As you know, the stock and bond markets around the world continue to be extremely volatile and are experiencing very large swings in valuations with almost every new piece of information regardless of its accuracy!

I have spoken with many of our clients over the past few weeks and months and it is very gratifying to receive their appreciation. In almost all cases, the message has been that they understand that the managed portfolios are down but they are thankful that their account is far better off than the broad market and the investments of most of their friends.  Please be assured that we will never stop our constant market analysis and portfolio adjustments in an effort to provide the greatest risk reduction as circumstances dictate.

On another note! I recently wrote what is referred to in our industry as a “White Paper” for possible distribution through the media. I am pleased to inform you that it was published on about a dozen different websites and search engines.  Unfortunately, it was edited down to better meet the article “size” most wanted (this is pretty normal for things in the media).  I have included the original document in the following paragraphs. If you would like to see the published version you can go to the website directly for viewing. Some of the sites are, Market Watch, Yahoo Finance, Dallas News.com, Google and MSN News. I realize that much of the information below may not apply to you because we are very careful to help our clients avoid such mistakes. However, you may want to share it with friends and relatives so that they can also avoid these costly errors.

I look forward to our next conversation and hope that you are having a wonderful fall season!

Six ‘Traps’ to Avoid with Your Retirement Accounts

By Phil Couture, CFP®

President, Couture Financial, Inc.

            For most Floridians, retirement accounts provide an important safeguard for the future. Making annual contributions to an Individual Retirement Account (IRA) or employer’s 401(k) plan during the working years can significantly reduce your taxable income – an immediate financial benefit. Your nest egg grows more quickly because those taxes are deferred. And when you finally withdraw those funds in your retirement years, your tax bracket is likely to be lower.

            However, the Internal Revenue Service (IRS) has very strict rules governing these retirement accounts. And in today’s turbulent financial markets, it’s all too easy to make a serious mistake that will cost you money. For instance, if you withdraw funds from a retirement account before age 59.5, you’ll probably pay a 10 percent penalty as well as the income tax.

Here are six suggestions for avoiding the most common traps:

            • Don’t let your bank or other plan custodian give you a credit card or checking account tied to your retirement funds. While it’s a convenient way to make withdrawals, you could wind up withdrawing excessive amounts that could not be paid back, causing potential future problems. And don’t lose sight of the tax consequences: withdrawals taken from these funds will count as personal income.

            • Don’t take out a loan from your IRA or 401k plan. Many Floridians today are looking for funds for overdue mortgage payments or other immediate debts. But any loan from an IRA must be paid back in full in 60 days. If you have a loan from your 401k and you lose your job, it must be paid back immediately. Otherwise, it’s considered taxable income.  You’ll also have to pay the 10 percent penalty if you’re younger than 59.5 in either case.

• Be sure your IRA accounts that are held at any bank are insured. The Federal Deposit Insurance Corporation (FDIC) currently covers up to $250,000 in retirement accounts at any one bank. But if your IRA has grown to $300,000, the extra $50,000 is at risk. Fortunately, you can move some of your IRA assets to another bank to be sure the total amount is protected.

            • Be very careful when transferring or “rolling over” your IRA funds to avoid tax penalties. The IRS will only allow you to move the funds “in a rollover transaction” from one custodian to another just once in any 12-month period. The better method is a direct “trustee to trustee” transfer (the capital passes directly from one custodian to the other without being received by the account owner), as there are no limitations for transfers.  In any rollover, set up the new IRA first, then ask your current bank to transfer the money directly rather than writing a check in your name for you to deposit.

• Name your beneficiaries directly. Designating your spouse or children as beneficiaries of your IRA provides greater flexibility in inheritance funds, allowing them to minimize tax consequences. Therefore, it’s usually a better choice than naming a living trust as the beneficiary.  Remember that someone eventually will have to pay the taxes – and it’s usually better to spread out those tax payments over time. If a living trust is the beneficiary, this option is lost.

            • Diversify your investments. Don’t let the volatility on Wall Street lead you to putting all your IRA funds into “safe” investments like certificates of deposit (CDs), Treasury bills or other fixed-income investments that will not keep up with inflation.  To avoid losing your “purchasing power” in the future, you need to maintain a diverse investment portfolio that may include stocks, real estate and other types of assets.  That’s a good way to reduce both short- and long-term risks.

Phil Couture is president and founder of Couture Financial, Inc., Sarasota, holds the professional designation of Certified Financial Planner (CFP®). Since founding the firm in 1977, Couture has helped thousands of clients achieve their individual investment objectives with minimum risk.