In my last post here at PFA, I detailed four compelling reasons to keep feeding your 401(k) account during these admittedly trying economic times.  In most cases, I believe that advice is sound.  Don’t give up on your 401(k).

However, there are exceptions to every rule.  That’s what this post is all about.  Last time I promised I’d address a few caveats to the general rules favoring 401(k) participation.  Here they are:

Disappearing Employer Contributions. Times are tough enough that many employers are bailing out on their longstanding 401(k) matching policies.  As companies look for ways to cut costs and to remain competitive, they’re looking very carefully at their contributions to employee retirement accounts.  Chicago’s Southtown Star reports that General Motors is already pulling the plug on some matching and that other companies will undoubtedly be following the auto giant’s move.  If your employer is eliminating or suspending 401(k) matching, you might need to take a close look at your situation.

In many cases, a chief reason to prefer 401(k) participation is the employer match.  When you remove that money from profitability calculations, the overall picture can change dramatically.  Employer contributions crank up your assets when the market is humming and they act as a kind of hedge when things go bad.  Run the numbers if your employer is bailing out on you and make sure that feeding your fund still makes sense.

Bad or Negligible Choices. As we mentioned last time, one of the reasons to love 401(k)’s relates to their flexibility.  Employees generally have a slate of choices regarding what kind of instruments and investments go into their 401(k) wrappers.  Unfortunately, many companies have greatly reduced or eliminated choices in hopes of streamlining and increasing administrative efficiency.  The Curious Cat Investing and Economics Blog, which concurs with my assessment that 401(k)’s are generally a good idea explains, “[n]ow there can be some 401(k) plans that are less ideal. Limited investing options can make them less valuable. Those limited options could include the lack of good diverse choices, index funds, international, money market, real estate, short term bond funds…”

That might not be a deal-breaker for most people, but if your 401(k) options are over-limited and force you to retain positions that appear incredibly weak or doomed, you might want to reconsider your participation.  At the very least this could justify a reduction in contributions.

Pressing Debts. Recently, we discussed the age-old question of whether it makes more sense to invest or to pay down existing debt.  The bottom line?  It depends on the nature of the debt and the value of the investment.  Making the right decision in this regard requires a holistic perspective.

If you’re facing high-interest debts and are still contributing significantly to a weakened 401(k), you might want to re-think your priorities.  You may be able to get more mileage out of your cash by applying it directly to your debt load instead of socking it away for your retirement.  This is particularly true in current market conditions.  Your debt continues to accrue the same (and in the case of some debts, very high) interest obligations even when the likely return on investments is tanking.  If you haven’t looked carefully at your debt situation relative to the earnings levels of your 401(k), this might be a great time to do so.

These are three factors that could form a strong argument for adjusting your 401(k) activity.  However, it is important to remember the strong general argument in favor of feeding your retirement accounts.  Consider any changes very carefully and don’t allow your emotions during a high-stress economic period to lead you in the wrong direction.  Additionally, make any and all decisions with a clear understanding of all possible repercussions.  For instance, you need to take the tax advantages of a 401(k) into consideration, your own personal habits and “money psychology” and the fact that the current down market may very well represent an opportunity to acquire value stocks at a temporarily reduced price into consideration.

Most people will find that 401(k) participation makes sense.  Some, however, may discover that it’s time to pull the plug on their current contribution strategy.

Fear. Disgust. Anger. Disappointment. Frustration. Confusion.

Those have been the reactions of thousands of people who’ve opened their recent 401(k) statements. The stock market has been sick and our 401(k) balances show the symptoms quite clearly. Folks are spotting dips in excess of 30% over the course of a single month. It’s ugly out there.

The natural reaction to these scary 401(k) moments? Run for the hills. Get out while you can! Yank that money out of there before you’re staring at a statement where the only numbers are to the right of the decimal point.

Why would you want to keep feeding a 401(k) when the money you’re pumping in its direction is leaking out so fast, right?

Wrong. Very wrong. It might seem counterintuitive to push money into an investment that’s declining in value, but it’s the right thing to do. This nasty economy does NOT justify decreasing your 401(k) contribution.

