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THE ANSWER DESK . . . ARCHIVES
Volume 170: To submit a question to
MFI's panel of experts, please write to us.
This week's panel:
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Paul Pignone
 Paul
R. Pignone, CFP, CLU, ChFC, a Financial Advisor and Principal at Boston
Retirement Advisors, Inc., in Salem, New Hampshire, has been involved in
the financial industry since 1978. Paul specializes in retirement and
estate planning, investment management, and business and tax consulting.
He has taught financial planning and investments at high schools and
colleges and has conducted seminars in Retirement and Investment Planning
at Digital, Honeywell, GTE, and many other organizations. Visit Paul's
website here.
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Rob Creegan
 Rob
Creegan, CFP, is a principal of Creegan & Nassoura Financial Group,
LLC, a comprehensive financial planning firm with offices in Westford,
Mass., and Stratham, N.H. Since the early 1980s, he has managed
investments and avidly followed the financial markets, and has served as
chief financial officer and treasurer of several national corporations. He
holds the Certified Financial Planner license, as well as a bachelor's
degree in business administration, with a major in accounting, from the
University of Lowell. He can be reached at rcreeganjr@aol.com.
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Questions and Responses
How might I reduce my number of Roth IRA's?
Has a mutual fund ever suffered a total loss?
Can a subcontractor contribute to the company's 401(k)?
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How might I reduce my number of Roth IRA's?
from Adam
Q: A couple of years ago, my wife and I as
new investors invested in two Roth IRA's (Kaufmann and Vanguard US Growth and
Life Strategy) putting $2,000 in both of them for that year. We then talked to a
financial advisor and he recommended that we direct deposit out of my paycheck
into two different Roth IRA's (SMMIX). Since we were newly married and new to
investing we took his advice and now have four Roth IRA's. W
We only max out the two (SMMIX) each year, so the other ones just sit there
earning capital gains and dividends. Do I have any options with these other two?
Can I roll them over into the SMMIX Roth IRA or to a mutual fund? Or am I stuck
with them until retirement? I read something about using them towards the
purchase of our first home but wasn't real sure about that.
A: (Paul) It's a great idea to
begin contributing to a Roth IRA as early as possible. You'll be well rewarded
in the future for your early commitment.
Yes, you can rollover your Roth IRA's and consolidate your accounts. Whether
you need to liquidate these funds depends on the custodian. If you have a
brokerage account and didn't go directly to the fund family, you may transfer
these funds without liquidation. You are not taxed on any Capital Gains or
Dividends and hopefully they are reinvested into new shares. Aim Summit is in
the top 25% of Large Growth funds. You could do worse, but you could also do
much better. Of the three, the Aim Summit is better.
Regarding using these funds for a first time home purchase, while that option
could be available, I would not suggest it. Save in individual accounts for a
down payment on a home and depending on how soon you need the cash, be careful
whether you commit it to the stock market.
Has a mutual fund ever suffered a total loss?
from Kumi
Q: I was curious: Has a mutual fund ever declined 100%? I understand
the Investment Company Act of 1940 regulates the mutual fund companies; however,
for an individual fund it would seem to reason that there have been funds that
went belly up. Would you have any examples?
A: (Paul) According to my resources,
I don't know of any mutual fund filing for bankruptcy over the last 20 years.
Some funds have been merged with other funds within their family, while others
have been liquidated and the proceeds sent to the shareholders.
One of the major advantages of mutual fund Investing is that diversification
prevents a high concentration in any one position to avoid such occurrences.
Can a subcontractor contribute to the company's 401(k)?
from Darrell
Q: I have a question that no one seems to be able to answer. I was an
employee at a company with a 401(k). I then went from being an employee to a
subcontractor. Now I have a 401(k) with not much money in it, but I want to
continue contributing to it.
Is there any way I can continue to deposit money into my
401(k)? I want to ensure that I will have a good retirement.
A: (Rob) It is not possible for a
subcontractor to make contributions to a 401K plan of the employer it is
subcontracting for. I suggest you investigate SEP-IRA and Keough retirement
plans. These plans will allow for contributions of up to 15% of your self
employment income. You should also investigate a Roth IRA. These are a great way
to save for retirement.
Important Disclaimer
Investing in equities involves a serious
principal risk, and no assurance can be given that the techniques described here
will be successful. Returns vary and you may have a gain or loss when you sell
your shares. Past performance is no guarantee of future results. Index returns
shown are historical and include the change in share price, reinvestment of
dividends, and capital gains. Indexes are unmanaged and do not reflect the
impact of transaction costs. Transaction costs would have reduced the total
returns.
International investments, especially those in
emerging markets, entail greater risks (as well as greater potential rewards)
than U.S. investing. These risks include political and economic uncertainties of
foreign countries, as well as the risk of currency fluctuations. These risks are
magnified in countries with emerging markets, since these countries may have
relatively unstable governments and less-established markets and economies.
Lastly, the questions and responses set forth
here are for general informational purposes only and are not intended to
substitute for performing your own independent research or contacting your
financial or legal professional before making any investment decisions. We make
no guarantees as to the performance of any investment strategy you choose and
are not responsible for any losses you might incur.
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