(NEWSCHANNEL 3) – Tuesday evening, Newschannel 3 had a Certified Financial Planner, Jessica Hall from Portage based Zhang Financial, in the station, answering viewers e-mails about financial questions in the wake of Wall Street’s recent turbulence.

Here are your questions and Hall’s answers.

Connie wrote in:

Hello.
 
I have stock in Stryker, Baxter, Home Depot, and a few other companies.  Should I sell these now (esp. since the prices on Stryker and Baxter are up), and put them elsewhere in the market?  I.e. gold back or silver backed stocks???  Your advice is appreciated!
~connie

Hi Connie:
 
Without knowing your complete financial picture it is difficult to say if gold and silver would be appropriate investments for you.  Keep in mind, commodities can be very risky and may lose value just as easily, and possibly quicker, then individual stocks.  Stryker is a great company and has performed well in the past.  If you are looking for long term results you may choose to continue to hold Stryker.  Considering the nature of Stryker's business (healthcare equipment) and the aging of the baby boomer generation you may see great appreciation in the years to come.   
 
If you feel uncomfortable investing 100% of your portfolio in individual stocks you may want to consider purchasing a balanced, well diversified mutual fund or ETF.  These investments can help decrease volatility while enhancing return.  I also noticed that all of the stocks you mentioned are primarily domestic - you may benefit by looking into diversifying a portion of your funds into global or international investments to decrease your exposure to the U.S. market.  I would suggest speaking with a qualified financial advisor to determine the most appropriate investment strategy for your financial situation.

Tammie wrote:


 I am a 41 yr old widow living on Social Security and finishing school, I have a $10,000 settlement that I need to invest. .  With the stock market mess I am wondering what is my best bet for investing this money safely.

Tammie

Hi Tammie:
 
When the market is uncertain it may be the best time to invest.  Uncertainty typically drives the market down and offers new investors great opportunities to purchase.  As you know, the rule of investing is buy low, sell high.  The key to investing during turbulent times is to keep the right perspective and invest for the long run.   
 
If you forsee needing the $10,000 for expenses within the next few years it may not be wise to invest in the stock market.  With the volatile state of the market, your investment may take years to make a good return.
 
Instead, you may look at FDIC-insured certificates of deposits offered by most local banks.  CDs are a great investment option for someone who is not comfortable with the market or may need to use their money after a certain time period.  Remember, FDIC only insures up to $100,000 so be sure to keep your CD investment below that limit.
 
If you feel comfortable investing in the stock market you may want to start out investing in a balanced, well diversified mutual fund.  I would suggest consulting with a Certified Financial Planner or investment advisor before choosing any specific stock investments.

Dominick wrote in:


I'm a 68 year old retiree with funds in mutual funds. Would it be wise to withdraw funds to pay off the remainder of my house and save paying the interest rates. With what is going on in the markets today and in the past few months, I have not made gains but have losses. The outlook according to analysts is the the market may take over a year or more for the  markets to rebound. I owe about $100.000 and fixed rate is 6.125% for 25 yrs . Please reply. Thanks, Dom

Hi Dominick:
 
Before making a big decision like this you should consider your options.  I would strongly suggest speaking with a tax advisor and investment professional before making this decision - there may be important tax consequences if you choose to liquidate your investments.
 
Zhang Financial receives questions similar to yours often.  We tell our clients to consider the following before making your decision:

    *
      Cash Flow - does your monthly mortgage payment put a strain on your cash flow?
    *
      Taxes - are your investments tax qualified or non-qualified?  If your investments are qualified, upon withdraw you will owe income taxes - which can be quite expensive.  Do you receive tax benefits by deducting mortgage interest expenses on your taxes?
    *
      Risk Level - your level of risk will help predict your future investment returns.  Does your risk tolerance support your goal of making 6.125% per year?
    *
      Gains/Losses - if you choose to liquidate your investments what would your gains and losses be?  Remember, by selling everything you turn your "paper" losses into realized losses.   
    *
      Income - do you rely on your investments as a source of income?  Would you compromise your lifestyle if you no longer had investment income?
    *
      Portfolio Value - how large is your portfolio?  Would your investment portfolio be sustained if decided to withdraw $100,000?

