-----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 At some point hitherto, Lucas Wagner hath spake thusly: > Some areas so far: > 1. Can I save for retirement as a 1099 contractor? > 2. What is a 401(k) and why should I not overuse it? I'm very curious about your answer to that question -- especially the latter part. > 3. What happens to my 401(k) if my previous employer goes bankrupt? Having just been through this, the answer seems to be: The money you contributed (or, rather, the shares of whatever you're investing in that were purchased with that money) are yours outright. The money that your employer contributed on your behalf is (surprise!) also, yours. It can not be taken back and used to repay investors, as it belongs to you, held in escrow on your behalf (though that may not be the technically correct terminology, I'm not sure). Additionally, contributions made on behalf of employees who have left the company prior to vesting is distributed in some fashion amongst the remaining participants in the plan. Some of this may be dependent upon your company's vesting schedule. At my company, we became 100% vested upon any "significant company event" (which included sale or bankruptcy). > 4. What happens if I'm disabled and I'm between employers? > 5. What are the penalties for using my qualified (e.g., retirement) money > in times of hardship? > 6. Why isn't having two different IRAs with two different custodians > (e.g., banks or other financial institutions) being "diversified"? Well, I'm not an expert, but I did study finance briefly during my long stint at college. I don't believe that the above is necessarily true, but depends on what kind of IRA they are and in what they are invested. Diversification is a relative term... [This is going somewhere, I promise...] I may have all of my money invested in one stock, which is about as undiversified as one can get. Or I can invest in two stocks, in different sectors, which tend to perform differently during the same point in an economic cycle. This is more diversified than the previous case, but few investors or investment planners would consider this diversified. Most would probably recommend buying a more vastly diversified portfolio, such as investing in individual stocks, mutual funds in different sectors, bond funds, government treasuries, commodities, etc. The reletive amounts depend on the aversity to risk of the investor (which largely relates to their age, and other factors). On the other hand, brokers and investment planners who work on commission are happiest when their clients buy (and sell) a lot of things; they make their money per transaction and make money whether or not their clients do. Brokers absolutely love traders... [Now, here's the punchline:] If my understanding of the above is somehow flawed, then I'd be very interested to understand why... > 7. What happens if my IRA custodian goes bankrupt? Now that's a good question! > I'd like some feedback about what you want to know about your money; if it > is personal in nature, drop me an e-mail. I'm definitely interested in the questions I didn't comment on, as well as your assessment of those I did comment on. I'm also really curious about how alternative minimum tax works. I've been told nightmarish stories about people having to pay millions of dollars in alternative minimum tax on stock options that they had not cashed in, and which when they finally DID cash in were worth dreadfully less than they were valued for the purpose of calculating AMT, resulting in the investor taking a double hit. I'm very interested to separate the myth from the mundane... - -- Derek Martin ddm@pizzashack.org - --------------------------------------------- I prefer mail encrypted with PGP/GPG! GnuPG Key ID: 0x81CFE75D Retrieve my public key at http://pgp.mit.edu Learn more about it at http://www.gnupg.org -----BEGIN PGP SIGNATURE----- Version: GnuPG v1.0.6 (GNU/Linux) Comment: For info see http://www.gnupg.org iD8DBQE84I/QdjdlQoHP510RAtBGAJ0RiHY1/qyi1n0GgN1nthqWs4gOVQCfXdlQ IGaU8jiUZAmk6DGe3MAOhaU= =Ikew -----END PGP SIGNATURE-----