What is Individual Retirement Account (IRA)?

An Individual Retirement Account (IRA) is a kind of insurance policy which provides people tax benefits so they could earn for retirement plans and savings.

Various Retirement Accounts

Individual Retirement Account (IRA)

Every time you put money into your account, you’ll get tax deductions. This type of retirement account permits you to add a certain amount annually and invest this tax-free. This would entail no charges on taxes on your investment profit yearly.  In the event you decide to get your money from the account, the distribution from the Individual Retirement Account (IRA) will be incorporated in your taxable income.

Investing in bonds, stocks, ETFs, mutual funds, and any other type of investments is possible since IRA is an investment account.But if you get the money prior to withdrawal from work or position (example: age 59 years old and a half), you will most likely have to be charged a 10% fine.

Roth Individual Retirement Account or Roth IRA

The conventional IRA and Roth IRA have a lot in common. Yet, deposited amount are not susceptible to tax deductions and distributions that meet the qualifications will be tax-free. Roth IRA deposits are done following tax but whatever quantity created within the Roth is not charged with another tax. You could also get your deposited amount prior to your retirement with no fine. Investing in Roth IRA is a wise decision you make in terms of your extra money while expecting a favorable tax break eventually.

 Non-deductible Traditional Individual Retirement Accounts

Just like a conventional IRA, a non-deductible IRA is an investment plan that is tax-free. The deposited amount, though, is not tax-deductible. A portion of your deposit becomes tax-free return of the old deposit that is non-deductible when you begin with your deposit. All others are charged with tax just like a regular income. If the company you work for provides retirement plans, it is usually a non-deductible IRA most of the time. The only difference between the conventional IRA and the non-deductible IRA is on how they deal with the old deposited amount.

Roth 401(k)

This kind of account is given via the company or firm people work for. The deposited amount is gotten from the net income. This type is new so not all companies offer this to their employees.

401(k) Account

This is a company retirement account and it is, most of the time, given to workers as benefits. This kind of account enables you to provide a part of your gross income in an investment account that is tax-free. In case you give cash prior to it being charged with tax, your income where your taxes are based is decreased. For example, you have $90,000 and you gave $30,000, then your tax will be based on a $60,000 income. In the event you take back your money prior to you retiring, you will be fined 10% and it will be taxed.

It may take a while before your retirement but there is a need to enhance your financial mindset and invest in IRA’s the soonest possible time. You could begin to invest your money regardless if you will withdraw from work few decades from now.

Simply put, annual investment of your income on top of the percentage that goes up yearly multiplied to 20 years would mean a huge amount already. That is why, getting a retirement plan is a wise financial planning. The best way to start is now and not when it’s too late.

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The question “how much money to do I need to save for my retirement” is always a very popular one. Planning your retirement is a must. This way, you are sure that you will still have the same standard of living when you retire from your job.

Have you ever heard of “saving for the rainy day”? The rainy day will come soon. We are not young forever. Therefore, the act of making money cannot last for a very long time. When you’re old, you simply cannot do that anymore. So, while we are still young, we need to make sure that we have a retirement plan to stay on the safe side.

One of the best ways to help you determine how much money you should save, aside from the basic rule of thumb of retirement, is to make a more detailed estimate basing on your current situation. Therefore, you need to find out what expenses you will have in your retirement, including the ones that you won’t have. This includes pinpointing the sources of income you will lose and gain, and the changes of lifestyle that you may possibly have.

What you want to do during retirement can determine your income needs. Perhaps you want to move or buy another house, travel around the world, start a business, etc. The plans that you have in the future will determine how much money you need for your retirement.

The only glitch to this method is that it may only work best for those who are reaching retirement say five to ten years from now. it may be difficult to get a good, more real hold of your financial needs beyond 5 to 10 years because a lot of things may still change, including tax laws. For those who are in their early 20s or 40s, we may rely so much on our assumptions. A lot of us want to plan ahead, but we should also take considerations of the disadvantage in doing so. We do not want to retire broke, right? if you’re still not sure, you can consult a financial adviser. 

