2009 RMD Waiver Relieves Retirees in a Down Market.

George Bush enacted the RMD waiver into law in December 2008 under the Retiree and Employer Recovery Act when the financial crisis was at its peak and stock portfolios held in IRAs and other tax deferred retirement accounts were at its lowest values. An RMD or required minimum distribution is the amount an account holder must withdraw in order to pay taxes.  Of course one may withdraw more in order to meet living expenses and medical bills and other such necessities or luxuries.

This requirement begins in April of the year one turns 70 ½.  The money must be withdrawn by December 31.  If the RMD is not withdrawn, then a 50% penalty is imposed on the amount that was not withdrawn.    The RMD is basically how the government ensures that it receives taxes on your retirements accounts that were allowed to accumulate and gain value tax free.  It’s a revenue stream that helps pay for all the wonderful services we receive as U.S. citizens.  The RMD only applies to IRAs and employer sponsored retirement plans such as 401k and 403b plans.  If you own a Roth IRA, you do not have to worry as the money used to fund this type of account has already been taxed and therefore exempted from this requirement and obviously waiver.

The IRS determines your required minimum distribution based on your life expectancy and the balance in your retirement account.  Your accountant can tell you what your RMD should be.  You can also find your RMD at IRS.gov.  Many financial and retirement related websites also have retirement calculators for RMD.  Just Google RMD calculator.  Retirees have benefitted from the 2009 RMD waiver because it allows them to recover some or hopefully all of the losses endured in 2008.  Absent a waiver, a retiree would have had to make a withdrawal on a lower account balance and force to take losses.  Instead with the waiver, one will likely have a lower taxable income while enjoying the potential of having account values (including the RMD not withdrawn) grow once again with the thriving stock market.  As a result, some may benefit by not having to pay taxes on social security income as well.

Don’t expect the waiver to be extended to 2010.  The growing sentiment that the U.S. economy is out of danger and the 50%+ advance in the stock market has the administration and the IRS preferring to get its portion of taxes from retirement accounts.  That said the resumption of 2010 RMD will be based on account balances as of December 31, 2009.  If you turned 70 ½ this year you would have had the privilege and responsibility of taking your first distribution if there was not a waiver.  Make certain for 2010 you do it (your RMD) by December 31, 2010.  If you already took a distribution this year, you have the option of putting that money back into your IRA as long as you do it by November 30, 2009.  Please discuss this matter with a tax or financial planner to ensure compliance with IRS requirements.

The Golden Years, Tarnished

Many retirees had planned on retiring this year based on the bull market of 2007.  Once again, I recall a conversation with a lady who had just those plans in December 2007.  I counseled her to have her advisor move assets into something safer for two reasons: 1) she had no business in that asset allocation, 2) while I didn’t predict the magnitude, I felt the market was in for a correction. Her portfolio was highly leveraged, because she was convinced that “you gotta have growth”.  Problem is that in our conversation she didn’t qualify it.  She got growth, all 43% – negative.

Here is an article sourced from the NY Times, Clifford Krauss, November 13, 2008 and linked by the AARP Bulletin Today.  It discusses the very fear that retirees have and worries of lifestyle changes, and having enough money to see them through retirement. 

DELRAY BEACH, Fla. — Since the stock market began to fall, friends have been coming to Barbara Goldsmith to talk about their depression, loss of appetite, insomnia and cravings for hot fudge sundaes.

“People are grieving,” said Ms. Goldsmith, a semiretired psychotherapist who counsels fellow residents of the Gleneagles Country Club, a gated community here. “There was a death. Their money died.”

In communities like Gleneagles and in the homes of retirees across the country, these are days of fear and uncertainty. In theory, retired people are not supposed to invest much in the stock market; in reality, many millions of them do. With the economy in free fall and stocks down about 40 percent this year, legions of middle- and upper-middle-class people are suddenly worried about having enough to carry them through.

To be sure, no bread lines are forming at places like Gleneagles. The community remains placid and, on the surface at least, highly prosperous. Retirees play golf, tennis and cards amid peach-colored condominium villas, ornate fountains, and manicured palm trees and violet bougainvillea.

