Frequently Asked Questions

How do you set investment goals?

Setting investment goals means defining your dreams for the future. When you're setting goals, it's best to be as specific as possible. For instance, you know you want to retire, but when? You know you want to send your child to college, but to an Ivy League school or to the community college down the street? Writing down and prioritizing your investment goals is an important first step toward developing an investment plan.

What is your time horizon?

Your investment time horizon is the number of years you have to invest toward a specific goal. Each investment goal you set will have a different time horizon. For example, some of your investment goals will be long term (e.g., you have more than 15 years to plan), some will be short term (e.g., you have 5 years or less to plan), and some will be intermediate (e.g., you have between 5 and 15 years to plan). Establishing time horizons will help you determine how aggressively you will need to invest to accumulate the amount needed to meet your goals.

How much will you need to invest?

Although you can invest a lump sum of cash, many people find that regular, systematic investing is also a great way to build wealth over time.

Start by determining how much you'll need to set aside monthly or annually to meet each goal. Although you'll want to invest as much as possible, choose a realistic amount that takes into account your other financial obligations, so that you can easily stick with your plan. But always be on the lookout for opportunities to increase the amount you're investing, such as participating in an automatic investment program that boosts your contribution by a certain percentage each year, or by dedicating a portion of every raise, bonus, cash gift, or tax refund you receive to your investment objectives.

Which investments should you choose?

No matter what your financial goals, you'll need to decide how to best allocate your investment dollars. One important consideration is your tolerance for risk. All investments carry some risk, but some carry more than others. How well can you handle market ups and downs? Are you willing to accept a higher degree of risk in exchange for the opportunity to earn a higher rate of return?

Whether you're investing for retirement, college, or another financial goal, your overall objective is to maximize returns without taking on more risk than you can bear. But no matter what level of risk you're comfortable with, make sure to choose investments that are consistent with your goals and time horizon. A financial professional can help you construct a diversified investment portfolio that takes these factors into account.

Investing for retirement

After a hard day at the office, do you ask, "Is it time to retire yet?" Retirement may seem a long way off, but it's never too early to start planning--especially if you want retirement to be the good life you imagine.

For example, let's say that your goal is to retire at age 65. At age 20 you begin contributing $3,000 per year to your tax-deferred 401(k) account. If your investment earns 6 percent per year, compounded annually, you'll have approximately $679,000 in your investment account when you retire.

But what would happen if you left things to chance instead? Let's say that you're not really worried about retirement, so you wait until you're 35 to begin investing. Assuming you contributed the same amount to your 401(k) and the rate of return on your investment dollars was the same, you would end up with approximately $254,400. And, as this chart illustrates, if you were to wait until age 45 to begin investing for retirement, you would end up with only about $120,000 by the time you retire.

(This is a hypothetical example and is not intended to reflect the actual performance of any investment.)

Investing for college

Perhaps you faced the truth the day your child was born. Or maybe it hit you when your child started first grade: You only have so much time to save for college. In fact, for many people, saving for college is an intermediate-term goal--if you start saving when your child is in elementary school, you'll have 10 to 15 years to build your college fund.

Of course, the earlier you start the better. The more time you have before you need the money, the greater chance you have to build a substantial college fund due to compounding. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.

Investing for a major purchase

At some point, you'll probably want to buy a home, a car, or the yacht that you've always wanted. Although they're hardly impulse items, large purchases are usually not something for which you plan far in advance--one to five years is a common time frame.

Because you don't have much time to invest, you'll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.

Review and revise

Over time, you may need to update your investment plan. No matter what your investment goal, get in the habit of checking up on your portfolio at least once a year, more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to bring it back in line with your investment goals and risk tolerance. If you need help, a financial professional can help.

Bank/savings and loan deposit accounts

Generally, deposit accounts at banks and savings and loans insured by the Federal Deposit Insurance Corporation (FDIC) are insured up to $250,000 per depositor per bank. FDIC insurance covers both demand deposits (those that provide immediate access to cash, such as checking, NOW, and savings accounts as well as money market deposit accounts) and time deposits, such as certificates of deposit (CDs). It covers both principal and any interest accrued as of the date that an insured bank closes.

FDIC insurance does not cover mutual funds, stocks, bonds, life insurance policies, annuities, or other securities, even if they were bought through an FDIC-insured bank. It also does not cover U.S. Treasury securities (because they are backed separately by the full faith and credit of the federal government) or safe deposit boxes.