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Conventional or Roth IRA- Choose Which Suits You Best

Nowadays, creating an Individual Retirement Account (IRA) is possible so long as you’re making money. An IRA is a retirement savings policy which you could get for yourself when you’re charged of a tax. So that would include salaries, wages and maintenance fees as well as other additional income. However, you should be 70 years old and younger to qualify on top of the other criteria.

The Difference between Roth & Conventional IRA’s

If you’re earning good money, Roth IRA is for you especially if you have the intention to withdraw the funds since all the deposits are tax-deductible and tax-free when you get them.

On the flip side, individuals who prefer to have their deposits being taxed automatically must get the conventional IRA. In this case, they no longer need to pay future taxes since it was already deducted from their current income but that would mean they will earn less.

For a year, there will be a deposit limit of $5,000 per year for both conventional and Roth IRA’s but for individuals above 50 years old, you can deposit for up to $6,000 annually.

If you want to create an IRA, you got three options: a banking institution, ma brokerage firm or a mutual fund company. There is no specific amount required to do so. You can even have an initial deposit of $25 to $100. There are also other banking institutions that offer stocks but for mutual funds, it usually requires an initial deposit of $1,000 or more. Brokerage firms, on the other hand, are for skilled investors who would like to invest in bonds, stocks and mutual funds.

Conventional IRA: Withdrawal Policies

The rule indicates that you should be at least 59.5 years old to be able to get your deposited amount; otherwise, you will be fined 10% on top.

Another rule is what we call the MDR rule (Minimum Distribution) that takes effect when you reach 70.5 years old. You must be able to get the sum of the amount of cash to get yearly utilizing the expectancy table, ensuring that there is no remainder amount in your IRA account in the event you reach the expectancy age.

Roth IRA: Withdrawal Policies

In order to create a qualified distribution, you have to be at least 59.5 years old. In the unfortunate event that you become physically challenged, you will be allowed to get your deposited amount. You may also use the cash as a home buyer.

If you work in an institution that offers no retirement benefits, then conventional IRA is for you. There are a good number of retired individuals who have lower tax brackets in comparison to when they were still working.   It is necessary to have not just one source of retirement savings because you cannot predict changes in the tax rate in the future.

An IRA helps you prepare for your retirement from work so it will be most favourable if you grab every opportunity to save money while you are still young and capable to earn. It is among the various facets of financial planning that you need to possess and it helps a lot to have a n excellent investment specialist whom you can work with to reach your financial goals.

For more information on this subject you may contact Deborah Koval, your financial expert.

Many business owners use basic cash management techniques to keep track of the money involved that come in and come out in the businesses. Basically, these involve expenditures, debts, and profits- of course. This is important because it helps businessmen know whether or not the business is making any profit at all. When it comes to business, keeping track of all the monetary records is really a must.

Expense tracking is one of the techniques of basic cash management that businessmen use. The business owner will be able to keep track of the money that goes out by using this technique. This is used when procuring additional supplies, distributing salaries of employees, and paying loans. The remaining money after subtracting the rest of the expenses from the business’s income is typically the net income. It is detrimental not to record every cent that goes out, for you may never determine the exact profits.

Another cash management technique involves tracking accounts receivable- all of them. Account receivables are the money that comes from returned investments or sales.

When you keep a record of the incoming money, you will have the chance to control a good cash flow. This is vital in business.

Another good financial technique is to start a credit line. When your business has this, you won’t have to immediately worry when profits don’t come as they should; you still have money to run the business as it is. Having a backup plan when running a business is a must.

Cash management basics basically aim to account all financial transactions for business to run smoothly. Inventories are also important. This is the total amount of goods and materials in your business. It is important for businessmen to have an inventory, so that they will know how much their business is really worth.

