Don’t overreact to stock market’s ups and downs

By David Pitt

The Associated Press

updated 9:22 am PT, Mon., June 7, 2010

Highlights:
Understand the market

Part of learning to ignore the swings is understanding that some amount of market volatility is normal. The key is to understand that it can be caused by different factors.

Today’s market fluctuation is nothing like 2008 when credit markets were collapsing, banks had little liquidity and the economy was on the verge of a meltdown, said Rose Greene, a Los Angeles financial adviser.

“It may have nothing to do with North Korea, China or Europe,” she said. “If you know that, you can incorporate that into your thinking and you can breathe.”

To read the full article click HERE

Investing in mutual funds involves risk, including possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other important information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

Here’s an overview of the retirement plan landscape, excerpted from a special section on our website, “IRA Rollovers for Dummies“.
provided by Los Angeles Financial Planner Rose Greene, CFP®

All retirement plans are not the same. In fact, there is such a wide variety of retirement plans that it is worth it to read up on your choices. Here’s a brief look at the different plans and what they have to offer.

The Traditional 401(k). Most people have such a retirement savings plan, and it works like this. The plan is funded with pre-tax dollars taken out of your paycheck (through payroll deductions). If you’re lucky, your company will match your level of contribution or even make contributions on your behalf – after all, the employer contributions are tax-deductible. The I.R.S. will currently let you put up to $16,500 a year in a Traditional 401(k); COLA adjustments may drive that limit higher in the future.

The I.R.S. also allows catch-up contributions (additional contributions from those aged 50+), with a current annual limit of $5,500. In 2010, the total amount put into a 401(k) by you and your employer can’t exceed $49,000.₁

There are several variations on the traditional 401(k) theme …

The Safe Harbor 401(k). A byproduct of the Small Business Job Protection Act of 1996, the Safe Harbor plan combines the best features of the traditional 401(k) and a SIMPLE IRA, making it very attractive to a business owner. With a Safe Harbor plan, an owner-operator can avoid the big administrative expenses of a traditional 401(k) and enjoy higher contribution limits. The Safe Harbor plan allows for employers to make matching or non-elective contributions. Typically, employers match contributions dollar-for-dollar up to 3% of an employee’s income.₂

The SIMPLE 401(k). Designed for small business owners who don’t want to deal with retirement plan administration or non-discrimination tests, the SIMPLE 401(k) is available for businesses with less than 100 employees. Like a Safe Harbor plan, the business owner must make fully vested contributions (up to 3% of an employee’s income). But the maximum pretax employee contribution to a SIMPLE 401(k) is $11,500, and employees with a SIMPLE 401(k) can’t have another retirement plan with that company.₂

The Solo 401(k). Combine a profit-sharing plan with a regular 401(k), and you have the Solo 401(k) plan, a retirement savings vehicle designed for sole proprietors with no employees other than their spouses. These plans currently permit you to contribute up to $49,000 annually plus $5,500 in catch-up contributions for a total of $54,500 if you are 50 or older.₃

The Roth 401(k). Imagine a Traditional 401(k) fused with a Roth IRA. Here’s the big difference: you contribute after-tax income to a Roth 401(k), and when you reach age 59½, your withdrawals will be tax-free (provided you’ve had your plan for more than five years). The annual contribution limits are the same as those for a Traditional 401(k) plan.₄

You can roll Roth 401(k) assets into a Roth IRA when you retire – and you don’t have to make mandatory withdrawals from a Roth IRA when you turn 70½. With a standard 401(k), you have to roll over the assets to a traditional IRA and make the required withdrawals.₄

The DB(k). The DB(k) is a defined benefit retirement plan with some of the features of a 401(k). Companies with fewer than 500 employees are starting to put them into place. They offer plan participants a retirement savings plan with the potential for a small income stream in the future, mimicking the pensions of years past. The pension income equals either a) 1% of final average pay times the number of years of service, or b) 20% of that worker’s average salary during his or her five consecutive highest-earning years._5,6