You can't increase your protection simply by opening more than one account in your name at the same bank. For example, splitting the money between a checking and a savings account or opening accounts at different branches of the same bank do not increase your coverage.

However, deposits that represent different categories of ownership may be independently insured. For example, a joint account qualifies for up to $250,000 of coverage for each person named as a joint owner. That coverage is in addition to the $250,000 maximum coverage for each person's aggregated single-owner accounts at that bank. For example, a married couple with three accounts at one bank--they each have $250,000 in an individual account, and they also have $200,000 in a joint account--would qualify for FDIC insurance on the entire $700,000.

The limit on the amount protected in one or more retirement accounts at one bank also is $250,000; this is separate from the $250,000 coverage of individual accounts. (Remember, however, that FDIC insurance applies only to deposit accounts, not to any securities held in an IRA or other retirement account.)

There also may be additional safety nets. In some states, a state-chartered savings bank is required to have additional insurance to cover any losses beyond the FDIC limits. Some banks also may participate in the Certificate of Deposit Account Registry Service (CDARS), which enables a bank to spread large CD deposits among multiple banks while keeping the amount at each individual bank, including the original bank, within FDIC insurance limits.

You do not have to be a U.S. citizen or resident for your account to receive FDIC protection. According to the FDIC, no depositor has ever lost a penny of funds that were covered by FDIC insurance. An online calculator at the FDIC's website, www.fdic.gov, can help you estimate the total FDIC coverage on your deposit accounts.

Credit unions

Member share accounts at most credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). It is administered by the National Credit Union Administration (NCUA), which like the FDIC is an independent agency of the federal government and is backed by the full faith and credit of the U.S. Treasury. (Some credit unions are not federally insured but are overseen by state regulators; they typically have private credit insurance.)

NCUSIF insurance is similar to FDIC insurance; it covers share accounts, share certificates, and share draft accounts but not investment products sold through a credit union. It covers single-owner accounts up to $250,000 per customer per institution. Retirement accounts such as IRAs and Keoghs have separate coverage up to $250,000. As with bank deposit accounts, independent coverage may be available for different categories of ownership. You can estimate your existing coverage by using the calculator at the NCUA's website www.ncua.gov.

Brokerage accounts and SIPC

Most brokerage accounts are covered by the Securities Investor Protection Corporation (SIPC). Unlike the FDIC, the SIPC is not a government agency but a nonprofit corporation funded by broker-dealers registered with the Securities and Exchange Commission. (A non-SIPC member must disclose that fact.)

SIPC was created by Congress in 1970 to help return customer property if a broker-dealer or clearing firm experiences insolvency, unauthorized trading, or securities that are lost or missing from a customer's account. Many brokerages also extend coverage beyond the SIPC limits with additional private insurance. If a member firm became insolvent, SIPC would typically either act as trustee or ask a court to appoint a trustee to supervise transfer of customer securities and cash. The SEC requires brokerages and clearing firms to segregate customer accounts from their proprietary assets and funds.

SIPC covers a maximum of $500,000 per individual account (including up to $100,000 in cash) at a given firm. As with banks, total coverage can be higher for multiple accounts at one institution. For example, a married couple could have two individual accounts with $500,000 worth of coverage each, plus a joint account that would bring their aggregated coverage for that firm to $1.5 million. Each of your retirement accounts at a firm also is generally eligible for another $500,000 of SIPC coverage (including up to $100,000 in cash).

SIPC doesn't protect against market risk or price fluctuations. If shares lose value before a trustee is appointed, that loss of value is not covered by SIPC. In general, SIPC covers notes, stocks, bonds, mutual funds, and other shares in investment companies. It does not cover investments that are not registered with the SEC, such as certain investment contracts, limited partnerships, fixed annuity contracts, currency, gold, silver, commodity futures contracts, or commodities options.

Check yourself out

It's important to review your credit report periodically. Check to make sure that all the information contained in it is correct, and be on the lookout for any fraudulent activity.

You may get your credit report for free once a year. To do so, contact the Annual Credit Report Request Service online at www.annualcreditreport.com or call (877) 322-8228.

If you need to correct any information or dispute any entries, contact the three national credit reporting agencies:

1. Equifax: www.equifax.com
   (800) 685-1111
2. Experian: www.experian.com
   (888) 397-3742
3. TransUnion: www.transunion.com
   (800) 916-8800

Secure your number

Your most important personal identifier is your Social Security number (SSN). Guard it carefully. Never carry your Social Security card with you unless you'll need it. The same goes for other forms of identification (for example, health insurance cards) that display your SSN. If your state uses your SSN as your driver's license number, request an alternate number.