But sustaining that comfortable life for another two or three decades, as many retirees hope to do, requires money. People with investments that were worth $1 million or $2 million a few months ago are suddenly canceling cruises, clipping supermarket coupons, eating at home rather than at restaurants and cutting back on contributions to their grandchildren’s college educations.

Like retired people everywhere, residents here knowingly juggled what they saw as competing risks.

They all heard the standard advice to move their assets out of stocks and into supersafe investments as they neared retirement. But, with interest rates so low, the returns on safe investments like government bonds were meager, and many of them saw a risk in not keeping some money in stocks. To finance a long retirement, they figured they needed the gains characteristic of the stock market.

Keeping money in stocks left them exposed, of course, to the risk of a once-in-a-lifetime market meltdown. Now, that day is at hand.

“Every television monitor in the card room and locker room is on CNBC, so we can get aggravated all day,” said Jerry Rivkin, 75, a retired appliance store owner. “We’re playing for nickels and dimes while we watch ourselves losing tens of thousands.”

To cope, some people are selling their homes up North, so they will have the money to stay here. A handful of condominiums in Gleneagles have gone into foreclosure, something that was almost unheard of until recently. Humor is becoming darker as residents tell jokes about their shrinking “301(k)’s” and the sorry inheritances their children will be surprised to receive.

For years, retirement and financial advisers have said that elderly people should be lightly invested in stocks, putting most of their assets in bonds, certificates of deposit and other conservative investments. But even some of the experts acknowledge that such a strategy does not always work for retired people in good health who can live to be 90 or older, unless they have a lot of money or move to a place with a low cost of living.

“With life expectancies being what they are, and medicine getting better and better every year,” said Joseph La Scala, a senior financial consultant at GunnAllen Financial, “someone who is entering retirement now needs to be a long-term investor, and that means there needs to be more of an allocation to growth investments such as equities.”

According to government statistics, a third of retirees have almost no stock exposure. But those are mostly poor or lower-middle-class people who rely on Social Security for income. Others are shielded by pension benefits, although those have been shrinking in recent years, especially for younger retirees.

Retirement experts say a majority of people in the middle and upper-middle classes have portfolios that are far more weighted with stocks, and therefore are more risky, than is commonly recommended. According to a recent survey by the University of Michigan that was sponsored by the National Institute on Aging, in the wealthiest 40 percent of the population age 75 and older, more than half had at least a third of their accumulated savings in stocks.

“Older middle-class people have made plans based on a set of assumptions of how the world works, and the world has gone crazy,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. Those assumptions once included the notions that bank accounts and corporate bonds were secure, and blue-chip stocks were the best long-term investments.

“If you call my mother,” said Jason J. Fichtner, acting deputy commissioner of the Social Security Administration, “her goal was $1 million to retire on in stock equities. She had that for a weekend, and now it’s worth $600,000.”

At Gleneagles, people still play cards, swing 9-irons and take painting classes. But the anxiety in the community is palpable, and rising.

“I feel terrible,” said Harry Pure, 80, retired athletic director at Philadelphia University, who has lost 25 percent of his savings.

While taking a break from a painting class, he said, “It was nice to put your head on the pillow at night and know you felt secure. Now I put my head on the pillow and the brain cells are not going to sleep. All different scenarios are playing in my mind now: What to do? What to do? What to do?”

Even those with relatively large portfolios are feeling the pain.

“This threatens our lifestyle,” said Sid Freedman, a 74-year-old former owner of a textile company who divides his time between Gleneagles and Great Neck, on Long Island. With more than $2 million in assets, he said, he thought he and his wife were set for a long, secure retirement.

But he said his portfolio was down 30 to 40 percent. Without a pension, he said he might have to start contemplating his “safety net” if the market keeps falling: the unpleasant thought of selling his house on Long Island, even though that would mean less time with his children and grandchildren up North.

Uppermost on Mr. Freedman’s mind is his divorced daughter who has two children and a good job, but no support from her former husband, he said. Mr. Freedman had put aside enough money in a fund to pay for a year and a half of college for her oldest son, but that investment was down 20 percent, and he was to start school next year.

“We’re looking at a totally new ballgame,” Mr. Freedman said after playing tennis. “My mother lived to be almost 101 and her mother lived to be 90, so what it means is, if conditions get worse, we could outlive our money.”