And then there are SEP-IRA, SIMPLE IRA and Keogh plans …

The SEP-IRA. This employer-funded plan gives businesses a simplified vehicle to make contributions toward workers’ retirements (and optionally, their own). The employer contributions are 100% vested from the start, and the employer can supplement the SEP-IRA with another retirement plan. In 2010, these plans have a $49,000 maximum contribution limit, and an individual’s personal contribution limit depends on such factors as service, performance, and salary. These plans don’t permit catch-up contributions._3,7

The SIMPLE IRA. This is like a SIMPLE 401(k) – a small business retirement plan with mandatory employer and optional employee contributions and a current $11,500 annual contribution cap. But in this plan, there is one big difference for the business owner. If the business is not doing well, the owner can reduce plan contributions. The employer contributions are still 100% vested from the beginning, and $2,500 catch-up contributions are currently allowed for employees 50 and older._3,8

The Keogh Plan. The Keogh is designed for small unincorporated businesses. There are defined benefit, money purchase and profit-sharing variations; the defined benefit variation is a qualified pension plan offering a fixed benefit amount. In 2010, the annual contribution limit for a profit-sharing Keogh is $49,000.₉

Did you know you had so many choices? If you are an employer, you may not have realized you have such an array of choices in retirement plans. But you do, and asking the right questions may represent the first step toward implementing the right plan for your future or your company. Be sure to ask a qualified financial advisor or business retirement plan consultant about your options today.

For more information, visit a special section on our website called IRA  Rollovers for Dummies. Still confused? Call Rose at 310.3991200 and she’ll answer all your questions.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

1 smartmoney.com/personal-finance/retirement/got-a-401k-question-13841/ [2/2/10]2 irs.gov/retirement/article/0,,id=119625,00.html [1/5/10]3 turbotax.intuit.com/tax-tools/tax-tips/tax-planning-and-checklists/5438.html [4/19/10]4 smartmoney.com/personal-finance/retirement/understanding-the-roth-401k-17679/ [2/2/10]5 kiplinger.com/businessresource/forecast/archive/DBk_pension_of_future_090819.html [8/19/09]6 bankrate.com/finance/retirement/where-to-find-income-for-retirement-1.aspx [3/9/10]7 irs.gov/retirement/article/0,,id=111419,00.html [2/3/10]8 irs.gov/retirement/article/0,,id=111403,00.html [10/16/09]9 moneycentral.msn.com/quickref/quickref.asp?cat=10&qamode=2&reftype=0&selcat=6&sub=4&topic=5 [4/19/10]

provided by Los Angeles Financial Planner, Rose Greene, CFP®

In 2010, anyone may convert a traditional IRA to a Roth IRA. No income limits will stand in the way of the conversion.₁ Should you do it? Here’s why it may (or may not) make sense for you to go Roth this year.

Why you might want to consider it. A Roth IRA permits tax-free growth and tax-free income distributions in retirement (assuming you are age 59½ or older and have held your Roth account for 5 years or longer). You can contribute to a Roth IRA after age 70½, without having to take mandatory withdrawals. While contributions to a Roth IRA aren’t tax-deductible, the younger you are, the more attractive a Roth IRA may seem.₂

However, older investors have reason to go Roth as well – especially if they don’t really need to withdraw IRA assets. Under present tax law, converting an untapped traditional IRA to a Roth will shrink the size of your taxable estate, and careful estate planning could foster decades of tax-free growth for those IRA assets.₃

Currently, if you name your spouse as the beneficiary of your Roth IRA, your spouse can treat the inherited IRA as his or her own after you die and forego withdrawals. So those Roth IRA assets can keep compounding untaxed across the rest of your spouse’s life.₄

If your spouse then names a son or daughter as a beneficiary, that heir has the choice to make minimum withdrawals according to his or her life expectancy, all while the assets continue to compound tax-free. Currently, withdrawals from an inherited Roth IRA are not subject to income tax.₃

The federal government may be giving you a tax break this year.