There are at least four rock-solid reasons not to abandon ship:

Our economy’s resiliency. This whole downturn might feel new to you, but it isn’t. The market goes up. The market goes down. Overall, however, it tends to grow over time. In fact, we’ve seen tremendous total growth over just about every meaningful period since the Depression. There’s every reason to believe that things will improve considerably in the future. Walter Updegrave writes for CNN and Money that “The point, though, is that the economy and the markets will rebound from this crisis just as we’ve recovered from the Crash of ’87, the Asian crisis of 1997, the Long-Term Capital Management debacle in 1998 and 10 recessions since World War II.”.

Your balance might be down today, but in the long run it’s likely to increase. In fact, some people are actually encouraging people to increase their 401(k) contributions right now because they believe the recent downturn represents a significant market overcorrection and argue that investors can pick up great value stocks at insanely low prices right now. It is, they argue, a buyer’s market. Recession Proof Living recently recounted an office visit from a 401(k) rep that hammered that message home. That kind of advice stems from the realization that our economy is incredibly resilient. Don’t bet against the overall economy. In the long run, you will lose.

Employer matching. If your 401(k) is set up with employer matching intact you simply MUST keep investing. For all practical purposes, your contributions are doubled. Thus, you can withstand significant losses while still staying ahead. Even if you could find more solid investments, it’s incredibly unlikely that the gains you’d discover would trump the value of your employer match. Let’s say your employer matches your contribution dollar for dollar. If the bottom completely falls out of the market and your investment decreases in value by 49%, you still have more money set aside than if you stuffed all of your cash in a safe mattress somewhere. As Cake Financial notes, your employer may match up to 6% of your annual salary. That’s a lot of free money to walk away from!

Taxes. You’re not paying taxes on the income you contribute to your 401(k). You’re not paying taxes on the money that’s growing (or will eventually be growing again) in your 401(k). The IRS will be happy to whack you around, however, if you start yanking your cash out of your retirement fund. The government will be equally pleased to take some of your money if you put it into alternative investments that don’t have the kind of tax advantages we find with a 401(k). When you begin to calculate the tax repercussions of either (a) pulling money out of your account or (b) putting your money elsewhere, you’ll get a better idea of why it makes sense to keep feeding your 401(k). A post at Dr. Jim Collier’s provides a great example of a tax horror story associated with getting out of a 401(k) too early. The impatient investor netted a fraction of what they probably deserved and ended up with a massive, lingering tax burden in the process. Brunette on a Budget provides a nice rundown of the tax implications of giving up on your 401(k).

Flexibility. The expression “401(k)” doesn’t tell us anything about the nature of your investments themselves. A 401(k) is not a type of investment, really. It’s a wrapper with certain legal protections (particularly in terms of taxation) that may contain any number of financial instruments. What does that mean to you? It means that if your 401(k) is circling the drain, you have the option to redistribute the investments within the plan. Most company plans will have multiple 401(k) investment options and some offer tremendous flexibility for those with a “do it yourself” streak. If your 401(k) is in the process of being crushed, take a look at what’s actually behind the wrapper. Then, talk to the folks managing the plan and take advantage of the flexibility available to better protect yourself. You may not remember it now, but when you signed up for your 401(k) you probably indicated a preferred set of investments for your contribution. It might make more sense to revisit that decision than it does to pull out of the plan.

In our next post, we’ll look at a few caveats to this position. There are times when it might make sense to say “no” to a 401(k). Overall, though, they remain a valuable means of saving for retirement and you probably shouldn’t let recent economic events scare you away from continue your investment pattern.

Friday as I was getting ready to go to work, I heard a brief comment on the local news about Washington Mutual being sold to JP Morgan.  They did not mention much else… just that simple one liner. As soon as I got to a computer, I went to CNBC.com to see what was going on.  And OMG!  What was going on was a mess! That one liner definitely did not suffice to explain the gravity of what happened.

Washington Mutual… the WaMu Whoo Hoo… gone! What the @#%$?!?!

