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Show BUSINESS NANCY BUSS EDITOR: THE DAII.Y HLRALD (WWW.HERALDEXTRA.COM) 2 SATURDAY, OCTOBER 16, IM inflation spike, Greenspan worries hit markets By MARTIN CRUTSINGER AP Economic Writer - sky-hig- h Peter Kranenburg care Long-ter- m WASHINGTON The biggest jump in wholesale prices in nine years and new worries by Federal Reserve Chairman Alan Greenspan about the stock market sent shock waves through U.S. and global markets on Friday. Investors from Tokyo to Wall Street were unnerved, first by Greenspan's comments about the threat of a possible "bursting bubble" of stock prices and then by a government report showing a insurance provides peace of mind surge in inflation at the wholesale level. Prices for energy, food, tobacco and new cars all rose in October. The Dow Jones industrial average ended the day down 266.90 points, or 2.6 percent, at 10,019.71, its biggest point drop in more than a year. Friday's decline put the average down 1,306 points from its Aug. 25 high, a drop of 11.3 percent. Financial markets were primed to react in a negative fashion to Greenspan's comments, given that investors are on heightened alert to possible future Fed interest care insurance can help from being dedassets protect your icated by an extended illness. Deciding whether you need a policy is an important part of your financial planning. """"To begin, consider your overall financial picture. If you have enough assets to pay the premiums, but not enough to afford several years of uninsured care, a policy may provide peace rate increases. The central bank has already boosted its federal funds rate, the interest commercial banks charge each other, twice this year. Many economists said a third rate increase on Nov. 16, when Fed policy-maker- s next meet, is all but certain, especially if upcoming statistics show the economy still growing strongly with rising inflation pressures. Investors in Tokyo quickly noted Greenspan's cautionary words on the stock market Thursday night, with the Nikkei average falling 178.69 points, a loss of 1 percent. The events Friday were reminiscent of the impact another late night Greenspan speech had in December 1996 when the Fed chief first worried that investors could be in the grips of "irrational exuberance," a comment that sent stocks diving around the world. While the Dow average has soared by 57 percent since that time, Greenspan has returned with regularity to worries that American investors and the economy at large are vulnerable to a stock market "bubble," inflated prices that could plunge quickly and without warning "History tells us tha sharp reversals occur abrupt ly, most often with little advance notice," Greenspar said this week. "Whether Dutch tulid bulbs or Russian equities, tlx! market price patterns remaiv much the same," Greenspar said. He was referring to lasi year's plunge in Russian markets rockec; that investors worldwide and to the 17th century plunge in inflated tulip bulb prices, ont) of the most famous specula tive market frenzies of nil time. Long-ter- Teen's gamble pays off with BPO Xr !$mind. sands of dollars. Alteon, which sells Internet hardware and By MICHELLE QUINN Knight RkJder Newspapers care policies In general, fall into two categories: qualified and nonqualified. Premiums paid for a qualified policy are deductible as medcare policies ical expenses. Long-terare available with a variety of options. long-ter- SAN JOSE, Calif Oh, the hardship of being a Hans Pang, 17, must go to school every day, although he x teen-age- Y M doesn't see the point. His par- THE POLICY that best suits your a. varifour needs will depend on key ables: Benefit period. This is the length of time you will receive benefits under the policy. Generally, the shorter the benefit period, the lower the premium. Daily benefit. This is the maximum benefit paid per day. Check the average rate for care in your area to help you decide the daily benefit you need. X. Elimination period. This is the length of time you have to pay your own expenses before coverage takes over. Basically equivalent to an insurance deductible, the longer the period, the lower your premiums. Benefit "triggers." These are the requirements you must meet in order fer benefits to begin. As a practical matter, the more "triggers" a policy recognizes, the easier it is to collect nefits. There are other factors you should consider, such as inflation protection and home care. In addition, ycu might be able to utilize alternatives to care insurance, such as a reverse .arortgage on your home and your own elimi-W&tio- r. v V' ttJ - f economy: A paycheck is good, but equity is better. Itf it n J MERI SIMONSSao Jose Mercury News Good choice: Seventeenear-olHans Pang got stock instead of pay for his summer internship at Alteon Web Systems. His stock is now worth almost $100,000. Behind Pang is "the d ents only recently agreed to let him get his driver's license. And he wouldn't mind having a girlfriend. But even at his tender age, Hans has grasped one of the key concepts of the Internet screaming man," part of the company's ad campaign. A week ago, Alteon WebSystems of San Jose went public, and Hans, who worked there over the summer solely for stock options, told his skeptical friends, Tm going to be rich." Well, not quite. At the close of business Sept. 24, the day of the IPO, his shares were worth about $60,000. By close of market Sept. 27, as the share price continued to rise, he was dreaming of his virtual $100,000. But during the week, Hans lesson in the got a real-lif- e vicissitudes of the stock market as the value of his shares fluctuated by tens of thou long-ter- .HQfestments. JTax benefits are only one considera- care tion when purchasing a insurance policy. But if you are thinking about buying such a policy, you should know the rules. long-ter- 1TI: UNDER CURRENT law, premising paid for a "qualified" care policy are deductible as a medical expense. In addition, any money you Trustee has responsibility to maintain 401(k) long-ter- jgpjflect from a qualified policy is tax-fre- (Qualified policies are those that meet conditions specified in the Internal Revenue Code.) rThere are two limits on deducting qualified policy premiums. First, you roust meet the general medical expense limitation. If you itemize, you may deduct unreimbursed medical expenses only to the extent that they exceed 7.5 percent of your adjusted jgross income. jgecond, the deduction for jcqjg insurance premiums is subject to jagjfbased liraite. For 1999, the deduction is $210 if you are 40 piJSpunger. The deduction increases to ISB60 above age 70. long-ter- maxi-jmJJJ- ri If you have InJHme, you qualify for a special tax biSSk. For 1999, 