Don't have your SSN preprinted on your checks, and don't let merchants write it on your checks. Don't give it out over the phone unless you initiate the call to an organization you trust. Ask the three major credit reporting agencies to truncate it on your credit reports. Try to avoid listing it on employment applications; offer instead to provide it during a job interview.

Don't leave home with it

Most of us carry our checkbooks and all of our credit cards, debit cards, and telephone cards with us all the time. That's a bad idea; if your wallet or purse is stolen, the thief will have a treasure chest of new toys to play with.

Carry only the cards and/or checks you'll need for any one trip. And keep a written record of all your account numbers, credit card expiration dates, and the telephone numbers of the customer service and fraud departments in a secure place--at home.

Keep your receipts

When you make a purchase with a credit or debit card, you're given a receipt. Don't throw it away or leave it behind; it may contain your credit or debit card number. And don't leave it in the shopping bag inside your car while you continue shopping; if your car is broken into and the item you bought is stolen, your identity may be as well.

Save your receipts until you can check them against your monthly credit card and bank statements, and watch your statements for purchases you didn't make.

When you toss it, shred it

Before you throw out any financial records such as credit or debit card receipts and statements, cancelled checks, or even offers for credit you receive in the mail, shred the documents, preferably with a cross-cut shredder. If you don't, you may find the panhandler going through your dumpster was looking for more than discarded leftovers.

Keep a low profile

The more your personal information is available to others, the more likely you are to be victimized by identity theft. While you don't need to become a hermit in a cave, there are steps you can take to help minimize your exposure:

• To stop telephone calls from national telemarketers, list your telephone number with the Federal Trade Commission's National Do Not Call Registry by calling (888) 382-1222 or registering online at www.donotcall.gov
• To remove your name from most national mailing and e-mailing lists, as well as most telemarketing lists, write the Direct Marketing Association at 1120 Avenue of the Americas, New York, NY 10036-6700, or register online at www.dmachoice.org
• To remove your name from marketing lists prepared by the three national consumer reporting agencies, call (888) 567-8688 or register online at www.optoutprescreen.com
• When given the opportunity to do so by your bank, investment firm, insurance company, and credit card companies, opt out of allowing them to share your financial information with other organizations
• You may even want to consider having your name and address removed from the telephone book and reverse directories

Take a byte out of crime

Whatever else you may want your computer to do, you don't want it to inadvertently reveal your personal information to others. Take steps to help assure that this won't happen.

Install a firewall to prevent hackers from obtaining information from your hard drive or hijacking your computer to use it for committing other crimes. This is especially important if you use a high-speed connection that leaves you continuously connected to the Internet. Moreover, install virus protection software and update it on a regular basis.

Try to avoid storing personal and financial information on a laptop; if it's stolen, the thief may obtain more than your computer. If you must store such information on your laptop, make things as difficult as possible for a thief by protecting these files with a strong password--one that's six to eight characters long, and that contains letters (upper and lower case), numbers, and symbols.

"If a stranger calls, don't answer." Opening e-mails from people you don't know, especially if you download attached files or click on hyperlinks within the message, can expose you to viruses, infect your computer with "spyware" that captures information by recording your keystrokes, or lead you to "spoofs" (websites that replicate legitimate business sites) designed to trick you into revealing personal information that can be used to steal your identity.

If you wish to visit a business's legitimate website, use your stored bookmark or type the URL address directly into the browser. If you provide personal or financial information about yourself over the Internet, do so only at secure websites; to determine if a site is secure, look for a URL that begins with "https" (instead of "http") or a lock icon on the browser's status bar.

And when it comes time to upgrade to a new computer, remove all your personal information from the old one before you dispose of it. Using the "delete" function isn't sufficient to do the job; overwrite the hard drive by using a "wipe" utility program. The minimal cost of investing in this software may save you from being wiped out later by an identity thief.

Be diligent

As the grizzled duty sergeant used to say on a televised police drama, "Be careful out there." The identity you save may be your own.

Time is money

To minimize your losses, act fast. Contact, in this order:

• Your credit card companies
• Your bank
• The three major credit bureaus
• Local, state, or federal law enforcement authorities

Your credit card companies

Credit card companies are getting better at detecting fraud; in many cases, if they spot activity outside the mainstream of your normal card usage, they'll call you to confirm that you made the charges. But the responsibility to notify them of lost or stolen cards is still yours.