A 120 year old bank disappeared over night.  According to what I hear… this is the biggest banking failure in history.  This seems like a bit of déjà vu.  I could have sworn I heard the same story last week, last month.  It seems that everyday… we are seeing the “biggest failure in history”.  How many more “biggest failures” can we endure?

Really people, I must be sleeping.  I am going to wake up any day now and realize that the collapse of the financial industry is a bad dream… a horrible nightmare.  But sadly, I know that I am not sleeping and no pinch is going to cure this mess.

So what happened to WAMU?

Basically, Kerry Killinger, former CEO of Washington Mutual, was paid more than $10 million dollars a year to run the bank into the ground.  And he did a great job.  A bunch of bad judgments and greedy decisions later… WaMu no longer Whoo Hoos.

Killinger left WaMu in utter ruin earlier this month.  Towards the end, he tried to redeem his egregious mismanagement by resigning his position as Chairman of the board, raising capital (TPG raised $7 billion dollars - $2 billion of their own money), laying off employees, and restructuring business lines. And to be honest, I thought his attempts to save WaMu might actually work.  (But boy was I wrong!) Apparently using bicycle patches to fill a gigantic hole ain’t enough to keep the Titanic from sinking.

But what finally took the stern under… since the fall of AIG, Lehman Brothers and Merrill Lynch on September 15^th, WaMu customers withdrew nearly $17 billions dollars in deposits.  The run on the bank rendered it virtually insolvent.  And as we learned from the recent descend of Indy Mac, for a bank… no liquidity means the feds will be arriving soon to put it out of its misery.

The FDIC came in, took over Washington Mutual, sold it to JP Morgan for $1.9 billion dollars… it was all a rather seamless transition for accountholders.  But for WaMu stockholders, for WaMu bondholders, for TPG who had just invested $2 billion dollars in WaMu… well they are up the creek without a paddle.  Or to describe it more accurately, the value of their portfolio is as deep as Atlantic seafloor… (Yeah…  chilling with the Titanic.)

But seriously this is the one thing that really bothers me about WaMu’s downfall… stockholders and bondholders got screwed.

You see… When you buy a company’s stock, that means you are buying equity… ownership in the company.  For WaMu shareholders… holding equity in a company that no longer exists means you are left with nothing.  The value of the stock… $0!

And… When you buy a company’s bonds… that means you are giving the company a loan.  The bond is like an IOU.  For WaMu bondholders… having bonds from a company that no longer exists means that the paper it is written on has more value than the bond itself.  The value of the bond… $0!

And just because you may own individual WaMu stocks and bonds… don’t think this will not impact you.  It will.  Many institutional investors, such as pension funds, mutual funds and other banks and insurance companies, owned the majority of WaMu stocks and bonds.  These pension funds are in charge of our retirement security.  These mutual funds are a part of our 401Ks… our children’s 529 accounts! If you have any money invested anywhere… then odds are you held some stake in WaMu’s success or failure.  And because WaMu failed, the value of your assets dropped.

And aside from the financial impact, the psychological impacts are more far reaching.  If consumer confidence wasn’t completely shot before, you can be guaranteed that it is now.  Consumer confidence measures how consumers feel about the current and future state of the economy.  When consumer confidence is low, then people stop spending (which contributes even more to the economic depression) and start stockpiling money… just in case.

But this situation is different in that consumers no longer feel confidence in the finance industry.  This means that instead of stockpiling money in savings accounts, folks feel more security with stockpiling it under their pillows.  And when people began taking their money out of banks… well you know what happens next (IndyMac, WaMu).

The whole thing is cyclical and as it  continues the problem gets worse.

I, for one, tend to be an optimist.  And I am certainly a strong believer in free enterprise and the ability of the market to correct itself.  But even I, with my typically rosy outlook, am getting worried.  I keep looking for the plunge to end, but the end is nowhere in sight.  Every time I think it can’t get any worse. ..  it gets worse times 2.  I just hope that WaMu will be the last to sink, but for some reason I feel that the dominoes have just begun to fall.

The Navy Federal Credit Union offers excellent benefits to its more than 3 million members. Navy Federal has been around since 1933 and as of today holds over $34 billion in assets and $23 billion in member savings.  The credit union offers a wide array of financial services and great rates on its products.