60 percent of the care for qualified long-terfrom deducted be can your jnSSrance this You take income. may g$Ss idSiction even if you are eligible for ealth insurance under an employer's plan. The only requirement is that the Employer's plan does not cover long-eri; pre-itnST- care. care preA deduction for miums is also available to certain 'partners in a partnership and to cer-- : tain stockholders in an S corporation. !; long-ter- I! ; li drem . ' , . Peter Kranenburg, owner of 'mmnburg Accounting & Tax Service, can 8 or reached at utiripleckiaol.com ii ; r CPA, 224-456- The Orange County Register O. My company recently changed the firm that manages our 401 (k) plan. I can understand why any new contributions I make andor the company matches must be deposited into the new plan. But shouldn't I have been offered a choice as to what I did with the existing funds in the old plan? I would think that I should have had an option to leave the funds there, transfer them somewhere else or roll them over into the new plan provider. What are the rules and regulations governing company-sponsore- d a 401(k) plan under these circumstances? A. Here's what Keith Offel of Money Concepts, a financial planning center in Placentia, Calif., says about those changes: First of all, let's make sure that we use clear terminology. Your employer changed the plan's investments, not the plan. Generally, the more investment providers a plan has, the more costly it is to administer, and the more likely there will be duplication in the investment options-Mos- t importantly, frenzy." For start-u- p companies like Alteon, paying people in stock helps reduce the payroll and ties the employees' future financial success to the company's. Dominic Orr, Alteon's chief executive, had weighed whether to offer a scholarship to Hans, who worked as a systems administrator vat the company for the previous two summers. Instead, Orr offered Hans a very modern choice: $10 a hour, an option to ; buy 500 shares of Alteon, or a mix of stock and pajiW'? "'ft L Pension choice leaves workers with questions If a change is being made, it is in' response to a review, and the intent is to improve or increase the options. By DIANA MCCABE e. services to keep Web sites running at full speed, is in a post-IPquiet period and would not talk about its stock price or future revenues. Hans is comfortable with the capricious nature of the market and displays a degree of cool that would be the envy of many a market veteran. "I can't do anything about it," says the Palo Alto High senior, who is restricted as are aD Alteon employees from sellfor stock months five his ing after the IPO. "So why worry about it? Anyway, I expect the stock to level off after the IPO though, the plan sponsor has the fiduciary responsibility to review and select the funding vehicle offered through the investment provider (usually through an insurance company, bank, wire house or mutual fond company). Normally, if a change is being made, it is in response to such a review, and the intent is to improve or increase the options. As long as the trustee (again, usually your employer) is acting prudently, it is his right, as well as responsibility, to make the change. In short, assuming that the move is an improvement, you have little recourse in this change. Q. I know it isn't good to constantly switch credit balances to new cards offering lower interest rates. But what if I don't open any new accounts and instead shift my balance to an existing account with a lower rate? A. "Frankly, Tm surprised that your current card issuers would allow you to continue to piay this game," said Steve Rhode, president of Debt of Counselors America. However, Rhode says he can't think of a particular reason why your credit report would be negatively affected because you are not opening new lines of credit. i By PAMELA YIP The Dallas Morning News DALLAS The tough choices surrounding pension plans aren't just limited to the employees of IBM who openly revolted when the giant company switched over to the controversial plan from its traditional pension plan. Twenty-tw- o percent of Fortune 100 companies offer the pension plans," according to Watson Wyatt Worldwide, an employee benefits consulting firm. Pummeled by critics and its International employees, Business Machines Corp. relented and agreed to allow any worker 40 years old or older with at least 10 years of service to chose whether to remain in the company's traditional pension plan or switch to the cash- balance plan. Steve Barber, an IBM services marketing representative in Fort Worth, said he still hopes IBM will eventually give workers an option on pension plans. ."I haven't given up hope that we're going to get it. fixed," said Barber, 40, who missed the company's age cutoff by 13 days. He has worked for IBM for 18 years and is the Dallas-are- a leader of an employee group formed to j" cash-balan- - protest IBMs cash-balanc- e plan. "In the event that I don't get it fixed," he said, "I will probably adjust my lifestyle to live a little less frivolously. IH probably be taking less expen- - MILTON IHNNANTDalLis MotciAg Neb Choices: Steve Barber, a marketing executive with IBM, hopes his employer will give the option of using a traditional pension plan. plan or using a cash-balanc- e sive vacations." Employees at firms offering a choice of pension plans must consider myriad factors, including their age, how long they plan to remain with their employer and how comfortable they are managing a large sum of money. And it's not a simple task. Not only are plans a relatively recent innovation, but also no two plans are exactly alike. plans are like a staircase. Credits in a account accrue at a steady and generally conservative rate each year. With every year that workers remain with their employer, their pension benefit goes up another step. In contrast, a traditional pension plan is like an elevator. In that type of plan, workers accrue the bulk of their cash-balanc- Cash-balanc- e cash-balan- e benefits in the last five to 1 years of service with their ; employer: Although"- workers must wait some time for a significant benefit to build up, when it reaches that point, it can whisk them up to a high pension level overnight. When faced with a choke between pension plans, workers need to break down the decision-making process into two areas: quantitative factors and qualitative factors. - The quantitative issues have to do with the hard-cornumbers, with the bottom-linquestion being: Which of the two plans will give workers the most value when they retire? v. Qualitative factors include how weua worker can manage a large amount of moneyNas well as age, which is one of the e e most significant factors. 1 |