Why you may want to think twice about it. The IRS regards a traditional IRA-to-Roth IRA conversion as a distribution from a  traditional IRA - a taxable event.₅ You’ll need to pay taxes on the entire amount of the conversion.

If you talk to your local tax preparer, CPA or financial planner, you will probably find all of them agreeing on one thing: federal income tax rates are likely to be higher in the future than they are now. This is another reason why 2010 may be a good time to convert.

You could simply do a partial Roth IRA conversion if converting the full amount would send you into a higher tax bracket. If you think you have more IRA assets than you need, a partial Roth conversion could result in a more manageable short-term tax impact as you pursue the objectives of having some tax-free retirement income or leaving some IRA assets to your heirs.

You may be tempted to use the current IRA assets to pay the conversion tax, but should you? If you’re younger than 59½, you’re looking at a 10% penalty on the amount you withdraw, and you’ll lose the chance for tax-free compounding of those assets within the Roth IRA.₆

Be sure to consult your tax advisor before you convert. This is a very good idea before you arrange any rollover, trustee-to-trustee transfer, or same-trustee transfer of your IRA assets. There are many variables to consider, and they differ greatly from person to person. In any year, you should fully understand the potential tax impact of a Roth conversion on your finances and your estate.

Also, remember that while the income limit on Roth IRA conversions will go away in 2010, the income limits on Roth IRA contributions still apply next year and for the foreseeable future. So high-income IRA owners can make the conversion, but they may not be able to pour new money into the account. For 2010, the MAGI phase-out limits kick in at $105,000 for single filers and $167,000 for joint filers. However, those income limits don’t prevent you from contributing to a traditional IRA in 2010 and converting that IRA to a Roth.₇

Rose Greene is a Representative with Rose Greene Financial and may be reached at http://www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.
1 kiplinger.com/magazine/archives/2009/01/sweet-deal-on-roth-ira-conversion.html [1/09]
2 thestreet.com/print/story/10505164.html [5/26/09]
3 smartmoney.com/personal-finance/retirement/estate-planning-with-a-roth-ira-7966/ [1/22/09]
4 smartmoney.com/personal-finance/retirement/roth-iras-to-convert-or-not-7965/ [1/10/08]
5 smartmoney.com/personal-finance/retirement/roth-iras-you-wanted-to-know-7967/ [1/9/08]
6 cnbc.com/id/34511917 [12/21/09]
7 northjersey.com/news/business/82334757_Make_a_New_Year_s_to-do_list_to__bring_home_the_bacon__.html [1/22/10]

What do they do? And should you have one?

What does a financial planner do? Well, that depends. Many individuals refer to themselves as “financial planners”, but not all perform true multidisciplinary financial planning. Investment, insurance and tax professionals sometimes specialize in certain areas of financial planning (such as retirement planning, estate planning, tax planning, or investment management). A Certified Financial Planner™ practitioner is qualified to give you comprehensive financial advice, as a result of examination, continuing education, board certification and accumulated experience.

In general, individuals who call themselves “financial planners” aim to help you plan for your goals and needs and improve your unique financial situation.

What doesn’t a financial planner do? A financial planner cannot make you a thriftier shopper, a better saver, or help you earn more money. Ideally, he or she will look at your financial “big picture” and help you work to enhance it via money management. Depending on their credentials, they may recommend specific investments, long-run investing strategies, insurance options, retirement planning, risk management methods and more.

Who needs a financial planner? If you have some significant assets built up (a home, a retirement fund, savings, etc.) and are wondering about how to protect and/or grow those assets, you’re probably ready for a financial planner. If you currently live paycheck to paycheck or have less than $10,000 combined in your savings and/or any retirement accounts, then you’re probably not yet in need of a financial planner. What you should do is research savings strategies and take a good look at your spending habits so you can begin to build your wealth at a faster pace.