Auto loans

Refinance your auto loan and get $100.  And what makes the deal even more attractive… the interest rate on used car loans are as little as 4.75% for 36 months.  The average right now is 7.14%.  At this rate, the savings can add up quick.  Also if you are in the market for a new car, you can get a great rate through Navy Federal.  The new car loan rate is as low as 3.75%.  That is about half of the national average.

Mortgage loans

Navy Federal offers an excellent rate on home mortgage loans.  The 30 year fixed rate is 5.375% with .75 points.  The going rate everywhere else… 5.97%.  That may not seem like much of a difference, but .6% makes a huge difference on a $500,000 or even $200,000 loan. And if you use a RealtyPlus approved agent to help you search for and buy your new home, you can get a rebate of up to $5,050 (depending on the purchase price).  This rebate also works if you use a RealtyPlus approved agent to help you sell your home.

Certificates of Deposit

Navy Federal offers 4% on its one year CDs.  With the declining market, it can be comforting to know that your money is guaranteed to earn 4%.  But the best part… you only have to make a minimum deposit of $100.  Most CDs required much higher minimums of $1,000, $5,000 or even $10,000 or more.

Credit Cards

Navy Federal issues several different credit cards. But two I like the most… the Platinum Visa and the nRewards Visa.  There is no annual fee for either card. And the credit limit can range from $1,000 to up to $50,000.  The APR on the Platinum is 7.9%. The APR on the nRewards card is 8.9%. Plus you can earn 1% back on every purchase made with the nRewards card.

Free Seminars

Even with all of the great products and low rates, the thing I like most about Navy Federal is that they offer free seminars to it members.  The seminar usually last 1 to 2 hours and center around different financial topics that are very useful.  They regularly host home buying seminars.  But other seminars focus on investing, estate planning, retirement planning, and taxes.

In addition to those few that I have mentioned, Navy Federal also provides services for small business and investment and insurance services. However, the only way you can benefit from what Navy Federal has to give is to become a credit union member. Until recently, membership was limited to only those with an affiliation with certain branches of the military.  However as of May of this year, membership eligibility has been expanded to include all branches.  So to join the Navy Federal Credit Union, you must be a civilian or non-civilian employee of the Department of Defense, be a Department of Defense reservist or be enrolled in a officer candidate program.  Else you must be a family member of anyone who fits into one of these categories.

Unfortunately, I am not eligible to join.  But if you are, you should seriously consider giving Navy Federal a shot.

Are you a member of the military or a military officer’s association?  Do you work for the feds?  Yes? Great!

No… well do you have an immediate family member or housemate that is?  Are you employed by a federal contractor?  Or are you a member or are you interested in becoming a member of the National Military Family Association?

If you answered yes to any of these questions, then you may be eligible to join the ranks of those who are proud members of the Pentagon Federal Credit Union.

Who are they?

Chartered in 1935, the Pentagon Federal Credit Union is one of the oldest and largest credit unions in the US.  It services members of the armed forces, their families and other groups of specified people.  Pentagon FCU is lead by President Frank Pollack and governed by a 13 member volunteer board.

Pentagon FCU, which is insured by the NCUA (the FDIC for credit unions), has over 825,000 members and holds over $12 billion in assets.  Just last week the NCUA approved the credit union’s proposed merger with another smaller credit union, Clara Barton FCU.  This merger will increase their membership by 3,000 and bring their assets up to $20 billion.

Pentagon FCU has 27 branch locations and offers a varied array of financial services.  They offer checking, savings and money market accounts, mortgage loans, auto loans, home equity lines of credit, internet banking, access to over 32,000 ATM, credit cards, insurance options, investment services and so much more.

About their products and services

Money Market Certificates - with a minimum deposit of $1,000, you can lock in a 4.6% APY for 5 years… and plus the interest on this account is compounded daily.  That is really sweet because with many money markets interest is usually compounded only once a month or less.  Read here to learn about the power of compounding interest.