As you mentioned, it may take years for the market to come back - you have to ask yourself what is more important.  Would you prefer to own your home free and clear, or would you feel more secure having an investment portfolio?  Again, with such an important decision I would strongly suggest speaking with a tax and investment professional.

Someone who chose not to identify themselves wrote in:


Jessica:
 
With the market the way it is, would you recommend cashing the davis funds, financial and venture in, and putting the money into a money market?
 
Thank you

Jessica replied:

Once the market is down it is usually too late to sell.  If you choose to liquidate your investments you turn your "paper" losses into realized losses.
 
Investing in a money market would significantly reduce your investment risk and exposure to the stock market.  Keep in mind, money markets will not appreciate signficantly when the market rebounds.  Therefore, you lose out on your chances to make back any losses your portfolio sustained.
 
In a way, what you are describing is "timing the market".  Zhang Financial does not employ or recommend market timing stratgies.  We have found market timing leads investors to buying high and selling low - very detrimental to your investment return.  You may want to consider re-assessing your risk tolerance.  Next, decide on an investment strategy consistent with an appropriate level of risk.  Then, stick to your strategy regardless of what the market is doing.  If you are running into difficulty deciding on your risk level I would suggest conuslting with a financial professional for assistance.

Bob wrote:

I've been putting a substancial amount of my weekly paycheck into a 401K plan for about 7 years now and not seeing it grow. Should I consider putting into CDs or something else that is safer?
Thank you,
Bob.

Hi Bob:
 
Zhang Financial does recommend saving in your 401k.  There are numerous benefits including tax deferral, disciplined savings, and possibly employer matches.  Although you may not feel your 401k is growing, keep in mind that when the market is down you purchase additional (more) shares.  When the market rebounds you have more shares to appreciate.  In addition, the more shares you own the more dividends you will receive.
 
Typically CDs are not available for investment in a 401k plan.  In addition, withdrawing funds from your 401k would have tax consequences.  If possible, consider saving a portion of your paycheck into a savings account.  Once you have built up cash, purchase a CD.  Remember, FDIC only insures up to $100,000 so be sure to keep your CD below that limit.

Judy wrote in:


I have about 5 years before I want to retire. I have already lost some in my 401k,should I freeze the rest or wait and hope that I can recover what I lost? Also should I keep putting money into my 401k?Thank you Judy Land

Hi Judy:
 
First, I would consider what type of risk you are taking.  What is your exposure to the different sectors and industries?  It is important to invest consistent with your risk tolerance.  When you are nearing retirement you may want to consider decreasing the amount of risk you take with your investments.
 
When the market is down, it is usually too late to sell.  As you still have five years left until retirement, you may choose to consider riding out the market.  If you decide to sell your positions now you will turn your "paper" losses into realized losses.
 
You should also consider continuing to save in your 401k.  When the market is down you are able to purchase more shares.  This gives you more appreciation and dividend potential.
 
If you feel nervous about the current market conditions and your nearing retirement I would suggest meeting with a financial planner to assess your risk tolerance and financial position.  Being that you are so close to retirement it may also be wise to have a financial plan in place.

Carl wrote in:

I am worried about a structured (guaranteed) annuity with AIG. If AIG files bankruptcy or goes under in any way, am I at risk of losing my structured annuity? Should I consult an attorney, or am I safe at this time? This is my only source of income. I am wondering if it's guaranteed should I be worried. Thank you for your time and all considerations.........cap

Hi Carl:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  Since you are currently invested in a structured annuity you may not be able to redeem your money from AIGA.  I would suggest consulting with a financial advisor or AIG representative about your options.  If possible, you may want to consider investing your money with a different company.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Marsh wrote in:


I have a Lehman Brothers bond which has lost 65% of it's value as of yesterday.  What will happen to his bond?  Will it eventually go down to a "0" value based on the bankruptcy?  Thank you for you response...Marsha

Hi Marsha:
 
Lehman Brothers filed Chapter 11 Bankruptcy which means they are restructuring - not "going out of business".  Therefore, there is a chance this company may make a comeback.
 