How much does it cost? That is a tricky question to answer. The cost of hiring a financial planner can vary depending on who you hire, where they are located and what type of “fee structure” they use. A fee-only financial planner earns a flat fee, hourly or otherwise, for their services. A fee-based planner generally prefers to charge advisory fees (often .50% to 2.00% annually of the assets under management) for his or her services, rather than commissions linked to investments or product sales.

In occasional instances, charging commissions may actually be more cost-effective for you, but may not be as beneficial. A commission-based planner typically receives the total percentage of his or her income in upfront commissions and therefore some may feel they have little incentive to service you on an ongoing basis.

In most cases, your initial meeting with one of these professionals will be free of charge (be sure to ask in advance about this), and you can discuss fee schedules and compensation arrangements at that time.

What is a “Certified Financial Planner”? If you see the designation “CFP^®” after a planner’s name, you have found a Certified Financial Planner™ practitioner (alternately called a Certified Financial Planner™ professional). A CFP^® has passed a comprehensive examination, amassed three or more years of qualifying full-time work experience, and enrolled in continuing education courses. A CFP^® practitioner must also adhere to a strict code of ethics as set forth by the CFP^® board.

Can you claim to be a financial planner without being a CFP^®? Yes. Although it’s important to point out that the field of financial planning remains vastly unregulated – meaning almost anyone can call themselves a “financial planner”. Does that mean a planner without their “CFP^®” designation is unqualified? Not necessarily. But if they aren’t certified, you may want to inquire about their experience and training.

How do I choose a planner? In two words … ask questions. Ask trusted friends or colleagues for referrals. Sit down with any planner you’re considering and find out how long they’ve been in business, what their credentials are, how they operate, etc. Most importantly, make sure if and when you hire a planner that your personalities will mesh. This is someone you may well be working with for the rest of your life, so you should choose someone you feel comfortable with.   Additionally, you can use this free checklist for interviewing a financial planner.

Rose Greene has been a Santa Monica based Certified Financial Planner for over 26 years and can be reached at 310-399-1200

This material was prepared by Peter Montoya, Inc. not the named Representative or Broker/Dealer, and should not be construed as investment advice.  Neither the named Representative or Broker/Dealer give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Events and data in recent weeks have prompted market participants to view the tailwinds that caused the markets to go sailing higher for much of 2009 as beginning to fade. They now view them as having become more balanced with the rising headwinds associated with increasing global frictions.

We continue to expect the powerful economic and profit growth to weaken in the second half of 2010. The weakening is likely to result from the fading of the extraordinary global policy efforts that created a tailwind for growth and the rise of new headwinds as some actions are reversed. The early stage of this transition is already underway leading to heightened market volatility. While there is still plenty of good news acting as tailwinds for the markets, there is increasingly more of a balance with the bad news, or headwinds. The winds of change blowing in the markets include the following:

Tailwinds

1. -The Federal Reserve (the Fed) is our friend (for now)
2. -U.S. Gross Domestic Product (GDP) growth is above average
3. -S&P 500 earnings growth is strong
4. -Credit and housing markets continue to heal
5. -China’s double-digit GDP growth (but slowing loan growth)
6. -Steep yield curve
7. -Massive global fiscal stimulus in the pipeline

Headwinds
-No job growth (yet)
-Federal, state and local budgets are awful
-Anti-business tone in Washington
-Commercial real estate woes remain
-China and India inflation risks
-European debt problems exacerbated by weak economies
-Bank lending is weak

These are not in any particular order since the importance placed on them by the market varies from day to day. Some of them will switch from being tailwinds to headwinds this year, like the actions of the Federal Reserve, while others may switch from being headwinds to tailwinds such as job

Want more details?  Click here to explore each of the winds that are currently driving the choppy market environment.