If you do so in a reasonable time (within 30 days after you discover the loss), you won't be responsible for more than $50 per card in fraudulent charges. Ask that the accounts be closed at your request, and open new accounts with password protection.

If an identity thief opens new accounts in your name, you'll need to prove it wasn't you who opened them. Ask the creditors for copies of application forms or other transaction records to verify that the signature on them isn't yours.

Follow up your initial creditor contacts with letters indicating the date you reported the loss or theft. Watch your subsequent monthly statements from the creditor; if any fraudulent charges appear, contest them in writing.

Your bank

If your debit (ATM) card is lost or stolen, you won't be held responsible for any unauthorized withdrawals if you report the loss before it's used. Otherwise, the extent of your liability depends on how quickly you report the loss.

• If you report the loss within two business days after you notice the card is missing, you'll be held liable for up to $50 of unauthorized withdrawals. (If the card doubles as a credit card, you may not be protected by this limit.)
• If you fail to report the loss within two days after you notice the card is missing, you can be held responsible for up to $500 in unauthorized withdrawals.
• If you fail to report an unauthorized transfer or withdrawal that's posted on your bank statement within 60 days after the statement is mailed to you, you risk unlimited loss.

If your checkbook is lost or stolen, stop payment on any outstanding checks, then close the account and open a new one. Dispute any fraudulent checks accepted by merchants in order to prevent collection activity against you. And notify the check-guarantee bureaus:

• Certegy (FIS) www.certegy.com
• Check Rite www.checkritesystems.com
• ChexSystems www.chexhelp.com
• NPC www.npc.net
• SCAN www.nobouncedchecks.com
• TeleCheck www.telecheck.com

The three major credit bureaus

If your credit cards have been lost or stolen, call the fraud number of any one of the three national credit reporting agencies:

1. Equifax (888) 766-0008
2. Experian (888) 397-3742
3. TransUnion (800) 680-7289

You need to contact only one of the three; the one you call is required to contact the other two.

Next, place a fraud alert on your credit report. If your credit cards have been lost or stolen, and you think you may be victimized by identity theft, you may place an initial fraud alert on your report. If you become a victim of identity theft (an existing account is used fraudulently or the thief opens new credit in your name), you may place an extended fraud alert on your credit report once you file a report with a law enforcement agency.

Once a fraud alert has been placed on your credit report, any user of your report is required to verify your identity before extending any existing credit or issuing new credit in your name. For extended fraud alerts, this verification process must include contacting you personally by telephone at a number you provide for that purpose.

Most states now allow you to "freeze" your credit report. (In the few that don't, the credit bureaus allow state residents to freeze their reports voluntarily.) Once you freeze your report, no one--creditors, insurers, and even potential employers--will be allowed access to your credit report unless you "thaw" it for them.

To freeze your credit report, you must contact all three major credit reporting agencies. In many cases, victims of identity theft are not charged a fee to freeze and/or thaw their credit reports, but the laws vary from state to state. Contact the office of the attorney general in your state for more information.

If you discover fraudulent transactions on your credit reports, contest them through the credit bureaus. Do so in writing, and provide a copy of the identity theft report you file. You should also contest the fraudulent transaction in the same fashion with the merchant, bank, or creditor who reported the information to the credit bureau. Both the credit bureaus and those who provide information to them are responsible for correcting fraudulent information on your credit report, and for taking pains to assure that it doesn't resurface there.

Law enforcement agencies

While the police may not catch the person who stole your identity, you should file a report about the theft with a federal, state, or local law enforcement agency. Once you've filed the report, get a copy of it; you'll need it in order to file an extended fraud alert with the credit bureaus. You may also need to provide it to banks or creditors before they'll forgive any unauthorized transactions.

When you file the report, give the law enforcement officer as much information about the crime as possible: the date and location of the loss or theft, information about any existing accounts that have been compromised, and/or information about any new credit accounts that have been opened fraudulently. Write down the name and contact information of the investigator who took your report, and give it to creditors, banks, or credit bureaus that may need to verify your case.

