Financial Consultant for
SafeAmerica members.
Jean Gunnarson
Credit Union’s
Brokerage Services

Asset Allocation in a Rising-Rate Environment

The Federal Reserve Board is nearing the end of the series of interest rate increases it commenced in 2004, and although the extent of further Fed tightening is unknown, the rate hikes so far have gradually changed the investment environment.

The Problems with Cash
Even with higher rates, short-term accounts (certificates/money markets) are inadequate for long-term investing for three basic reasons.

First, the most modest goal of long-term investing should be to beat inflation. However, long-term investors don’t need to beat the national inflation rate – they need to beat the inflation they face. And the tough reality for those saving for retirement is that inflation is higher for older Americans because of above-average spending on medical care and utilities.

Second, as interest rates rise, so do the taxes on interest income. For fully taxable investments, well-off individuals can easily pay 40% of their interest income in federal and state taxes.

Third, the power of compounding makes what seems an innocuous choice for any one year a dangerous direction for the long run. While there is little difference between 4% and 8% in any one year, over 20 years the difference is staggering Essentially that difference could translate into either retiring to Malibu or retiring to Mudsville.

The Asset Allocation Alternative
But if cash doesn’t get the job done, how can long-term investors exploit the potential of long-term financial assets without having to stomach the full brunt of stock market volatility?

The simplest answer may be an asset allocation fund.

The single neatest aspect of asset allocation funds is that like shock absorbers, the diversification benefits they offer are not distributed evenly, but rather kick in most strongly in extreme markets. This extra protection in tough times reflects the fact that the most extreme shocks to financial markets have different implications for different asset classes.

Most investors need the returns from long-term assets in order to achieve their goals. Asset allocation funds are a particularly interesting alternative for investors hesitating to move back into long-term assets after the stock market roller coaster of recent years.

Call me today at (925) 847-8386 or email jgunnarson@safeamerica.com to schedule an appointment if you are interested in knowing how an asset allocation strategy might benefit you.

Securities offered through Duerr Financial Corporation, member NASD/SIPC/MSRB, at your financial institution are not insured by NCUA, FDIC, or any other governmental agency. They are not deposits or other obligations of or guaranteed by Duerr Financial Corporation, or your financial institution and are subject to investment risks, including possible loss of the principal amount invested.

Announcing 2006 College Scholarship Program

Five Awards of $1,000 each. Entry Deadline March 31, 2006.

Listen up students and parents of students. It is time to apply for SafeAmerica’s College Scholarship Program. SafeAmerica is announcing its “call for entries” for the 2006 Scholarship Program. Five hard working, college bound seniors and students already attending college, will receive scholarships to help with tuition and book expenses. We extend this opportunity to all members as a way of supporting higher learning and the encouragement of continued education.

How to apply:
Applicant must be a member in good standing with the credit union and have a cumulative grade-point average of at least a 3.0. Each applicant will submit a 500 word essay entitled, “What do I see as my future financial needs and how can the credit union fit into those plans?” To apply, a student must be either a high school senior planning to attend college or a college student enrolled full-time at an accredited college, university or junior college. Proof of registration is required before the funds will be disbursed. Submission deadline is March 31, 2006. Call to request an application packet (800) 972-0999, ext. 5-352 or email your request to bshafi@safeamerica.com. If your student is not a member yet, be sure to request a membership application also.

SafeAmerica’s Charitable Contributions for 2005

ach year SafeAmerica donates to worthy causes that benefit those in the communities we serve. Some of the organizations that were supported by charitable gifts from SafeAmerica Credit Union in 2005 are listed below:

• The American Cancer Society
• Kaiser Hospice Hayward
• Leukemia & Lymphoma Foundation
• Lam Foundation
• American Red Cross – Tsunami Relief
• American Red Cross – Hurricane Katrina Relief
• Alameda/Contra Costa County Food Banks
• Alzheimer’s Walk-A-Thon
• The Family Giving Tree

Sign-up for Direct Deposit of Your Tax Refund Check

s your credit union, we want to offer a little help during tax season. Information and tax forms are now available at www.safeamerica.com, look for the TAX HELP button on the Home Page. Have your tax refund check directly deposited to your SafeAmerica account. Let your tax advisor know or include SafeAmerica’s routing number 321171757, along with your account number when completing your tax returns. Call if you need assistance in getting set-up with easy direct deposit of your refund check (800) 972-0999.

You Can Still Contribute to Your IRA for Tax Year 2005

t is not too late to contribute to your IRA for this year’s taxes. IRA contributions for the current year are accepted until April 15, 2006. For more information on IRA accounts or other investment options call our IRA specialist at (800) 972-0999 ext. 5-330 or email at ira@safeamerica.com.

 


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