LPL Financial Research Weekly Market Commentary

Be cognizant of these unique challenges.

provided by Los Angeles Financial Planner, Rose Greene, CFP ®

Many states have passed laws barring housing, credit and employment discrimination against LGBT (lesbian, gay, bisexual, and transgender) couples and individuals. Yet these civil rights moves have not removed the financial penalties that gay, lesbian, bisexual and transgender couples face directly and indirectly.

State civil rights legislation hasn’t changed the mind of the IRS. Yes, there are progressive states like Massachusetts that have afforded gay and lesbian couples full marriage rights. But there is still a huge financial problem: federal tax law doesn’t recognize same-sex marriages, civil unions or partners. If a gay or lesbian couple marries, they are still single filers to the IRS, and each partner has to figure out their income separately on federal tax forms.¹

In one area, the corporate sector is ahead of the government. While the U.S. government doesn’t provide employee benefits to same-sex couples, the majority of Fortune 500 companies now offer health insurance and other forms of benefits to LGBT employees and their same-sex partners. However, LGBT couples pay federal taxes on employer-provided benefits. (Married heterosexual couples don’t.)¹

Extra $ for basic protection. Once straight people marry, they can count on certain legal and financial protections. In states that don’t recognize same-sex marriage or civil unions, it is much more involved and expensive for gay and lesbian couples to realize these same assurances.

A recent Chicago Tribune article pointed out the difference in Illinois: a gay couple with two children paid $10,000 to a lawyer to create two revocable trusts, powers of attorney and wills that would approximate the legal, medical and financial protection conveyed to straight spouses by a $40 marriage license.²

Retirement planning issues While gay couples pay equally into the Social Security system, no spousal or survivor benefits can be granted to them under federal law. (That’s because of the 1996 Defense of Marriage Act signed into law by President Clinton.) Many pension plans don’t allow survivor benefits to a same-sex couple either.^1,2

This has prompted many gay and lesbian couples to look into long-term income-producing investments for retirement, and to adopt a long-range growth investing approach as a sudden loss of SSI or pension benefits may raise the risk that they will one day tap into their principal. Younger gay and lesbian couples who recognize this potential retirement hazard can maximize contributions to IRAs, 403(b)s and 401(k)s in the present and consider converting traditional IRAs to Roths for tax-free growth.

Estate planning issues. Same-sex couples do not get the tax breaks the IRS gives to married heterosexual couples. This makes for some heavy-duty estate planning. Multiple powers of attorney may be needed per person; privacy waivers permit same-sex partners to access each other’s medical records in an emergency. Trusts may need to be created for real property and life insurance policies.

For 2010, Colorado and Wisconsin have passed laws that include estate planning protections for same-sex couples.³

Eldercare planning & nursing home care. Long term care planning is especially wise for the gay or lesbian couple. When the need for nursing home care arises, all couples fear the possibility of spending down their assets to the point that they need Medicaid. Yet federal law is crueler in this circumstance to domestic partners. If one of two straight spouses enters a nursing home and applies for Medicaid, the other spouse can stay in the couple’s jointly-owned residence without fear of losing the home. Yet if domestic partners own a home jointly and one applies for Medicaid, the healthy partner must buy out the ill partner’s ownership share to remain in that home.⁴

How George W. Bush gave gay couples a tax break. As a closing note, here’s an interesting financial wrinkle. When President Bush signed the Worker, Retiree and Employer Recovery Act of 2008, an opportunity that was once merely allowed became legally required. As of January 1, 2010, a surviving partner of a same-sex couple can roll over lump-sum inherited retirement savings from an employer-sponsored retirement plan to an IRA without a tax penalty. Before 2010, companies could prohibit this kind of rollover. Now, all employer-sponsored retirement plans that pay lump sums to non-spouse beneficiaries must provide the option.⁵

Let’s talk. Have you and your partner, husband or wife considered the amount of money you’ll need for the future? Have you taken time to look at your options in terms of trying to protect yourself from financial risk? A chat with a financial consultant can prove informative and illuminating. Have it now rather than later.

