but here goes:   Are bank accounts, IRAs, and 401(k)s insured? The Federal Deposit Insurance Corporation (FDIC) has raised the limit for individual bank deposits from $100,000 to $250,000. Joint accounts held by a husband and wife would be covered up to $500,000. Unfortunately, defined contribution plans such as 401(k)s are not protected against market losses. But federal protections are present in the event the employer or the company managing the account goes under. In fact, under the Employee Retirement Income Security Act, the amount on the 401(k) account cannot be claimed by creditors of failed companies.   How about money market funds? The government now temporarily insures money market funds against losses for the next year. A brokerage account, which may include mutual funds, stocks, or bonds, is not protected against market fluctuations. However, the account is protected against fraud and that’s where the Securities Insurance Protection Corporation (SIPC) comes into play. It insures the account up to $500,000. It’s important then to make sure that the brokerage is SIPC-insured.   Don’t stay in the market? People talk about bailing out. Experts advise it is usually best to stay the course, because a highly diversified portfolio generally reflects the amount of risk that the individual has been comfortable with as well as goals. Many advisors are recommending that one just hangs in there and avoids panic selling.   Of course, there are some who simply can’t ride out the storm, so where do they put their money? Experts claim that the safest investments are certificates of deposit and money market funds, particularly those that invest in Treasury bills. However consider the tradeoff. The safest investments generally produce the lowest returns. Buying annuities, or charitable gift annuities from a charity or university, which do come with tax breaks, may be an alternative for investors who are looking to reduce their stock exposure and who want an income stream for life.   What about those annuities? Many leading experts in financial circles advise that because variable annuities fluctuate with the market, they do provide an opportunity to take advantage of a market boom. Conversely, they may not protect from a down market unless a guaranteed minimum withdrawal benefit had been purchased, which affords a guaranteed income stream regardless of the performance of the investment accounts.   However, there is a downside here: it costs more and most insurers restrict the investment choices. Some experts suggest transferring a variable annuity to a fixed annuity where the principal is guaranteed and withdrawals of up to 10 percent of the account value are permitted each year without a penalty. But, keep in mind that this may incur heavy penalties for just switching from one to another.   Is it better to use a credit card or a debit card for purchases? Much depends on the individual’s situation but it doesn’t take being a brain surgeon to realize that a credit card should only be used if the full balance can be paid off each month. That way, it’s really borrowing someone else’s money to finance a monthly purchase and at no interest. Of course, if there already exists a heavy balance, then obviously, that shouldn’t be added to; therefore, consider using the debit card to keep the debt load down.   Finally, keep in mind that savings itself should be handled based on age and years until retirement. The most important factors are the post-retirement income and the value of the overall investments in determining how to allocate a portfolio. Diversified investments focusing more on capital preservation and income generation, and less on riskier growth stocks, are usually considered the best bets. Older investors may opt for the safety of money market funds.

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