Winter 2001 Newsletter
IN THIS ISSUE . . . Click on the Below Topics to Jump to That Area:
If you’ve reached your 40s or early 50s and find you haven’t saved much for retirement, don’t just abandon your retirement goals. You can still save significant sums by approaching the task seriously. Some strategies to consider to accelerate your retirement savings include:
The Economic Growth and Tax Relief Reconciliation Act of 2001 (Tax Act) significantly expanded the tax advantages of education IRAs, now called Coverdell Education Savings Accounts (ESAs). Starting in 2002, the key features of ESAs include:
This example is provided for illustrative purposes only and is not intended as a projection or reflective of any specific investment
Like other provisions of the Tax Act, provisions regarding ESAs are scheduled to expire in 2011 unless further congressional action is taken. Before contributing to an ESA, consider the impact on financial aid. Typically, an ESA is considered your child’s asset for financial aid purposes. Please call us at (800) 878-4036 if you’d like to discuss whether you should use an ESA.
The Economic Growth and Tax Relief Reconciliation Act of 2001 has provided significant new benefits for both Section 529 plans and Coverdell Education Savings Accounts (ESAs). With all the new provisions, you may have difficulty deciding which to use for your college savings. Some factors to consider include:
There are a number of factors that should be considered before deciding between an ESA and a Section 529 plan. Please call at (800) 878-4036 if you’d like to discuss your situation.
Rating agencies assign ratings to bonds to give investors an indication of the bond’s investment quality and the relative risk of default. The two largest bond rating services are Standard & Poor’s Corporation (S&P) and Moody’s Investors Service (Moody’s), both of which evaluate thousands of bond issues.
The ratings assigned by S&P and Moody’s are as follows:
|AAA-Aaa||Highest quality, extremely strong ability to repay debt.|
|AA-Aa||Very strong ability to repay debt.|
|A-A||Strong ability to repay debt, somewhat more susceptible to adverse changes.|
|BBB-Ba||Adequate ability to repay debt, adverse conditions are more likely to lead to weakened ability to repay debt.|
|BB-Ba||Faces major uncertainties which could lead to nonpayment.|
|B_B||Has the ability to repay debt, but adverse conditions will likely impair the capability to repay debt.|
|CCC-Caa||Vulnerable to nonpayment.|
|CC-Ca||Highly vulnerable to nonpayment.|
|C-C||Bankruptcy may have been declared, but payments are still continuing.|
|D-D||Currently in default.|
Within each category, each agency uses qualifiers: + or - for S&P and 1, 2, and 3 for Moody’s. The first four categories are considered investment grade bonds, while the lower categories are considered speculative.
After a bond is issued, the rating agencies continue to monitor it, making changes if warranted. A rating is merely a general guide of a bond’s investment quality and risk of default, not a recommendation to buy the bond. Other factors should be considered before investing in a particular bond.
In investing, our natural tendencies sometimes makes it difficult for us to follow fundamental principles. So, as we face this volatile period, make sure to understand these tendencies so your investment performance isn’t adversely affected:
The incredible bull market of the past few years has led many investors to become overconfident in their abilities and to take on added risk in their portfolios. Now that the market has shown it can do down as well as up, investors need to keep their natural tendencies in check so they don’t overreact. Please call us at (800) 878-4036 if you’d like to review your portfolio in light of current market conditions.
YOUR SPOUSE AND THE FAMILY’S FINANCES
In many families, one spouse takes primary responsibility for the family’s finances, doing everything from paying bills to making investment decisions to reviewing insurance policies. If that spouse dies first, the other spouse may have difficulty taking over these tasks. Therefore, if you take care of money matters in your marriage, one of your more important financial duties is to prepare your spouse for handling the family finances. Some strategies to consider include:
Just as different types of clothing, music, and food move in and out of fashion, so do different types of investments. A short time ago, technology stocks were the darlings of the investment world, only to see many of their values come crashing down. With investing, it is important to avoid the latest fashions and concentrate on selecting investments that help you meet your financial needs.
Determining your personal investment profile is an important factor in deciding where to put your investment dollars. This, in turn, can directly affect your comfort level with your investments. The recent market volatility has most investors concerned. However, if you are excessively worried about your investments, review your needs and concerns with a trusted professional. Keep in mind your investment requirements can change as you age and as your circumstances change.
Please contact me at (800) 878-4036 if you would like to review your investment portfolio.
If you have any questions about a specific newsletter article, please call us (800) 878-4036 so we can discuss its implications. Additionally, if you have any questions about our services, please let us know.
Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.
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Wink Tax Services / Wink Inc.