Rose Greene, CFP ® is a Representative with LPL Financial, Member FINRA/SIPC and may be reached at http://rosegreene.com, (310) 399-1200 or rose@rosegreene.com.

In a challenging market, getting back to basics may be good.

provided by Rose Greene, CFP ®

Respect for the humble CD. When the stock market turns bearish, people take a second look at fixed-rate investments, including certificates of deposit. In a bull market, the CD may seem like just about the most unattractive investment choice out there. But at the moment, those who own CDs can be thankful for their cautiousness.

A classic interim investment. Often, people choose to put money in a CD when they are “between investments” – that is, as they move a portion of their assets out of the market or a market sector for the short-term. While leaving the stock market altogether is a laughable and ill-advised idea for the serious, committed investor, most CDs are FDIC-insured and thereby offer safety of principal (up to $250,000) along with a guaranteed rate of return.

A CD is certainly a commitment: you can’t pull the money out of one until the end of the specified term. (If you need to withdraw your money, you’ll almost always pay an early withdrawal penalty.) You also want to find a CD that offers returns sizable enough to keep ahead of inflation. Since the inflation rate is just over 4% right now and since your gains will be taxed (assuming your CD is a short-term investment and not held inside a retirement account), it is therefore only logical to look for one that offers at least a 6% rate of return.

The tradeoff of a CD is easily expressed. We all want CDs with higher rates of return, but this usually means CDs with longer periods until maturity. The longer the wait, the longer the investor goes without access to those funds, and the greater the potential opportunity cost of not assigning those assets to an investment that might perform better.

Index-linked CDs. Some CDs offer you the chance to earn stock-market like returns. As the term implies, index-linked CDs are linked to the performance of a particular stock index. Often, they will match 90-100% of the return generated by an index, and some offer guaranteed minimum returns regardless of how the linked index performs over the term of the CD.¹

Should you move money into a CD? For the short-term, given this challenging market, it is an option to consider. But before you make a move, be sure to speak to a qualified financial advisor about your financial direction – for today, and for the long term.

CD’s are FDIC insured and offer a fixed rate of return if held to maturity whereas the return and principal value of an investment in equities fluctuates with changes in market conditions and does not offer FDIC coverage.

Investors of equity linked CDs should be aware of the risks of these products, including liquidity risk, market risk and call risk.  While the principal is guaranteed by the issuer, the rate of return will fluctuate in accordance to the closing price of the underlying index over a set period of time. One cannot invest directly into any index.

Rose Greene, CFP ® is a Representative with LPL Financial, Member FINRA/SIPC and may be reached at http://rosegreene.com, (310) 399-1200 or rose@rosegreene.com.

Provided by Los Angeles Financial Planner, Rose Greene, CFP 

The stock market is amazingly resilient.

The Stock Market can Sometimes Feel like a Roller Coaster Ride

You might be surprised at how fast the stock market can change … for the better. Let’s look at how the market has recovered remarkably – and quickly – from some notable downturns.

2008-2009: The collapse of the subprime mortgage markets triggered a recession and made 2008 the poorest year for stocks since 1931. The Dow Jones Industrial Average fell 10% in June 2008 and fell 10% again in October 2008, losing 19.12% for the year. On March 9, 2009, the major U.S. indices closed at 12-year lows with the S&P 500 at 676.53.^1,2,3

Then the market took off. Investors who swore off stocks in early 2009 lost out on one of the great rallies. From the March 9 lows to the end of 2009, the S&P 500 soared 64.83% while the NASDAQ gained 78.87% and the Dow gained 59.28%.⁴

