What Not to Do With Your 401(k)

As we’ve discussed in previous issues of Money Watch, millions of Americans are not saving the right amount forretirement—most people just aren’t saving enough. But what about those who think they are saving what they should, but find out as retirement approaches that they’ve made poor investment decisions? Recent studies have shown that many people are doing exactly that.

Common investment errors can cost you hundreds of thousands of dollars if you aren’t aware of them and keep making the same mistakes year after year throughout your career. Take a look at this checklist and ask yourself the following questions. If you find yourself answering “yes” to any of the questions, you may be making big blunders whereit comes to investing and it is time to reassess your retirement savings strategy.

Are you loading up on your own employer’s stock?

Twenty percent of investors have half or more of their balance in their employers stock. Most often, this is the case because people feel they know their company and therefore this option seems less risky. However, a single stock is typically many times as risky as a diversified portfolio. Cases like Enron would go to prove that putting too much stock in your company (or any one investment option for that matter) comes with a high risk. If you own any employer stock in your 401(k) – think about selling it or at least limiting it to a small percentage of your portfolio.


Are you being too conservative?

Don’t put too much of your money into low risk choices like stable value, bond and money funds. Of course, these offer some protection from market setbacks, but they lack the growth potential you need to end up with adequate income at retirement. Instead, create a blend of stocks and bonds that allows for sufficient gains, but also provides some cushion from drops in the market. You’ll need a sizeable nest egg, and conservative choices with little risk will not pay off.


Are you dividing your money evenly like a pie?

Some people think diversifying means putting equal amounts into all the options. However, that approach will not balance your portfolio adequately. Depending on your plan’s options, you could end up with too many bonds or other investments that won’t help you achieve your goals. Go to and plug in your choices to see how your portfolio breaks down the asset classes—large and small stocks, bonds and foreign shares. Next, you will want to compare your current mix to the one the Asset Allocator suggests. This will give you an idea of whether you should rebalance your 401(k).

Navigating retirement savings can be a complicated task and there are many forces that can get you off track —not saving enough for retirement, or simply making bad choices where it comes to investing. Avoiding the common errors above won’t guarantee that you will have a giant nest egg, but it will help make sure you are making the most of everything you are putting aside for retirement.

An Ever-Changing Market Does Not Mean Ever-Changing Investment Strategy

Economic times are turbulent with the sub-prime lending issues, a struggling real estate market and the occasional mention of an all-out recession. Investors can get a little uneasy about retirement savings in a less than favorable market, but tread carefully. One of the worst things you can do in this situation is panic and start messing with your 401(k).

While the economy can be unsettling to say the least, it does not have to wreak havoc on your retirement plan. The best course of action is to stick to your 401(k) game plan — contribute regularly, don’t make rash decisions, and don’t completely liquidate.

The reason this works is dollar-cost averaging. Dollar cost averaging has been proven to be a good investment strategy for a variety of reasons. First, you avoid overexposing your investment to the risks involved in timing the market. Second, you are loyal to the plan and consistently invest your money on a regular basis. As most wise investors know, consistent investing is the key to successful investing. By allowing your 401(k) to operate as it is intended, you systematically put away a portion of your paycheck, tax-free, for retirement investment.

Contributions keep pace with your paycheck schedule, and thus spread the investment purchases over time and keep them consistent. The strategy is tried and true: slowly buy small amounts of stock or bonds over a longer period of time at a set rate.

Of course, time is a factor as well. If you are a couple years away from retirement and the market takes a hit, then your stock investments are likely to take a hit regardless. However, if time is on your side and you can wait out the storm then your best bet is to let your 401(k) do its job. Remember, your 401(k) must be diversified with a good mix of stocks and bonds, and should follow some general investing guidelines as we’ve discussed in previous issues. Regardless of the ups and downs in the market, resist the urge to liquidate your retirement plan and you’ll wind up better off.

Saving Too Much For Retirement?

Income vs. Assets

Many people think, or are told by on-line financial calculators, that piling up on assets is the road to a smooth retirement. Financial advisors often have a self-serving interest (commission) in encouraging clients to invest more in assets. Wall Street looks at it as a “conservative approach,” implying that they would rather have money left over at death, than allow the money to run out too early. However, with the right planning and balance, both can likely be avoided.

Is it possible to save too much? Yes, if you aren’t balancing the present and the future. Analysts show high percentages of required savings, but those numbers often don’t include any pension, social security or other checks you may receive in retirement. The calculators are primarily asset-based, versus income-based, and therefore the calculations can be somewhat inaccurate. You could be unnecessarily investing too much of the present under these assumptions.