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Just like individuals, the government, corporations, and banks often need to borrow money for a short time to make ends meet. Unlike most individuals, however, the scale of this borrowing is phenomenal.

The money market is the name given to the arena where most of this short-term borrowing takes place. In the money market, money is both borrowed and lent for short periods of time.

For example, a bank might have to borrow millions of dollars overnight to ensure that it meets federal reserve requirements. Loans in the money market can stretch from one day to one year or beyond. The interest rate is fundamentally determined by supply and demand, the length of the loan, and the credit standing of the borrower.

The money market was traditionally only open to large institutions. Unless you had a spare $100,000 lying around, you couldn't participate.

However, during the inflationary era of the 70s, when interest rates sky-rocketed, people began to demand greater returns on their liquid funds. Leaving money in a bank deposit account at 5 percent interest made little sense with inflation running at 12 percent. The money market was returning significantly higher rates but the vast majority of people were prohibited from participating by the sheer scale of the investment required.

And so, the first money market mutual fund came into being. By pooling shareholders’ funds, it was possible for individuals to receive the rewards of participating in the money market. Because of their large size, mutual funds were able to make investments and receive rates of return that individual investors couldn't get on their own.

Money market mutual funds typically purchase highly liquid investments with varying maturities, so there is cash flow to meet investor demand to redeem shares. You can withdraw your money at any time.

For a minimum investment, sometimes as low as $500, money market mutual funds will allow you to write checks. The check-writing feature is most often used to transfer cash to a traditional checking account when additional funds are needed. These funds are useful as highly liquid, cash emergency, short-term investment vehicles.

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in money market funds.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.


John F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” This is certainly true of preparing for retirement. If we continue to expect that the ways of the past will see us through to our futures, we will be left behind. The methods that helped prepare us for retirement are quickly disappearing, and we must start using others.

Today’s companies are rewriting the retirement rules for working Americans. Traditional pension plans, which gained prominence in the 20th century, are rapidly disappearing because of the high costs involved in funding them. Some corporations are defaulting on their plans, and an increasing number of companies have underfunded or at-risk plans.

To help protect employees with corporate pensions, the federal government has enacted laws requiring employers to meet a 100% funding target for their defined-benefit plans. Companies that sponsor pension plans are also required to pay higher insurance premiums to the Pension Benefit Guaranty Corporation (PBGC), which was created by Congress in 1974 to help protect American workers from the risk of pension default. Premiums have increased because the PBGC itself is facing a deficit as a result of more companies defaulting on their pension plans.

Because of these costly requirements, it is becoming less and less attractive for companies to provide traditional pensions to retirees. Employers with underfunded plans may simply choose to eliminate them, and even companies with healthy plans may decide that defined-benefit plans are not worth the cost. As a result, it is likely that more companies will offer defined-contribution plans like the 401(k) to attract new employees and to help employees fund their own retirements.

Thus, it is important to be aware that you may have less help from your employer and will probably have to rely more on your own savings and investments to fund your retirement.

The government has tried to help by raising contribution limits to most employer-sponsored retirement plans. You can contribute money to these plans on a pre-tax basis. Your contributions and any earnings accumulate on a tax-deferred basis. Of course, remember that distributions from most employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% federal income tax penalty.

A number of companies are taking steps to help workers fund retirement. Many have instituted automatic-enrollment in their defined-contribution plans to encourage more employees to participate. Some are enhancing the benefits of their plans by increasing the amount they contribute to employee accounts and/or enhancing matching contributions.

Many companies that still have traditional pension plans should be able to pay their promised benefits. But in light of recent trends, it would be wise to consider all possible sources of retirement income when reviewing your retirement strategy. With the changing retirement landscape, there may be no better time than now to size up your current situation. Your company-sponsored retirement plan will be just one piece of your retirement funding pie.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.
Profit-Sharing Plans

David Wray, the president of the Plan Sponsor Council of America, once said that the purpose of profit-sharing plans is “to generate goodwill and a feeling of partnership” between employer and employee. Profit-sharing plans give employees a share in the profits of a company each year and can help to fund their retirements.