2001-2002: After the four-day closure of the stock market following 9/11, the Dow fell 685 points to 8,920 on September 17. It kept falling, losing 14.26% in a week to close at 8,235 on September 21.  But what happened next? A huge gain. The Dow closed 2001 at 10,021 – a 21% rebound in less than three months.⁵

There were more challenges ahead. On October 9, 2002, the Dow had fallen to 7,286.  But on Halloween, the Dow sat at 8,397 – a 10.6% gain in 22 days.⁵

As for the people who panicked and bailed out of the stock market, they ended up kicking themselves:  in 2003, the DJIA gained 25.3%, the S&P 500 26.4%, and the NASDAQ 50%.⁶

1987: October 19 was Black Monday: in a contagion of selling exacerbated by unchecked computer technology, the Dow lost 22.6% in one day, falling to 1,738, a 508-point loss.⁷ (That would be akin to a 2,400-point one-day drop today.)  The S&P 500 lost 20.4%.⁸ By comparison, the initial “Black Monday”,  the stock market crash of 1929, represented a 12.8% market loss.⁹

Then the recovery kicked in. During the next two trading days, the Dow gained nearly 300 points – and it closed 1987 at 1,939, gaining back all of the loss and ending up 2% for the year.¹⁰ By January 1990, the DJIA was at 2,800.¹¹

If you were fortunate enough to invest $1,000 in the S&P 500 index at the close of Black Monday and reinvested your dividends, you would have wound up with about $10,800 20 years later.⁷ If you had invested in the Dow stocks a week before Black Monday, you would have lost 30% on your investment in the crash … but if you held on, your investment would have gained 462% over the next 20 years.¹⁰

1974: With investors fretting over rising inflation and the energy crisis, the Dow loses 30% of its value during the first three quarters of the year. Suddenly, the Dow gains 16% in October.¹² In early December 1974, the Dow is at 577; in July 1976, it hits 1,011.⁵

So while the Dow, S&P and NASDAQ have been through some rough periods (and even a poor decade), the important thing is how they have climbed historically.

On August 12, 1982, the Dow was at 777.  On January 14, 2000, it was at 11,722.98.  That’s a 1,500% gain in 17½ years.¹³ This is why people stay in the market through the downturns. This is what the market is capable of achieving. There are periodic descents, but history is definitely on an investor’s side.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Standard & Poor’s 500 Index is an unmanaged index generally representative of the U.S. Stock Market.

This material was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.

1. 1 cnbc.com/id/28451744 [12/31/08]
2. 2 allheadlinenews.com/articles/7013587460 [1/3/09]
3. 3 money.cnn.com/2009/03/09/markets/markets_newyork/index.htm [3/9/09]
4. 4 cnbc.com/id/34645043 [12/31/09]
5. 5 the-privateer.com/chart/dow-long.html [6/30/08]
6. 6 upi.com/Business_News/2003/12/31/UPI_NewsTrack_Business/UPI-75601072911443/ [12/31/03]
7. 7 sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/10/18/BUODSRIN6.DTL&type=printable [10/18/07]
8. 8 foreignpolicy.com/story/cms.php?story_id=4026 [10/07]
9. 9 money.cnn.com/2004/10/26/markets/1929crash/ [10/26/04]
10. 10 articles.moneycentral.msn.com/Investing/Dispatch/BlackMonday20YearsAfter.aspx [10/19/07]
11. 11 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average [7/3/08] 12 money.cnn.com/2008/06/27/markets/bear_market.moneymag/index.htm [6/27/08]
12. 13 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average [7/3/08]

Before 2009 ends, some things you might want to consider.

Fall is the time to consider some year-end financial moves – little and not-so-little things you might do to plan to improve your financial position.