Charles Mailman, 77, a retired zipper manufacturer, said he had accumulated a portfolio worth more than $1 million, 70 percent in stocks, and lost $300,000 in September and October. He said the days of yearly cruises for him and his wife were over for now.

“No more decorating, no more vacations, no more heavy-duty spending,” he said with a sigh. “If the market has hit bottom and it’s on the way back, I can live with that; the question is, what happens if it hasn’t?”

As for his broker, Mr. Mailman said, “He still says, ‘Sit tight. You have good stuff.’ They all say the same thing.”

Many people believed in stocks, they said, because the stock market had been good to them for years and represented the best way to keep their portfolios intact or growing.

“We stayed in stocks because they were so wonderful,” Jack Leinwohl, 67, who owns a U.P.S. store here to keep up his income, said. “I sold out everything two weeks ago so I can sleep.” He said he was looking to return to the market, though, because “I could be out of money in 10 years.”

Others say they do not dare to look at their portfolios anymore, or ask their spouses how things are going, for fear of the answer.

“There is no need for George and me to be crazy together,” said Ms. Goldsmith, 71, the psychotherapist, speaking of her husband. “I sleep, but George doesn’t.”

As for her three children, Ms. Goldsmith added, “I am getting them ready. If they are counting on their inheritance, they are in deep trouble.”

Anatomy of a Bank Takeover – This American Life & All Things Considered

Usually when you read about yet another FDIC bank takeover, the absence of emotion, the impact on the lives of bank employees, and the on the ground view of what happens on that fateful Friday is almost never portrayed as it is in Episode 377: Scenes from a Recession where a compellling audio story of the Bank of Clark County, Vancouver, WA is told. After all, who cares.  As long as my money is insured by the FDIC, I’m good!

In this episode, the story of a Circuit City store closing is also told.  This post will direct you to the All Things Considered resource.  The story was written by Chana Joffe-Walt.  The audio can be found here.  The abridged article transcript is here. I hope you get to listen to it.  It may not be completely objective or able to tell the entire story.  It is only 12 minutes.  But, you will see some criticisms of the piece from comments posted by readers on the article’s web site.

Anatomy of a Bank Takeover

by Chana Joffe-Walt

On a mid-January night, some 80 agents of the Federal Deposit Insurance Corp. pull into Vancouver, Wash. Their rental cars are generic, their arrival times staggered. One by one, agents check into a hotel, each quietly offering a pseudonym to the guy at the desk.

They’re here to take over the Bank of Clark County, which the FDIC has decided is insolvent. It’s the agency’s job to insure American bank deposits and to step in when a bank fails. The FDIC tries to keep the planning for its operations top secret, to avoid sparking a panicked run on the bank.

At 9 o’clock on this particular Thursday night, FDIC agents call another bank nearby, Umpqua Bank. They tell executives there that Umpqua has been selected to take over the Bank of Clark County. They order them not to tell anyone. Come to a meeting tomorrow at noon, they say, and we’ll fill you in on everything you need to know.

The next day, Ric Carey, an Umpqua vice president, heads into that meeting. “The FDIC had taken a location approximately two miles from the main office of the bank in a hotel under a different name,” he says later. “And they’ve been through quite a few of these. I think one of the gentlemen leading the discussion said, ‘You know, I’ve done over 200 of these over my 25 years, and let me tell you how it’s going to work.’ ”

He agrees it almost feels like a spy movie. “They’ve done this before — quite a production,” he says.

Breaking The News

Todd Zalk is what you’d call a team player, a total bank loyalist to the end and beyond.

Zalk works at the Bank of Clark County — “the best community business bank,” he says, “because we’ve changed the game in business banking and we were winning.” He laughs at himself, but a month after the failure he’s still wearing his Bank of Clark County nametag, still passing out his bank business cards with a warm handshake and calling people by name whenever possible.

Zalk says he had no idea the FDIC was in town and his bank was about to fail. On Friday afternoon, failure day, he was bringing in new business. “I had people that wanted to open accounts,” he says, adding that he opened more than 55 new accounts in the fourth quarter.