Mortgage Loan Products - Pentagon FCU offers many different mortgage loan options.  The interest rate on 30 year fixed loan is only 6.125% with no points.  This includes traditional and jumbo loans up to $2 million.  They also offer several different types of adjustable rate mortgages for as little as 4.5% with no points.  Right now they are offering a special on the 5 year ARM.  You can get a rate of 5.377% and it only adjusts every five years.  Fixed equity loan rates are as low are 5.99% for up to 20 years.

Auto loans - Pentagon FCU offers special internet only financing rates for auto loans.  The new car rate… 4.5%, the refi rate 4.5%, the used car rate… take a guess? Yes, 4.5%.  These are really cheap rates.  The national average on new car loans is 6.77%. And the national average used car rate is even higher, at 7.09%.

Credit cards - Pentagon FCU offers over 10 different platinum, gold, specialty, student, and reward credit cards.  Some of the cards have APRs as little as 10.99%.  Others offer 5% cash back on gas purchases, 2% cash back on supermarket purchases, 5.99% APR on balance transfers (fixed for the life of the loan), 1.25% cash back on everyday purchases, no annual fees, 1,000 bonus points for air miles, and balance transfer fees of only 1% (the standard for most cards is 3%).

Checking accounts - Their checking account comes with benefits such as access to online banking and free bill pay, free checks, free ATM/Visa debit card, no monthly service fee, automatic overdraft protection and no holds on deposits of $3,000 or less.

Pentagon Federal Credit Union… check them out!

Many of us have heard of the Roth IRA, but not many of us know about the man behind the name. William Roth, Jr., an Army vet and graduate of Harvard business and law, represented Delaware in both the House and Senate in DC for more than 30 years. Though best known for the retirement account that bears his name, he was also recognized as a virulent combatant of wasteful government spending. Mr. Roth passed away about 5 years ago, but his name and legacy lives on through is baby, the Roth IRA.

The Roth IRA is an individual retirement account that taxpayers may establish independent of any other employer sponsored retirement accounts. The Roth IRA offers tax benefits to its account owner. Initially becoming available in 1998, the Roth IRA differs in several ways from its predecessor and counterpart, the Traditional IRA. And in most situations, the Roth IRA is a more effective tax sheltering vehicle than the Traditional IRA.

The differences between Roth IRA and the Traditional IRA are quite simple. However, the implications of those differences are not as simple.

The Major Differences and Implications

1 - In a Roth IRA, contributions are made with post tax dollars. In a traditional IRA, contributions are mare with pre tax dollars.

Implication - Your taxable income is not reduced by the amount of your Roth IRA contributions. Your taxable income is reduced by the amount of your Traditional IRA contributions. Therefore an immediate benefit may exist with the Traditional IRA, as your contributions have the potential of reducing your tax liability in the current year.

2 - Your principal contribution in both accounts grows tax free. However, withdrawals from Traditional IRA are considered taxable income. But because Roth IRA contributions are originally made with post tax dollars, withdrawals are not taxable income.

I guess this can be construed as a pay now or pay later scenario… either way, you have to pay. But there is one gigantic caveat… withdrawals consist of principal and interest. When withdrawing from a Traditional IRA account, the interest earned on contributions is also considered taxable income. Quite the contrary is true with Roth IRAs; interest earned is not considered taxable income.

Implication - In a Traditional IRA, both principal and interest earnings is taxable at the point of withdrawal. In a Roth IRA, neither principal nor interest earnings is taxable at the point of withdrawal.

So which account is better? Well it depends… in some situations it may be more advantageous to have a Traditional IRA and in other situations it may be more advantageous to have a Roth IRA.

A Traditional IRA might be right for you if…

- You are looking for ways to reduce your tax liability today

- You like the idea of paying taxes on the back end

A Roth IRA might be right for you if…

- You like the concept of paying taxes on the front end

- You expect your income tax bracket will be higher in retirement than it is currently (This way your contributions will be taxed at the lower tax rate)

- You do not want to pay taxes on the interest earned on your principal contributions

- You like to simplify your tax reporting (with a Traditional IRA, your have to report contributions and withdrawals on a 1040)

With that being said, for most people the Roth IRA is a better deal. Both types of IRAs have advantages, disadvantages and limitations. But don’t let the fancy tax talk hinder you from taking action. Regardless of the retirement savings tool you use, it works best when you take advantage of your options early. The sooner you start, the better.