You could put more in your 401(k) before they play “Auld Lang Syne”. As you only get one chance to save for retirement and an annual deadline to make retirement plan contributions, you could increase your final retirement plan deferrals of 2009 to the maximum allowed by your plan, assuming your finances permit you to do so. Contributions to traditional IRAs and 401(k)s are usually made with pre-tax dollars and thereby could help you reduce your tax bill.¹

If you haven’t contributed to your IRA or Roth IRA for 2009, you have until April 15, 2010 to make that move. You can contribute up to $5,000 to an IRA (or spread up to $5,000 of contributions across multiple IRAs) for tax year 2009; those over age 50 may contribute up to $6,000 to their IRAs for 2009.² If your modified adjusted gross income (MAGI) is into six figures, this may reduce or even prohibit Roth IRA contributions depending on your filing status.

You could try to harvest some losses. You might want to sell some losers to offset some winners (not every security was a winner this year) and counterbalance capital gains. Keep in mind that if you are in the 10% or 15% federal income tax bracket for 2009, you won’t have to pay capital gains tax – that break extends into the 2010 tax year as well. If you want to sell, sell carefully – you don’t want to generate so much income that you creep into a higher tax bracket.³

You could try to pick up some tax credits. Are you thinking about buying a home? The up-to-$8,000 first-time homebuyer credit has been extended to the end of April and complemented by its new variant, the up-to-$6,500 credit for move-up buyers. Remember, the phase-out limits on that credit just rose – they are now $125,000 for single filers, and $225,000 for joint filers. The home has to have a price tag of $800,000 or less and it must be your primary residence. A first-time homebuyer is defined as someone who hasn’t owned a home within the past three years; a move-up buyer is defined as a buyer who has lived in the same primary residence for a stretch of five consecutive years or longer.⁴

How about some energy credits? If you make your principal residence more energy-efficient or purchase solar hot water heaters, geothermal heat pumps, wind turbines or other qualifying alternative energy equipment to heat or cool your home, you can qualify for a tax credit for up to 30% of the cost of the improvements. There is a maximum tax credit limit to $1,500 for improvements put in service in 2009.⁵

Do you have sons or daughters in college? The Hope Credit has become the American Opportunity Tax Credit, a credit of up to $2,500 toward qualifying college expenses. Phase-outs kick in at $80,000 MAGI for single filers, $160,000 MAGI for joint filers.⁶ Additionally, you could contribute a little more to a 529 plan before the year ends.

Prepay some deductible expenses. If you are pretty sure you will be in the same tax bracket or a lower one in 2010, think about making a thirteenth payment on your home loan in 2009 to boost your mortgage interest deduction, or prepaying your property taxes if your financial situation lets you do so.

Spend that FSA money. Do you have a Flexible Savings Account for your healthcare expenses? Think about getting some new glasses or braces, or find some way to use that money – money you might lose after December 31, unless your employer allows you the extended-access option to your 2009 FSA funds (in which case you’ll still have to use them by March 15 of next year).⁷

Sit down with your financial professional for a portfolio review. See how (well) you’ve done this year. Think about next year, and what you might do as the economic recovery progresses. Discuss some of the different aspects of your financial situation. If you want a better understanding of where you are at financially, this is the chance to gain it.

Rose Greene, CFP™ is a Registered Representative with, and securities are offered through LPL Financial, Member FINRA/SIPC. 

This was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

 Citations.

1 foxbusiness.com/story/personal-finance/retirement-advice-ages/ [12/26/08]

2 irs.gov/retirement/article/0,,id=202510,00.html [11/10/09]

3 usatoday.com/money/perfi/taxes/2007-06-15-mym-capital-gains_N.htm    [6/15/07]

4 money.cnn.com/2009/11/05/news/economy/Extending_unemployment_benefits/index.htm?postversion=2009110612 [11/5/09]

5 irs.gov/newsroom/article/0,,id=206875,00.html [11/13/09]

6 irs.gov/newsroom/article/0,,id=205674,00.html [11/6/09]

7 bankrate.com/finance/money-guides/use-fsa-money-so-you-don-t-lose-it-1.aspx [2008]