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Keeping cool in a wild market

Investors should stay calm during the current financial crisis regarding their current investments, IRAs and 401(k) plans and adequately protect their finances, advised members of the Personal Financial Planning Committee of the New York State Society of Certified Public Accountants.

CPAs advise taking care of the basics first. If you don’t have a budget, now is the time to start one to make sure your expenses don’t exceed your income. Also recommended for best returns are paying your debts, prepaying your mortgage and boosting your credit score.

Top among suggestions for investors is to review their risk tolerance to determine if their investment objectives have changed with recent market activity. “It is important to remember that the stock markets are cyclical in nature and the ups and downs of the market are inevitable,” says William T. Kriesel, CPA, a member of the NYSSCPA Personal Financial Planning Committee.

In looking at the tax aspects of investing, Jay Sanders, CPA, chair of the NYSSCPA Personal Financial Planning Committee, reminds consumers that, from a tax perspective, there are no real incentives for unloading a large number of loosing stocks as capital losses are limited to $3,000 per year.

CPAs also offered the following tips:

Consumers are protected on investments for:

Banks: FDIC Insurance covers up to $250,000 (recently increased in bail out package) in bank deposits per account. The limit on the amount protected in one or more retirement accounts is $250,000.

Brokers: Stocks and bonds are segregated from your broker’s other accounts. The Securities Investor Protections Corporation covers up to $500,000 of your brokerage assets ($100,000 can be in cash).

Retirement portfolios have been hit by present market activity, but consumers should continue to save. If your employer matches your contributions, this is a great time to take advantage of this valuable benefit even during current market fluctuations. For a reduced tax bill, consider converting your traditional Ira into a Roth IRA.

Spend less than you earn and start saving. Try to put away at least 10% of your pre-tax income into a savings account.

Set concrete financial goals for making larger purchases and retirement.

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