He knew the bank was going through a rough time — everyone knew that. The CEO had been saying that the bank was like a ship. The bank had taken on some water in the recent storm and might need a bigger ship, meaning a larger bank, to take it on. But things were basically under control.

On that Friday afternoon, Zalk is out meeting with potential clients.

At 5:01 p.m., a small team enters the Bank of Clark County. They’re a casual group, just two FDIC agents and a Washington state regulator, and they head straight for the CEO’s office. And this is when it happens: They deliver the news. They tell him his bank is undercapitalized and has failed.

At 5:03 p.m., an agent positioned by the CEO’s office door, types the news into a BlackBerry. It is received by everyone on the FDIC takeover team, including the FDIC’s manager on location, Ron Hodges.

“At 5:04, we receive the notification that the bank had been declared failed,” Hodges says. “It’s that simple.”

A minute later, FDIC agents begin closing in on the bank. A few are already inside, quietly and discreetly securing the cash and the vaults.

Carey, with Umpqua Bank, has assumed a position down the street. He’s sitting in his car, waiting and watching.

Gone In A Flash

Zalk, oblivious to all this, heads back into the office after a long day of work. And it’s weird, he says, how tense everyone seems. A teller mentions that there’s a staff meeting at 6 p.m.

“By this time it was quarter to 6, and I went up to someone who was senior vice president at the bank and I said, ‘How are you doing?’” Zalk says. “And they said, ‘Oh I’m doing all right.’ I could tell something was going on and they didn’t want to say. We looked across to the other side of the bank and there were two employees adjusting pictures on the wall. And he kind of laughed and said, ‘Wow, that reminds me of adjusting the chairs on the Titanic before it sank.’ And that really told me something was going down.”

The Bank of Clark County staff gathered in the lobby at 6 p.m. The group included a couple of people in suits whom none of the bank staff recognized.

“Mike Worthy, our CEO, came out,” Zalk says. “It was very short. He stood up and said, ‘Well, I’ve used the analogy that we were a ship that was taking on some water and we needed to pull up next to a bigger ship, and we thought we had a few buyers for that. And now the biggest ship that sails the seas has come alongside us, and they are going to be taking us over — and that is essentially the federal government.”

At 6:03 p.m., down the street in his car, Carey notices his BlackBerry vibrate. He was getting the signal, an e-mail: “It’s time. Come in.”

Two minutes later, Carey gets out of the car and starts walking toward the bank. Meanwhile, in the lobby, a woman from the FDIC takes the stage.

“She said within the next 10 minutes there will be 80 FDIC employees coming into the bank. And I looked out there, and it was dark so I couldn’t really see,” Zalk says. “Then all these people, mostly in suits and professional clothing with attorney-type briefcases, start entering the bank, just flooding into the bank. I was so awestruck at them coming in — and so many of them coming into the bank, that I turned around and looked over there, and just kept watching them, and they just continued to come. I mean 80? I mean, our bank had, like, 100 employees.”

Out in the parking lot, he noticed a flash. It was a photographer for the local newspaper taking a photo for the front page of Saturday’s edition.

Keeping The Doors Open

At 6:08 p.m., Carey enters the bank he will own in just a few days. He finds the staff members are standing in their closed bank headquarters trying to digest the news. Some of them are crying. He remembers one of them saying, “My goodness, I just told one of our biggest customers yesterday, ‘Don’t worry, everything’s fine.’”

He says they seemed almost personally embarrassed that they now had to face those customers.

It’s now around 6:10. The Clark County people have a bunch of questions running through their heads — first among them: Do we get to keep our jobs? Carey can’t answer that. Umpqua will need only about a third of the Bank of Clark County staff. But it’s too soon to let individuals know whether they just lost a job.

The Bank of Clark County no longer exists. It’s not quite Umpqua Bank yet. The FDIC is in charge. The bank has to open its doors Tuesday morning — Monday is Martin Luther King Jr. Day.

The FDIC agents announce that, through the weekend, the staffers will be temporary employees of the FDIC. Stay and help us, the agents say.

“Most of us were planning on leaving at the end of the day,” says Ken Moody, the bank’s vice president of information systems. “My daughter had a seventh birthday that we were going to go to.”