Zhang Financial, however, is not recommending that our clients invest in any Lehman funds or stocks.  In the event of total bankruptcy and liquidation bond holders would be paid before stockholders (if there is cash available).  I would suggest speaking with a tax and investment professional to explore all of your options.

Shawn wrote in:

I was permanently laid off of work.  I have over $19k in my 401K.  What should I do?  I was thinking of cashing out and putting it into a CD.

Thank you,
Shawn

Hi Shawn:
 
Zhang Financial recommends rolling over your 401k into an IRA account.  An IRA offers a lot of flexibility including more investment options, tax deferral and beneficiary designations.
 
If it is consistent with your risk tolerance, a CD may be a suitable investment for you.  Make sure that when you withdraw funds from your 401k you do not take a cash distribution - this would be considered taxable income.
 
Before completing any transactions I would seek assistance from your 401k provider or a qualified financial professional.

Wendy wrote in:

Jessica
 
Do you think that investing in gold is more secure then a 401k.
 
Thank you, Wendy

Hi Wendy:
 
A 401k is not technically an investment - it is just a type of account.  Within a 401k you are able to invest in different funds, stocks and sectors.  Rather than investing in gold, which can be very volatile and risky, consider diversifying your 401k.  Diversification and asset allocation can help enhance your return while decreasing the volatility of your investments.

Harry wrote in:


Greetings,
 What happens to policy holders, if AIG goes bankrupt.
                        Thank You,
                               Harry

Hi Harry:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.  AIGA claims the financial troubles experienced by their parent company, AIG, will not directly effect AIG annuity policy holders.
 
That being said, there is never a true guarantee.  If you own an AIG annuity I would suggest consulting with a financial advisor or AIG representative about your options.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Paul wrote in:

We have money in AIG.  What should we do?  Should we leave it there?  Should we pull it out?  What should we do?
Thanks,
Paul

Hi Paul:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  I would suggest consulting with a financial advisor or AIG representative about your options.  If possible, you may want to consider investing your money with a different company.  If you choose to liquidate your annuity there may be surrender charges and tax consequences.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Cathy wrote in:

I have an AIG annuity account that matures in 2011. Should I get out of the accounty? Is this type of retirement account covered by the SPC? Is it safe and insured?

Thanks,
Cathy

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Hi Cathy:
 
Annuities are not covered by SPC and are not insured.
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  I would suggest consulting with a financial advisor or AIG representative about your options.  If possible, you may want to consider investing your money with a different company.  Since your annuity does not mature until 2011 you would incur surrender charges for a full liquidation, however, it may be worth it depending on your situation.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Chris wrote in:


Hi Jessica,
 
I have an IRA, I am self employed.  I am wondering if it is worth it to make contributions to my IRA monthly when the money I contribute each month is just lost in the market down turns? Does it still work to my benefit for the tax savings?  Thank you.

Hi Chris:
 
You should consider continuing to invest in your IRA each month.  Regardless of what the market is doing, you will still receive the tax benefits associated with IRA contributions.
 
When you invest during a down market you are actually purchasing more shares.  Therefore, when the market rebounds you have more appreciation potential.  In addition, the more shares you own, the more dividends you will receive.

Someone who did not leave their name wrote in:


Hello Jessica,
 
I am wondering if AIG is not rescued and files bankruptcy what does that mean for the last annuity payment from my parents estate. Also I have life insurance through them that I am paying a monthly payment for.  Does that stay intact or will I have to get life insurance through someone else?  Thank you in advance for your time and answers.

Jessica replied:

AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  If you are currently waiting to receive a payment for your parents estate you will still receive the check as normal.  As far as your life insurance goes, if AIG Insurance does go bankrupt and the company is forced to close, you would need to find a new life insurance company.  I would suggest consulting with a financial advisor or AIG representative about your options

Sung wrote in:

I bought AIG fixed rate 7 year annuity on Oct 1, 2005 thru local bank. I didn't talk to bank person yet although I am a bit nervous about AIG news. If I withdraw now, there will be 7 percent penalty. Interest rate was 5.5 for the first year and 3 percent for the last 2 years. I am aware  annuity is not backed by FDIC. If AIG goes to bankrupt, am I going to lose all? Thanks. From Sung

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Hi Sung:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  Since your annuity does not mature for some time you would incur surrender charges for a full liquidation, however, it may be worth it depending on your situation.  I would suggest consulting with a financial advisor or AIG representative about your options.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Mary wrote in:


Hi,
I have over 140,000 dollars invested with aig. and im wondering will i be able to recieve and withdrawl my money if there isn't a settlement with aig. thanks in advance.
 