Currently led by CEO James Wells, SunTrust Banks, Inc. is one of the oldest and largest financial institutions. Since its inception in 1891, SunTrust has grown bountifully. As of March 31^st the bank held over $170 billion in assets. SunTrust operates nearly 1,750 offices which are spread throughout 11 states in the southern and east coast regions. It also operates 5 full service office locations in the Grand Cayman.

In the second quarter of 2008, Atlanta based, SunTrust Banks, Inc. posted an earnings lost of 20.6%. Net income available to common shareholders fell from $674 million in the same period last year to $535 million. At the same time provisions for loan losses rose 328%… from $104 million in the second quarter of 07 to $448 million in the second quarter or 08.

The quality of the banks assets has also declined in the past year. The ratio of nonperforming loans to total loans increased from .64% to 2.22%. It was noted by SunTrust that the change is this ratio was due primarily to residential real estate secured loans and residential real estate commercial loans. However today, amidst the mortgage crisis, these types of changes are common place in the banking industry.

Though the losses are staggering, SunTrust does not plan to cut dividends or issue more stock to remain solvent. This is significant because analysts have long held that this was the only option. Instead the company opted to sell 10 million of its shares in Coca Cola. This is move seeks to increase its capital standing while simultaneously offsetting losses.

However, in the wake of this loss, Moody’s is posed to downgrade the banks long term debt rating. Currently the bank’s senior debt is rated at an acceptable Aa3. But before the rating is modified, Moody’s will perform a full scope analysis of the bank’s capital situation. In the event the rating is adjusted, it is likely to slip by only one notch. And there is also a negative outlook for the bank’s Standard and Poor’s and Fitch’s debt rating. However, its DBRS’s outlook is stable.

Despite its losses and debt rating outlook, the bank continues to expand its kingdom. SunTrust has taken over the one of Florida’s failing banks. The FDIC closed the First Priority, without notice, on August 1^st. As of August 4^th, First Priority Bank of Bradenton is now SunTrust. SunTrust assumed $214 million of First Priority’s $227 million in deposits and bought $42 million of its $259 million in assets.

And on top of it all, SunTrust remains a leader in customer satisfaction. A study conducted by J. D. Power and Associates ranked SunTrust number two in overall customer satisfaction. The survey focused on mortgage lenders and measured customer satisfaction with the application process, closing process, service representatives and problem resolution. Out of a possible 1,000 points, SunTrust scored 809. If they would have gotten only three more points… they could have taken first place over Bank of America.

Even when considering the loss in net income available to common shareholders, SunTrust remains dominant in it class. Its shares are trading at nearly $40 each, while its competitor’s shares aren’t trading for nearly as much. Wachovia shares are hovering about the $17 dollar mark. And Washington Mutual is barely trading at $5 a share. SunTrust has not been spared a hit within the housing bust. However they have not fallen so hard that they cannot rebound.

So… what exactly happened over the weekend? It! Yes, it! About 3 o’clock on Friday the FDIC took over the failing Indy Mac bank. I knew it was coming but I wasn’t expecting it to happen so abruptly. And you wanna know how I knew it was coming? Cause the signs were everywhere.

2006 - Indy Mac is sitting fat. They are writing tons of new home mortgage loans. But no, not those scummy sub-prime ones like all the other lenders. They have found their niche in the home loan market, as an alt-A lender. The alt-A market are those people who can’t qualify for a prime loan, yet they are one late payment away from falling into the sub-prime category. Hell at some point, Indy Mac got so comfortable with servicing this new found market, they starting qualifying folks for loans without even verifying their income. And boy did the new loans start rolling in. Indy Mac’s valuation shot up to $3.5 billion. Their stock is trading at nearly $60 dollars a share, up nearly 100% over the past two years. Things are just great for the Mac.