Like An Autopsy

At 6:20 p.m., the FDIC agents spread out into offices, storage rooms, hallways, into any space available. They tape handmade signs to the doors, labeling rooms with functions like “audit,” “security” and “investigations.”

The agents begin going through files. They change the Web site and count all the cash by hand, a task that takes three hours. They check the safe deposit boxes, go through desk drawers and toss out bank letterhead.

From all the paperwork and computer hard drives, the FDIC has to reconstruct the bank’s entire balance sheet. It has to know what it’s selling to Umpqua.

The agents’ work includes checking every single account. Ones with a balance under $250,000 are fully insured by the FDIC. But some people have more than that, and there are business accounts and loans and it gets complicated. Some of the accounts are covered, some aren’t.

While the agents are sorting all this out, they can’t have customers going online and moving money around. They need to shut down the bank’s computers for a short while, maybe an hour. “Things started happening very quickly and with what seemed to be a lot of precision,” Moody says.

At 6:25 p.m., Moody sees three agents approaching. They hand him a thumb drive and ask him to plug it into a computer. The drive contains all the instructions about all the computer systems.

“It was like watching an autopsy being performed by a really skillful surgeon,” he says. “They just came in and sliced and diced and broke the bank up into a bunch of different pieces, threw them into different buckets — and did it with great efficiency.”

It was like an autopsy, he says, of all the work the bank employees had done together for a decade.

‘They Were Really Nice’

Many workers at the Bank of Clark County said one thing about the FDIC that you don’t often hear about a government agency — that it did a really good job. They describe the agents as kind, courteous and efficient. Everything was structured, even how and when to grieve.

“Many of the people who came in from the FDIC got to where they were because they were part of a bank that was failed,” says Lisa Stapleton, an assistant loan officer. “And they were like, ‘You know what? We’ve been where you are. And we understand and it’s going to be fine.’ So they were really nice. Having that empathy helped it kind of make it a little more pleasant.”

The Bank of Clark County had 100 employees and assets of $446 million — it was a really small bank. But the federal takeover kept 80 FDIC agents, about 50 Bank of Clark County staff, and 100 Umpqua employees, working round the clock for three days.

Most of the largest banks in trouble right now — Citibank, Bank of America — are about 6,000 times the size of the Bank of Clark County and much, much more complicated.

Considering the scale involved, it’s not surprising the U.S. Treasury secretary’s latest plan does everything it can to avoid using this process on those big banks. When you take over a little bank, it’s called receivership. When you do it to a big bank, people throw around the word nationalization.

But on the other hand, check these FDIC folks out. They know what they’re doing. And every week they get more experience. In the 10 weeks since the FDIC took over the Bank of Clark County, 18 more banks have failed. That brings us to a grand total of 20 since the start of this year — a number that will likely grow tomorrow.

FDIC Alert: Level One Bank Acquires Michigan Heritage Bank

Friday was a busy day for the FDIC.  On Friday, three other banks were taken over in addition to the one headlining this post.  The notices can be found on the following links:

• First Bank of Idaho – Ketchum, Idaho
• First Bank of Beverly Hills – Calabasas, CA
• American Southern Bank – Kennesaw, GA

Here is one of the most recent FDIC bank closures which was achieved by Level One acquiring Michigan Heritage Bank on Friday, April, 24. The article posted below is rom PRNewsWire via Comtex and appears on foxbusiness.com.

FARMINGTON HILLS, Mich., April 24, 2009 /PRNewswire via COMTEX/ —-Level One Bank of Farmington Hills is pleased to announce the acquisition of all deposit accounts and select consumer loans of Michigan Heritage Bank, also of Farmington Hills, from the FDIC as Receiver following its closure on April 24, 2009. Level One Bank was selected by the FDIC, after a competitive bidding process, to assume these deposits and purchase these selected assets.

All Michigan Heritage Bank offices will open for business as branches of Level One Bank beginning Monday morning, April 27, 2009. Michigan Heritage Bank depositors will automatically become customers of Level One Bank and will have uninterrupted access to their funds, all of which will continue to be insured by the FDIC to the FDIC’s limits with no loss of any depositor money.