All funds contributed to a profit-sharing plan accumulate tax deferred, as with other defined-contribution retirement plans, but employer contributions are tax deductible only if the plan is defined as an elective deferral plan, which means that instead of accepting their profit shares as cash, employees defer the assets into retirement funds.

Profit sharing is attractive to business owners because of its flexibility. Employers can choose how much to allot to employees each year based on the amount of revenue taken in. There is no required minimum. If the company has a bad year, the employer has the option of giving very little or nothing at all to employee accounts.

Employees are usually enrolled automatically in profit sharing once they become eligible. Companies can choose eligibility requirements based on age and length of service. In 2012, a company is allowed to contribute up to 25% of an employee’s salary or $50,000 (whichever is less). This amount is indexed annually for inflation.

Typically, companies set up vesting schedules that dictate how long workers must be employed in order to claim profit-sharing contributions when they move to another job or retire. Once employees are fully vested, they can take the entire amount contributed on their behalf and roll it over to an IRA or to a new employer’s qualified retirement plan.

If you participate in a profit-sharing plan, you may begin withdrawing funds after age 59½ without incurring a 10% income tax penalty. Withdrawals are taxed as ordinary income. Some plans may allow early withdrawals. Profit-sharing providers have greater flexibility when it comes to deciding the terms of early withdrawal than do administrators of other plans, such as 401(k)s. However, the trend has been to permit no early withdrawals.

Generally, you must begin taking required minimum distributions after reaching age 70½. You can elect to withdraw the assets as a lump sum and be taxed on the entire value of the fund or you can set up a minimum distribution schedule based on your life expectancy.

Some companies offer a combination arrangement with both a profit-sharing plan and a 401(k). A conjoined plan allows employers to contribute as much or as little as they would like each year, while giving employees a way to supplement their retirement funds.

If you are a business owner, profit sharing may be a way to attract high-caliber employees. It provides retirement funds for your employees, yet allows you the freedom to choose how much you wish to contribute each year.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.


Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation.

One rule of thumb is that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement. However, depending on your own situation and the type of retirement you hope to have, that number may be higher or lower.

Fortunately, there are several factors that can help you work toward a retirement savings goal.
Retirement Age

The first factor to consider is the age at which you expect to retire. In reality, many people anticipate that they will retire later than they actually do; unexpected issues, such as health problems or workplace changes (downsizing, etc.), tend to stand in their way. Of course, the earlier you retire, the more money you will need to last throughout retirement. It’s important to prepare for unanticipated occurrences that could force you into an early retirement.
Life Expectancy

Although you can’t know what the duration of your life will be, there are a few factors that may give you a hint.

You should take into account your family history — how long your relatives have lived and diseases that are common in your family — as well as your own past and present health issues. Also consider that life spans are becoming longer with recent medical developments. More people will be living to age 100, or perhaps even longer. When calculating how much you need to save, you need to factor in the number of years you will spend in retirement.
Future Health-Care Needs

Another factor to consider is the cost of health care. Health-care costs have been rising much faster than general inflation, and fewer employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your savings and even result in your filing for bankruptcy if the need for care is prolonged.

Factoring in higher costs for health care during retirement is vital, and you might want to consider purchasing long-term-care insurance to help protect your assets.

Another important consideration is your desired retirement lifestyle. Do you want to travel? Are you planning to be involved in philanthropic endeavors? Will you have an expensive country club membership? Are there any hobbies you would like to pursue? The answers to these questions can help you decide what additional costs your ideal retirement will require.

Many baby boomers expect that they will work part-time in retirement. However, if this is your intention and you find that working longer becomes impossible, you will still need the appropriate funds to support your retirement lifestyle.