Mary Rose

Hi Mary:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  If your annuity does not mature for some time you would incur surrender charges for a full liquidation, however, it may be worth it depending on your situation.  I would suggest consulting with a financial advisor or AIG representative about your options.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.

Jody wrote in:

Hello my name is Jody. My son has an account at Edward Jones that is set up for college or whatever he wants with it (mainly don't go to college it must be used for retirement). Should I be worried about it or should start looking at different options..
Jody

Hi Jody:
 
It is always good to plan ahead and save for college.  Without knowing what you are invested in, it is difficult to assess if you should be concerned with your investments.  If possible, continue to save despite the market conditions.  A down market is a great opportunity to invest additional cash.

Steve wrote in:

Jessica:

Please comment on people who have all their money in bank CD’s that are tied to their Family Trusts. You always hear financial experts say that if your money is in a bank you are safe up to $100,000. People who have Family Trusts are insured up to $100,000 per trust beneficiary, correct? Example, I have a trust with 4 beneficiaries (spouse, one child and two step-children). My understanding is that I am FDIC insured up to $400,000 per financial institution I have my money in, as long as my CD’s are in my Trusts name.

I think people are unsure about this and I would like some clarity, also.

 

Thanks,
Steve

Someone wrote in anonymously:


Hi,
We have a whole life insurance policy with AIG that recently matured.  Should we cash it in and invest it or should we just leave it as is?

Jessica replied:

When deciding to cash in a life insurance policy you really must consider many factors including:

    *
      Are you and your spouse comfortable having less or no life insurance coverage?
    *
      Do you have other life insurance coverage?
    *
      Are you the primary income source for your family?  Are you retired?
    *
      Do you still have a mortgage on your home?
    *
      Are there tax consequences for cashing in your insurance policy?

After your consider your financial position and insurance needs I would consult with tax advisor regarding possible tax implications.  If you decide you no longer need insurance, now would be a great time to buy.  Since the market is beaten down there are a lot of opportunities available to investors.

Another anonymous individual asked:

Should i take my money from my 401k  and pay taxes now or later?

Jessica replied:

When you cash in your 401k there are tax consequences.  Keep in mind 401k distributions are considered taxable income and may increase your tax bracket.  Not only will you owe state and federal income taxes, if you are under 59 1/2 you may owe a 10% premature withdraw penalty.  In addition, you do not have the ability to choose when you will pay the taxes if you decide to distribute your 401k.
 
Before you decide to withdraw your 401k you should consider your current tax bracket.  If you decided to take a distribution would it bump you up into a higher tax bracket?  Do you believe your current tax bracket is lower than it will be at retirement?
 
There are more options aside from distributing your 401k - you may also consider rolling over your 401k into an IRA.  Remember - your 401k is for your retirement, not for right now.

Joyce wrote in:

My father has 2 annuities with AIG. Should we go cash them in or is it too late?

Hi Joyce:
 
AIG's financial troubles have caused a lot of uncertainty among investors.  Zhang Financial has spoken with AIG Annuity Company (AIGA) concerning bankruptcy and we were told that AIG and AIGA (the annuity division) are considered seperate financial entities.  Therefore, AIG may not be able to access the cash AIGA has set aside for fixed annuities.
 
This may be good news for annuity holders.  AIG representatives shared the following information with Zhang Financial:
 
AIGA annuities are guaranteed by the "general account" of AIGA - which supports only the obligations of AIGA, and not any obligations of AIG.  Further, AIGA client assets in the general account are protected by Texas state insurance regulations.
 
That being said, there is never a true guarantee.  If your annuities do not mature for some time you would incur surrender charges and tax consequences for a full liquidation, however, it may be worth it depending on your situation.  I would suggest consulting with a financial advisor or AIG representative about your options.  Remember, there is risk with any investment and it is important to consider all factors before making a decision.