When planning for retirement, income can be a key force to your overall plan. Pensions, Social Security, IRAs, a new career, business or part-time work will all play a valuable role. If you are a homeowner, you should have some wealth built up in your home. Pay off the mortgage, live without debt, live comfortably within your means.

Everyone’s retirement goals and plan will vary. It is important to have a plan, stay on track for that plan, and work with an advisor you trust. Many people aren’t saving enough for retirement, and some are saving but not in the right way. If you are in either category, contact HLB Gross Collins, P.C. for a review of your retirement goals and we can help you get on track for a comfortable future, without sacrificing the present.

Can I Really Fix My Credit?

Absolutely! Bad credit is both stressful and costly, but you can take steps to repair it.
Following are a few steps to follow:

Stop Using your credit cards and don’t apply for any new ones. One of the worst things you can do is to continue accumulating more debt by using your credit cards or by applying for new ones. Put existing credit cards away until you have control of the situation. Any new applications may well be turned down and the decline will further reduce your score.

Get and review a copy of your credit report. You need to know exactly what you need to work on to begin repairing your credit. Highlight negative listings and rank them according to damage they are doing to your credit picture. Following is a list in order of damage to your credit:

  • Bankruptcy
  • Foreclosure
  • Repossession
  • Loan Default
  • Court Judgments
  • Collections
  • Past due payments
  • Late payments
  • Credit rejections
  • Credit inquiries

Creditors are required to notify you of any negative information they have placed on your credit report. If you have not been notified you can pressure the creditor to remove the listing.

Request corrections and challenge questionable items. You can not legally remove accurate negative information from a credit report, but the law does allow you to request a reinvestigation of information in your file. However, you can legally challenge anything on your credit report. The key to the credit repair procedure is that if the credit bureaus cannot verify information on your credit report they must remove it. Specifically, if a credit bureau cannot contact a collection agency which is reporting a collection on your report, they cannot verify the information, and must delete the entry.

Document your credit repair efforts. Document every correspondence and send every correction or challenge by certified mail. Keep a file outlining everything that you do. The credit bureau has 30 days from your dispute letter to investigate the legitimacy of the negative listing. They are required to notify you in writing the results of the investigation within five days of its completion. Be persistent in making sure that this is done.

Get current on delinquent accounts. Remember that your credit history makes up about 35% of your credit score so getting current on your delinquent accounts will have a great impact on your credit.

Be careful when closing credit cards. You might be tempted to close out credit card accounts that have become delinquent, but don’t. Before you close any account make sure that it won’t negatively affect your credit. Some things to consider:

  • Don’t close a credit card with a balance. The available credit is lowered so it looks like you are maxed out.
  • Don’t close your only credit card with available credit. This decreases available credit thereby increasing credit utilization and lowering the score.
  • Don’t close your only credit card. You want to keep a credit card in the mix because you want different types of credit reflected which will increase your score.
  • Don’t close your oldest account. Your credit score is based on the length of your credit history so you want to keep the older cards open.
  • Don’t close the credit card with the best terms. Don’t let a good one go. Keep this credit card for emergencies.

Call your creditors. Talk to your creditors about your situation. Many of them have temporary hardship programs that will reduce your monthly payment until you can get back on your feet.

Pay off your debts. You will have to start paying off your debts to improve your credit situation. Concentrate on the highest interest rate card and get it paid off. Then move on to the next one. Create a plan and outline how you will do it. Then stick to the plan.

Repairing your credit can be a time consuming task. Typically it will take 6 months to get all of the adjustments made in your credit report. However, the payoff at the end is well worth the effort so don’t let the time concern you. Be patient and don’t expect to improve your credit over night.

Fuel and Electricity Exemption for Georgia Manufacturers

There is a temporary, partial exemption from state sales tax for the sale or use of natural or artificial gas, No. 2 fuel oil, No. 6 fuel oil, propane, petroleum coke, or coal that is used directly or indirectly in the manufacture or processing of tangible personal property primarily for resale within Georgia. The exemption also applies to the fuel cost recovery component of retail electric rates for electricity used directly or indirectly in the manufacturing or processing of tangible personal property primarily for resale.

The exemption applies to the period that begins July 1, 2008, and ends December 31, 2010, and does not apply to local sales or use taxes. As usual, there are restrictions. A Georgia sales tax exemption also applies to the sale of electricity used directly in the manufacture of a product if the cost of the electricity exceeds 50% of the cost of all materials used in the product.

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