rapid fire
Retirement Living
Risky Business
Investors expect the government to protect them against risks, but what if the government actually exposes them to danger? Federal Reserve Chair Ben Bernanke wants savers to take more risk — and many are obliging as yields on “high-yield” bonds fell to record lows in January. These higher-risk securities (better known as “junk bonds”) have become popular along with other investment products that promise more income. But do buyers always appreciate the extra risk? I doubt it.
By driving short-term interest rates close to zero, Bernanke is pressuring savers to take greater investment risk. Savers who relied on income from savings or CDs must choose between punishingly low returns or higher risk. Savers tend to be inexperienced at judging investment risk and easily can be led astray by unscrupulous salespeople. Worse, the need for income can overcome savers’ natural skepticism, leading them to believe they can get higher returns without greater risk.
Savers should:
1. be skeptical, and remember higher returns always involve higher risks;
2. avoid risks when loss is not an option. “Don’t gamble with the rent money,” even if and when it seems like a sure thing; and
3. demand extra return proportionate to higher risk. If good-quality bonds pay 4 percent, how much more should you ask from a risky borrower?
Government policies sometimes can cause collateral damage. Be watchful, and don’t let the prevailing rhetoric affect you negatively.
— Capt. Kent M. Grealish, USN (Ret), CFP®, AIF®
Family Matters
Discover helpful resources for military spouses and children.
Retired Supreme Court Justice Sandra Day O’Connor is on a mission to educate today’s youth about how our government functions. In 2009, she founded
iCivics.org to prepare young Americans to become engaged 21st-century citizens. Children can master various games and activities, including
■ Win the White House: Campaign for office, raise funds, poll voters, and sway the media.
■ Argument Wars: Argue issues in front of the Supreme Court using real cases.
■ The People’s Pie: Control the federal budget. Make choices about taxes, funding, and programs, all while trying to keep taxpayers happy.
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