In the past decade, news stories featured the demise of corporations and the dramatic downfall of corporate executives.
Millions of retirements dollars were lost in the mix when companies misrepresented anticipated revenue that kept the market value of the company's stock at an inflated price.
Once the juggling of the dollars publicly reported was exposed, the?!*# hit the fan and the house of cards came tumbling down.
Employees thought they planned well for their retirements.
They had a nest egg saved that would enable them to retire at 65 and travel to their hearts' desires.
Then, the news reports revealed the truth about the company.
Employees and stock holders were the ones who were scammed and left holding the bag...
an empty bag...
a worthless bag...
of nothing.
Many lost everything they had worked their whole lives for, and had no idea how they would recoup the loss.
Could the losses have been prevented? To a great extent, yes.
If you followed any of the news stories that came to the forefront about 10 years ago, you find that the reason most companies, Enron, for one, fell from grace was due to reporting higher revenue trends than were factual.
Companies were often reporting projected earnings, instead of actual earnings, and the earnings projected were inflated.
The price of company stock continued to climb based on the rising projected earnings.
When the scam was finally exposed, the bottom fell out and some major companies collapsed, never to rise again.
Stock holders sold their shares immediately.
The price of the stock declined to the extent that it was termed worthless.
Tax laws may have changed, but as of February 2009, you could not claim a loss for worthless stock held in your IRA.
The same applied to stock included in your 401k.
Since you did not have to pay tax for a gain, you didn't get to claim a deduction for a loss.
With that in mind, and with the current condition of the economy, you have to rethink your investment strategies.
Stocks and bonds are not necessarily the way to go.
Even higher class municipal bonds are no longer a safe bet.
Just this past November, plenty of investors were dumping them like hot potatoes.
So, if stocks are not a good investment and municipal bonds no longer carry the clout they used to, what is it we can depend on to invest in long-term? Do you work for a company that matches your 401k/403b? Have the maximum payroll deduction allowed taken out of your paycheck and matched by the company.
If you are allowed to allocate where the investment goes, select the lowest risk stocks on the list.
In addition, open a Roth IRA and put in the maximum.
This will protect you from any future losses.
Also, consider certificates of deposit.
That's right - a CD.
The goal is to put your money in a sure-fire investment, to the fullest extent possible, until the economy turns around.
Of course, after the stock market stabilizes in the future, you can begin to think about mutual funds, stocks and bonds.
One note of caution.
Check with your company's payroll group, but you might want to spread your maximum deductions out over the year.
The problem is that if you arrive at the maximum amount you can have deducted before the end of the year, you lose the remaining amount the company will match.
Talk to a company representative before making a decision as to the amount of your 401k/403b payroll deduction.