If you think you have accounted for every possibility when constructing a savings goal but forget this vital component, your savings could be far from sufficient. Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing power over time. It is important for your savings to keep pace with or exceed inflation.
Social Security

Many retirees believe that they can rely on their future Social Security benefits. However, this may not be true for you. The Social Security system is under increasing strain as more baby boomers are retiring and fewer workers are available to pay their benefits. And the reality is that Social Security currently provides only 26% of the total income of Americans aged 65 and older with at least $57,957 in annual household income.1 That leaves 74% to be covered in other ways.
And the Total Is…

After considering all these factors, you should have a much better idea of how much you need to save for retirement.

For example, let’s assume you believe that you will retire when you are 65 and spend a total of 20 years in retirement, living to age 85. Your annual income is currently $80,000, and you think that 75% of your pre-retirement income ($60,000) will be enough to cover the costs of your ideal retirement, including some travel you intend to do and potential health-care expenses. After factoring in the $12,000 annual Social Security benefit you expect to receive, a $10,000 annual pension from your employer, and 4% potential inflation, you end up with a total retirement savings amount of $760,000. (For your own situation, you can use a retirement savings calculator from your retirement plan provider or from a financial site on the Internet.)

This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. The estimated total for this hypothetical example may seem daunting. But after determining your retirement savings goal and factoring in how much you have saved already, you may be able to determine how much you need to save each year to reach your destination. The important thing is to come up with a goal and then develop a strategy to help reach it. You don’t want to spend your retirement years wishing you had planned ahead when you had the time. The sooner you start saving and investing to reach your goal, the closer you will be to realizing your retirement dreams.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.

Long ago, people realized that there is strength in numbers. For hundreds of years, we have been joining forces against all kinds of calamities — including financial troubles.

The concept of insurance is simply that if enough of us can pool our money to form a large enough fund, then together we can handle practically any financial disaster. Our motivation for contributing to this fund is our own eligibility to draw from it in the event of a disaster. One for all and all for one, so to speak.

An early example of the concept comes from the Code of Hammurabi, Babylonian laws dating back to 1700 B.C., which contain a credit insurance provision. For a little higher interest, the ancients could exempt themselves from repayment of loans in the event of personal misfortune. A citizen of the Roman Empire could buy life insurance through the Collegia Tenuiorum for slaves and wage earners, or the Collegia for members of the military. The funds provided old-age pensions, disability insurance, and burial costs. In spite of some complications and occasional bureaucratic snarls, the system has worked remarkably well through the ages.

Today, virtually all heads of families should carry life insurance. Most financial advisors also recommend automobile, health, homeowners, personal liability, professional liability and/or malpractice, disability, and long-term-care insurance.

Purchasing individual or family insurance coverage is probably one of the most important financial decisions you will make. A great deal of study and advice is needed to choose wisely. A few basic guidelines can safely be applied to most consumers. Beyond these, each individual’s needs are unique and should be carefully assessed by an expert.
1. How much insurance do you need?

A good rule of thumb is: Don’t insure yourself against misfortunes you can pay for yourself. Insurance is there to protect you in case of an event with overwhelming expenses. If anything short of a calamity does occur, it will usually cost you less in actual costs than the insurance premiums you would have paid.
2. What kind of policy is best?

Broader is better. Purchase insurance that will cover as many misfortunes as possible with a single policy; for example, homeowners insurance that covers not only damage to the house itself but also to its contents. Carefully examine policies that exclude coverage in certain areas, the “policy exclusions.”
3. From whom should I buy?

Always buy from a financially strong company. Take the time to shop around for the best prices with the most coverage for your specific situation. You may be able to save money by buying multiple policies from the same agent.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.

What Types of Bonds Are Available?