Late 2007 - Bamboozled homeowners do not realized that their cheap mortgage payments are about to sky rocket as the end of these seductively low interest or no interest teaser rates looms. Since they were barely able to make the low payments, there is no way they can make the now nearly doubled payments. Foreclosure is eminent. People start walking away from the dastardly loans deals. And the bottom literally falls out of the mortgage industry. All the interest and principal payments the banks were expecting to receive never arrive. And now the banks are stuck with a defunct loan agreement and a nice pretty house that won’t sell in a deteriorating market.

Indy Mac did not lend in the sub-prime market… their mortgagees are able to handle the new higher payments, right? Not right, remember they did not even verify income for their mortgagees, so who knows what they are able to handle. So no, Indy Mac is not immune. They too are stuck with billions in unpaid mortgages and nice pretty houses that won’t sell.

January through June 2008 - Indy Mac’s losses from loans continues to swell. That bank’s valuation is nearly a fraction of $3.5 billion and stock prices continue to fall… and fall… and fall. Shares that were trading at $60 only two years ago are now barely trading for 60 cents.

End of June 2008 - Here comes Senator Schumer… He warns the feds that Indy Mac is on a collision course with absolute ruin. Word spreads fast and money starts gushing out of Indy Mac like water through a broken dam. In less than two weeks depositors withdrew more than a billion dollars. This ain’t a good thing for any bank, let alone a bank that is already barely solvent. The banks liquidity takes quick and steep tail dive. They have no cash!

July 11 - The FDIC rolls up… tells Indy that they gave it a nice try, but since they couldn’t figure it out… the big boys are here to shut the game down.

So what’s next… I am not sure what’s going to eventually come of Indy Mac. But its depositor’s can be comforted that their money is insured by the FDIC. Apparently the process of getting depositors their money back is simple. The feds should have made it available to account holders today… well that is for deposits up to $100,000. For those who have over $100,000, they’ll likely incur some loses.

But the one thing that I can’t seem to shake about this whole situation is that Lyle Gramley sits on the board of directors at Indy Mac. Mr. Gramley served as a former governor of the Federal Reserve. That’s a pretty good ally to have in your pocket… well it should be at least. With members that include people like Mr. Gramley, how could the board have allowed Indy Mac to go so astray? I just don’t get it.

Almost every adult can remember at some point in his or her younger years being given a US Savings Bond by a grandparent or well-meaning relative for a birthday or graduation, and then being instantly frustrated by the fact that the bond couldn’t be converted into a Beatles album or Grand Theft Auto cartridge the very next day. Of course, that is the appeal of US Savings bonds as gifts (at least from the point of view of the giver): They are one way to (almost) force a young person you love to save.

The Savings Bond grandma gave you when you were twelve was a Series EE Paper Bond. Paper Series EE Bonds are purchased at half their face value. So, for example, a $50 paper bond costs $25. Series EE Paper Bonds mature at different rates depending on the interest paid, which is set by the federal government and changes every six months. You can’t really predict when a paper Series EE Paper Bond will mature. For example, if the interest averages 5%, a $50 Series EE Bond will mature in 14 and a half years. If it earns an average of 6% interest, it will mature in 12 years. Paper Series EE bonds earn market-based rates that usually are much higher than deposit account rates at retail banks.

You can also purchase Series EE bonds at face value electronically for up to $30,000. Most banks will help you to purchase Series EE Bonds, or you can purchase them directly from the Treasury Direct website at http://www.savingsbonds.gov/, and you can also manage your bonds there and find a wealth of information on bonds and investing, all free of charge.

Another less familiar kind of Savings Bond is the government I Bond, which is an accrual-type security, meaning interest is added (accrues) monthly, much like a savings account. The interest is paid when the bond is cashed. I Bonds can earn interest for as long as 30 years depending on how you set them up. I Bonds purchased after 2003 must be held at least 12 months before they can be cashed.

You will owe tax on interest on both I Bonds and Series EE Bonds, but the interest can be deferred in for a number of reasons. Tax is not owed on the interest earned on I Bonds that are cashed. With Series EE Bonds, you want to make certain you cash them by or before the maturity date, since you will owe tax on the interest on the maturity date whether you cash them or not, and since they also quit earning interest on that date.