Level One Bank is a locally owned, full-service commercial and consumer bank which strives to exceed customer expectations at every point of contact. Level One Bank continues to take banking to a higher level with the most qualified and enthusiastic bankers in the market and the technology and infrastructure to make banking easier and more convenient.

“As a bank committed to the success of our local community – both its residents and businesses – we are thrilled to welcome the Michigan Heritage Bank customers into the Level One family. We pride ourselves on making a difference for each of our customers by providing a superior level of attention, treating each family like a business, and each business like family. We truly believe the transition will be a smooth, enjoyable experience for all our new customers. And we believe by keeping these deposits local, we’ll continue to positively support our communities and state,” said Patrick J. Fehring, President and CEO of Level One Bank.

Level One Bank’s Consumer Division offers personal savings and checking accounts including free checking and competitive interest-bearing accounts such as Money Markets, IRAs, and CDs. The bank also provides a complete array of consumer loan products including first mortgages, home equity, personal lines, auto, recreational vehicles and credit card services. The Commercial Division provides a complete menu of products including lines of credit, term loans, commercial mortgages, SBA loans and a full suite of Treasury Management Services.

   Level One Bank locations will be:
   30201 Orchard Lake Road, Farmington Hills
   28300 Orchard Lake Road, Suite 200, Farmington Hills
   21211 Haggerty Road, Novi
   28345 Beck Road, Suite 102, Wixom

The official fdic.gov press release can be found here: PR09058.

One Year’s IRA Contribution Can Really Make a Difference in Savings

(NewsUSA) – New data from Fidelity Investments found that more  than eight out of 10 Americans have cut back on discretionary purchases because of the recent economic crisis, and nearly half of respondents are now saving money. But many are unsure where to place the savings for the greatest benefit.

“After maximizing workplace savings plans and paying off credit card debt, investors should consider saving more for retirement using an Individual Retirement Account or IRA,” said John Ragnoni, senior vice president, Fidelity Investments. “Even though Americans are facing a challenging economic environment, it’s important to prepare for the future by making annual contributions.”

For example, an investor who makes a single contribution of $5,000 to a Roth IRA now could see that amount potentially grow to more than $53,000 in 35 years, assuming an annual rate of return of 7 percent.

Additionally, consolidating old workplace savings accounts at former employers into an IRA may offer the most compelling benefits for managing one’s retirement savings, including a broader range of investment choices.

This hypothetical example assumes the following: (1) one annual $5,000 Roth IRA contribution made on January 1 of the first year, and (2) an annual rate of return of 7 percent, and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pretax (deductible) contributions from a Traditional IRA are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax-free, provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10 percent penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market.

Are we in a recession yet? Part 2.

Finally some admission from the powers that be that we are officially in a recession.  Specifically, the economy began contracting in December 2007.  This revelation comes as the DOW closed down 680 points, the 4th largest point loss in its history.

So who made the official determination and why did it take so long to confirm what regular people like you and I knew all along.  The group is called the National Bureau of Economic Research.  According to their website’s FAQ,

Here is the who.

The NBER is the nation’s leading nonprofit economic research organization. Sixteen of the 31 American Nobel Prize winners in Economics and six of the past Chairmen of the President’s Council of Economic Advisers have been researchers at the NBER. The more than 1,000 professors of economics and business now teaching at universities around the country who are NBER researchers are the leading scholars in their fields. These Bureau associates concentrate on four types of empirical research: developing new statistical measurements, estimating quantitative models of economic behavior, assessing the effects of public policies on the U.S. economy, and projecting the effects of alternative policy proposals.

Here is the why.

Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER’s recession dating procedure?

A: Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. As an example, the last recession, in 2001, did not include two consecutive quarters of decline. As of the date of the committee’s meeting, the economy had not yet experienced two consecutive quarters of decline.

And…

Q: Typically, how long after the beginning of a recession does the BCDC declare that a recession has started? 

A: Anywhere from 6 to 18 months. The committee waits long enough so that the existence of a recession is not at all in doubt. It waits until it can assign an accurate date.

This committee is appointed by the NBER president and consists of directors responsible for various NBER programs as well as expertise in business cycle research.  It does not forecast durations of recessions.

I hope they don’t take as long to announce a depression.  Actually, they don’t do that or really use the word.  