Bonds are issued by federal, state, and local governments; agencies of the U.S. government; and corporations. There are three basic types of bonds: U.S. Treasury, municipal, and corporate.
Treasury Securities

Bonds, bills, and note issued by the U.S. government are generally called “Treasuries” and are the highest-quality securities available. They are issued by the U.S. Department of the Treasury through the Bureau of Public Debt. All treasury securities are liquid and traded on the secondary market. They are differentiated by their maturity dates, which range from 30 days to 30 years. One major advantage of Treasuries is that the interest earned is exempt from state and local taxes. Treasuries are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, so there is little risk of default.

Treasury bills (T-bills) are short-term securities that mature in less than one year. They are sold at a discount from their face value and thus don’t pay interest prior to maturity.

Treasury note (T-note) earn a fixed rate of interest every six months and have maturities ranging from one year to 10 years. The 10-year Treasury note is one of the most quoted when discussing the performance of the U.S. government bond market and is also used as a benchmark by the mortgage market.

Treasury bonds (T-bonds) have maturities ranging from 10 to 30 years. Like T-note, they also have a coupon payment every six months.

Treasury Inflation-Protected Securities (TIPS) are inflation-indexed bonds. The principal of TIPS is adjusted by changes in the Consumer Price Index. They are typically offered in maturities ranging from five years to 20 years.

In addition to these treasury securities, certain federal agencies also issue bonds. The Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corp. (Freddie Mac) issue bonds for specific purposes, mostly related to funding home purchases. These bonds are also backed by the full faith and credit of the U.S. government.
Municipal Bonds

Municipal bonds (“munis”) are issued by state and local governments to fund the construction of schools, highways, housing, sewer systems, and other important public projects. These bonds tend to be exempt from federal income taxes and, in some cases, from state and local taxes for investors who live in the jurisdiction where the bond is issued. Munis tend to offer competitive rates but with additional risk because local governments can go bankrupt.

Note that, in some states, investors will have to pay state income tax if they purchase shares of a municipal bond fund that invests in bonds issued by states other than the one in which they pay taxes. In addition, although some municipal bonds in the fund may not be subject to ordinary income taxes, they may be subject to federal, state, or local alternative minimum tax. If an investor sells a tax-exempt bond fund at a profit, there are capital gains taxes to consider.

There are two basic types of municipal bonds. General obligation bonds are secured by the full faith and credit of the issuer and supported by the issuer’s taxing power. Revenue bonds are repaid using revenue generated by the individual project the bond was issued to fund.
Corporate Bonds

Corporations may issue bonds to fund a large capital investment or a business expansion. Corporate bonds tend to carry a higher level of risk than government bonds, but they generally are associated with higher potential yields. The value and risk associated with corporate bonds depend in large part on the financial outlook and reputation of the company issuing the bond.

Bonds issued by companies with low credit quality are high-yield bonds, also called junk bonds. Investments in high-yield bonds offer different rewards and risks than investing in investment-grade securities, including higher volatility, greater credit risk, and the more speculative nature of the issuer. Variations on corporate bonds include convertible bonds, which can be converted into company stock under certain conditions.
Zero-Coupon Bonds

This type of bond (also called an “accrual bond”) doesn’t make coupon payments but is issued at a steep discount. The bond is redeemed for its full value at maturity. Zero-coupon bonds tend to fluctuate in price more than coupon bonds. They can be issued by the U.S. Treasury, corporations, and state and local government entities and generally have long maturity dates.

Bonds are subject to interest-rate, inflation, and credit risks, and they have different maturities. As interest rates rise, bond prices typically fall. The return and principal value of bonds fluctuate with changes in market conditions. If not held to maturity, bonds may be worth more or less than their original cost. Bond funds are subject to the same inflation, interest-rate, and credit risks associated with their underlying bonds. As interest rates rise, bond prices typically fall, which can adversely affect a bond fund's performance.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

You may contact Deborah Koval. She's an expert on this subject.

Note: Please be advised that this is a re-post from Deborah Koval.