If the theft of your identity involved any mail tampering (such as stealing credit card offers or statements from your mailbox, or filing a fraudulent change of address form), notify the U.S. Postal Inspection Service. If your driver's license has been used to pass bad checks or perpetrate other forms of fraud, contact your state's Department of Motor Vehicles. If you lose your passport, contact the U.S. Department of State. Finally, if your Social Security card is lost or stolen, notify the Social Security Administration.

Follow through

Once resolved, most instances of identity theft stay resolved. But stay alert: Monitor your credit reports regularly, check your monthly statements for any unauthorized activity, and be on the lookout for other signs (such as missing mail and debt collection activity) that someone is pretending to be you.

Initial tasks

• Upon the death of your loved one, call close family members, friends, and clergy first--you'll need their emotional support.
• Arrange the funeral, burial or cremation, and memorial service. Hopefully, the decedent will have made arrangements ahead of time. Look among his or her papers for a letter of instruction containing final wishes. Such instructions may also be stated in his or her will or other estate planning documents. Arrange any cultural rituals, and make any anatomical gifts.
• Notify family and friends of the final arrangements.
• Alert your loved one's place of work, union, and professional organizations, and any organizations where he or she may have volunteered.
• Contact your own employer and arrange for bereavement leave.
• Place an obituary in the local paper.
• Obtain certified copies of the death certificate. The family doctor or medical examiner should provide you with the death certificate within 24 hours of the death. The funeral home should complete the form and file it with the state. Get several certified copies (photocopies may not be accepted)--you will need them when applying for benefits and settling the estate.
• Review your family member's financial affairs, and look for estate planning documents, such as a will and trusts, and other relevant documents, such as deeds and titles. Also locate any marriage certificate, birth or adoption certificates of children, and military discharge papers, which you may need to apply for benefits. These documents may be found in a safe-deposit box, or the decedent's attorney may have copies.
• Report the death to Social Security by calling 1-800-772-1213. If your loved one was receiving benefits via direct deposit, request that the bank return funds received for the month of death and thereafter to Social Security. Do not cash any Social Security checks received by mail. Return all checks to Social Security as soon as possible. Surviving spouses and other family members may be eligible for a $255 lump-sum death benefit and/or survivor's benefits. Go to www.ssa.gov for more information.
• Make a list of the decedent's assets. Put safeguards in place to protect any property. Make sure mortgage and insurance payments continue to be made while the estate is being settled.
• Arrange to retrieve your loved one's belongings from his or her workplace. Collect any salary, vacation, or sick pay owed to your loved one, and be sure to ask about continuing health insurance coverage and potential survivor's benefits for a spouse or children. Unions and professional organizations may also offer death benefits. If the death was work-related, the decedent's estate or beneficiaries may be entitled to worker's compensation benefits.
• Contact past employers regarding pension plans, and contact any IRA custodians or trustees. Review designated beneficiaries and post-death distribution options.
• Locate insurance policies. The policies could include individual and group life insurance, mortgage insurance, auto credit life insurance, accidental death and dismemberment, credit card insurance, and annuities. Contact all insurance companies to file claims.
• Contact all credit card companies and let them know of the death. Cancel all cards unless you're named on the account and wish to retain the card.
• Retitle jointly held assets, such as bank accounts, automobiles, stocks and bonds, and real estate.
• If the decedent owned, controlled, or was a principal in a business, check to see if there are any buy-sell agreements under which his or her interest must be sold.

Within 3 to 9 months after death

• File the will with the appropriate probate court. If real estate was owned out of state, file ancillary probate in that state also. If there is no will, contact the probate court for instructions, or contact a probate attorney for assistance.
• Notify the decedent's creditors by mail and by placing a notice in the newspaper. Claims must be made within the statute of limitations, which varies from state to state (30 days from actual notice is common). Insist upon proof of all claims.
• A federal estate tax return may need to be filed within 9 months of death. State laws vary, but state estate tax and/or inheritance tax returns may also need to be filed. Federal and state income taxes are due for the year of death on the normal filing date, unless an extension is requested. If there are trusts, separate income tax returns may need to be filed. You may want to seek the advice of a tax professional.

Within 9 to 12 months after death

• Update your own estate plan if your loved one was a beneficiary or appointed as an agent, trustee, or guardian.
• Update beneficiary designations on your retirement plans, including IRAs, and transfer-on-death accounts on which the decedent was named beneficiary.
• Reevaluate your budget, and short-term and long-term finances.
• Reevaluate your insurance needs, and update beneficiary designations on insurance policies on which the decedent was the named beneficiary.
• Reevaluate investment options.