The NBER does not separately identify depressions. The NBER business cycle chronology identifies the dates of peaks and troughs in economic activity. We refer to the period between a peak and a trough as a contraction or a recession, and the period between the trough and the peak as an expansion. The term depression is often used to refer to a particularly severe period of economic weakness. Some economists use it to refer only to the portion of these periods when economic activity is declining. The more common use, however, also encompasses the time until economic activity has returned to close to normal levels. The most recent episode in the United States that is generally regarded as a depression occurred in the 1930s. The NBER determined that the peak in economic activity occurred in August 1929, and the trough in March 1933. The NBER identified a second peak in May 1937 and a trough in June 1938. Both the contraction starting in 1929 and that starting in 1937 were very severe; the one starting in 1929 is widely acknowledged to have been the worst in U.S. history. According to the Bureau of Economic Analysis, real GDP declined 27 percent between 1929 and 1933, roughly ten times as much as in the worst postwar recession. If the term Great Depression is used to mean the period of exceptional decline in economic activity, it refers to the period from August 1929 to March 1933. If it is used to also include the period until economic activity had returned to approximately normal levels, most economists would judge that it ended sometime in 1940 or 1941. However, just as the NBER does not define the term depression or identify depressions, there is no formal NBER definition or dating of the Great Depression.

For additional information on the National Bureau of Economic Research and the committees Recession Dating Procedure, go to http://wwwdev.nber.org/cycles/recessions_faq.html.

Are we in a recession yet? Hmm!

Perhaps the economist are confused about what the definition of a recession is, but it has felt like one in any people’s personal economy since the beginning of the year.  Finally, the talking heads, are acknowledging that we “may” really be in one.  What?

Anyway the DOW falls below 8000 for the first time in 5 years.  Keep in mind that in September 2002, the index closed at 7592 which was 6 years ago.  Are we headed in that direction?  How fast.  After that, at 7539 which was the low in August 1998, we will see lows posted that we haven’t seen in X years.  Here is an iPhone screenshot of the result.

Here are a few excerpts from MSNMoney explaining the losses yesterday.  The entire article written by Charlie Blaine and Elisabeth Strott can be found — HERE.

Today’s selloff reflected three forces at work:

• A sharp decline in financial stocks. That was, in part, a show of investor unhappiness that the Treasury Department has junked its plan to take over the troubled assets of a number of financial institutions.

• Increasing worries that the recession will be much worse than anyone thought, with deflation problems growing. The Federal Reserve issued new projections today showing unemployment could jump well above 7% next year. Prior forecasts had seen jobless peaking at no more than 6%. The economy is “deteriorating faster than any time since the second quarter of 1980,” former Fed governor Lyle Gramley told Bloomberg Television today. Indeed, the Fed pledged at its Oct. 28-29 meeting to take “whatever steps were necessary to support the recovery of the economy.”

• Fears that inaction in Congress will lead to the collapse of General Motors (GM,news, msgs), Chrysler Group or both.

Cheers, it’s not the end of the world…yet.

Dow Closes at 9,955.50

For the first time in 4 years, has the DOW broken the psycological support level of 10,000. Where do we go from here? Economists portend, as do participants in the stock market, that what is going on today is a reflection of what we are likely to see in the future. Only the future is now. It is going to take longer than that to have all of this gut wrenching retirement plan wrecking market/economic activity to work itself out.

This is not a American problem folks, our friends across the Atlantic are going through the same pain and stabilization process to correct as we are. Even the Russian stock exchange halted trading twice today.

The market gave up $2.5 trillion in wealth today. That represents a lot of hopes for the future gone for now. Some of you were just recovering from the market collapse in 2001 and haven’t broken even yet. I read an article this weekend from a notable market analyst who said “buy and hold”. That may be fine for a young investor who has time for the market to turn around. For those who were relying on this for income because of a current or upcoming retirement, that strategy won’t do. If you are taking out money at the same rate of your portfolio as before the market collapse, you will find yourself depleting your retirement savings at a faster rate.

It’s time for a DEFENSIVE safe money portfolio review. Yes, there are still safe places to put your money and even get a 5% return guaranteed. Next you design the portfolio so you can never run out of money while receiving the highest income possible at lowest tax iiability. Call today.