Inflation
Will Be Back
I Bonds protect you
Don’t Buy
The Hype
The Short Answer
Q: Are the seemingly
fantastic investment
offers I’ve been getting
lately for real?
A: Fantastic is the right
word, because they’re
fantasies. Now that every-
one’s feeling poorer,
and some of us are
desperate to recoup
investment losses,
scammers are get-
ting more aggres-
sive, says Joseph
Borg, head of the
Alabama Securities
Commission. Borg
has seen an increase
in suspiciously rosy adver-
tising lately. For example,
phrases such as “principal
guaranteed” and “safe,
easy returns,” attached to
foreign-currency offers
and real-estate-foreclosure
pools, have caught his eye.
The problem: By their very
nature, these prod-
ucts are both risky
and complicated.
“Never even think
about investing in
one of these things
without first calling
your state securi-
ties commission
to make sure the
broker/dealer and seller
are licensed and that the
product being sold is reg-
istered,” says Borg. “If it’s
a legitimate offering, then
have a trusted financial
adviser, attorney, or
accountant review it.”
Less overt, says Borg, is
66%
Portion of
Americans
worried about
maintaining
their standard
of living
(up from 51
percent
in 2007)
the label “IRA-approved,”
which you may see slapped
on ads for anything from
funds to real estate, from
now until tax time. “You
can put just about anything in an IRA,” explains
Borg, “so there is no such
thing as an ‘IRA-approved’
investment”—and nothing
safer or better about a
product that carries the
label. In fact, this kind of
meaningless hype should
raise your guard and have
you rightfully ask: Isn’t
there anything more substantial to recommend it?
—Walecia Konrad
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How big a tax break?
Obama’s Promise
IF YOUR
INCOME IS…
YOUR TAX SAVINGS
MAY BE…
Barack Obama campaigned on a plan to
cut taxes for the middle class. While we
don’t know the final form a new tax law
could take, the nonpartisan Tax Policy
Center used the candidate’s plan to
calculate average federal income tax
cuts for all types of filers. Factors such
as holding a mortgage or contributing
to a retirement savings account might
get you a bigger break. —Audrey Goodson
Less than $10,000
$10,000–$20,000
$20,000–$30,000
$30,000–$40,000
$40,000–$50,000
$50,000–$75,000
$75,000–$100,000
$100,000–$200,000
$444
$668
$860
$997
$1,098
$1,114
$1,236
$2,125
Does the threat of
deflation—a downward
spiral of wages and
prices as the economy
shrinks—mean you can
stop worrying about
inflation? Afraid not.
“We could have inflation overnight if other
countries stop buying
U. S. debt,” says Charles
Morris, who saw the
financial crisis coming
and wrote about it a
year ago in The Trillion
Dollar Meltdown—just
out in paperback as
The Two Trillion Dollar
Meltdown (
Public-Affairs). Morris sees a
nasty two years of
recession ahead, followed by a rebound.
Now that the Federal
Reserve, the nation’s
central bank, has
dropped its lending
rate to just about zero,
where can you get a
half-decent return on
savings? Jonathan
Pond, whose new book
is Safe Money in Tough
Times (McGraw-Hill),
recommends I Bonds,
which pay more as
inflation rises, and TIPS
(Treasury Inflation-Protected Securities)
during what he calls
the Great Recession.
Consider buying I Bonds
yourself online at
treasurydirect.gov or at
a bank. The threat of deflation may scare some
investors away from
TIPS, but Pond says a
low-cost TIPS mutual
fund or exchange-traded
fund makes a good
long-term inflation
hedge. —George Blooston