Bonds are attractive when the stock market is a mess (like now), but there are strict limits on the amount you can purchase. You can buy up to $30,000 in paper and electronic I bonds (for at total of $60K), and $30,000 in paper and electronic series EE Bonds (for a total of 60K). So, you can’t have more that $120K locked up in bonds in your name, and you can’t get around this by changing up the other signers like you can on other kinds of interest bearing accounts. Basically, if your name is on the bond, it counts toward your total allowance no matter who else is on it.

Savings Bonds are regulated by the same great folks who brought you the US tax code, so don’t expect all the rules, regulations, and rates to be transparently easy to comprehend, especially if you’ve been buying them for awhile. The rules are changing all the time in regard to bonds. Once you’ve purchased a bond, those specific rules for that specific bond do not change. But you could come back a year later and find that everything has been moved around and new rules apply.

Other great sites to find information on bonds, how to manage them, how to buy them and which ones to buy, and all the rules and regulations that apply to them include The Bureau of Public Debt, Tom Weishaar’s Savings Bond Advisor site, and Jack Quinn’s Savings Bond Information Center.

For current rates on Series EE an I Bonds you can also call 1-800-4US-BOND (1-800-487-2663) or any Federal Reserve Bank, or you can write to request a rate table to The Bureau of Public Debt, Bonds Div., Parkersburg, WV 26106-1328.

You don’t have to wait for an excuse to buy bonds, and frankly, they’re a great way to save without even thinking about it.  All you need to do is set this up at the Treasury Direct website, www.savingsbonds.gov.

You can download the Beatles Album anytime you want from I-Tunes.

All you need is love. And Savings Bonds.

Working in the call center of a major retail bank, I know how nervous people get before they leave home for another country, or even to visit another part of the US. VISA has found a way to take a lot of the worry and stress out of summer travel with a prepaid travel card that comes with all kinds of helpful perks and can be easily reloaded from anywhere in the world.

VISA prepaid travel cards are available at banks and financial institutions throughout the US. You can find where to purchase one by visiting Visa’s handy travel money card locater and simply plugging in your home address.

Why use a prepaid Visa Travel card instead of your usual credit card or debit card? One of the best reasons is VISA’s Zero Liability Policy of complete protection from fraudulent activity due to a lost or stolen card while you are away from home. Should you lose your card or have it stolen, VISA will get a replacement card to you anywhere in the world within one business day. You will be credited back all fraudulent charges, usually within 24 to 48 hours, and you will also have immediate access to VISA’s Identity Theft Protection Services.

Convenience is another good reason to use a prepaid VISA travel card. VISA operates over 1 million cash ATMs around the world and is the most widely accepted credit card in the world. VISA also will reimburse or replace merchandise you buy with the card for up to $500 if it is stolen, lost or damaged within the first 90 days after purchase. You can reload your VISA travel card from anywhere using funds from your bank accounts, your other credit cards or your debit card.

Prepaid VISA travel cards come with a number of other excellent travel ‘perks’ such as lost luggage reimbursement up to $250 per trip and $1000 per person, whether you are traveling by plane, bus, cruise ship, or train. Replacement of your lost luggage through your prepaid VISA travel card is not contingent on the purchase of your ticket with the card itself. Even if you buy your ticket in advance with cash before you purchase the card, you can still use the lost luggage reimbursement feature.

Prepaid VISA travel cards also offer 24 hour emergency services which include access to a translator any time of day anywhere in the world if you need one, medical and legal referrals, emergency trip arrangement assistance, and emergency messages to friends or family if something happen while you are away and need to get word home fast.

VISA makes taking and spending money overseas so easy with this prepaid card, there is almost no reason to fool around with traveler’s checks or cash, and the perks are so excellent it’s hard to pass up the deal. You can also purchase the cards as gifts for teens or other family members about to go overseas, or for anyone going on a vacation within the US but far from where you are.

Prepaid VISA travel cards are a great option when peace of mind is what you want, first and foremost.

And who doesn’t want that?