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Show The Salt Lake Tribune BUSINESS Sunday, August 4, 1996 lot of fund groups now offer checks on their bond funds. (The privilege that remains exclusive to money market funds — and which is not yet widespread — is debit cards, although they will soon be available on other ac- ‘Programming’ Your Mutual Fund Is Easy A lot of people have problems programming their VCR. They can play and rewind a tape, but don't know whatthe rest of those buttons on the box do and never make use of what they perceive as complicated program- ming features. .- The same goes for mutual fund igvestors. Most know how to buy ‘and sell their shares, but don’t pay muchattention to other featares that can simplify and/or imProve money management. *.“Fund companies are making things easier on the investor, but most people don't take advantage df it,” says Michelle A. Smith, managing director of the Kansas City-based Mutual Fund Education Alliance. “You need to know what conveniences your funds offer and howthey apply to you. Basic services include automatic investment programs. which regularly pluck cash from a bank account and deposit it with a fund Manyfunds waive minimum ini- tial investments for investors who take advantage of regular-purchase options. Similarly, telephone purchases 401(k) Holders May See Credit-Card Loans’ BYVIVIAN MARINO THE ASSOCIATED PRESS NEW YORK — More American workers are counts ico.) Direct deposits. So long as your employerallows for “direct deposit” of your paycheck, you can bypass the bank entirely. discovering the advantages of 401(k) borrowing over conventional loans: Interest rates are It’s no different than if you were having your entire check de- tions. About 30 percent of participants in plans posited to your checking account, with a few dollars pulled out for your savings account. And be- cause the moneyis set aside from take-home pay — rather than pulled from your bank accountas with automatic investment plans — there is no risk of bouncing checks because you forget to reconcile purchases with your bank statements. Systematic exchanges. Deposit a lump sum of moneyinto, say, a money market fund and have it pulled at regular intervals into the family’s other funds. This service allows for easy dollar-cost lower and plan holders repay themselves instead of a bank via convenient payroll deducwith loan features borrowed against their savings balances last year, with amounts averag ing $6,086, and 83.6 percentof plan sponsors allowed them to do so, according to the Profit Sharing-401(k) Council of America, a Chicagobased trade group. So, with individuals becoming comfortable with this mode of lending, will a credit card linked to retirement savings plans also fly? Thefinancial industry — which for years has been urging Americans to save more for retirement — is keeping a wary eye on the Midwest, where Banc One of Columbus, Ohio. plans to test market a 401(k) Visa by early October. The overall profit potential is certainly withdrawals, will iet employees borrow half their 401(k) ba'ance. or up to $50,000. A loan used to buy a house can be repaid over 15 or 30 years. Loans for other uses, such as a car or college education. must be repaid in five years. American United Life, an Indianapolis- based insurer that manages 9.000 retirement savings plans with 400,000 participants, is the first companyto sign on to the Banc One card Banc One also expects to make the card avail- able to its employees by early 1997 Only plan sponsorscan offer the credit card to their participants, says Karen Barrett, a bank spokesperson. However, she says some bank customers already have expressed an interest in eventually obtaining it and several companies have madeinquiries. The card, which would carry a $20 annual fee, lets employees charge up to 40 percent of their 401(k) vested balance, up to $10,000 They would repay their accounts at the prime interest rate, now8.25 percent, plus 2 percent to 4 percent of the outstanding balance, the latter of which would goto Banc One, Barrett said averaging when you have a big great. There are an estimated 228,000 plans chunk of moneythat you want to covering 22.3 million employees, with assets move; in addition, it is an easy portfolio-managementtool. @ “Householding.” If you, your of about $675 billion. card rate of 17.5 percent, though higher than Named after the Internal Revenue Service tax code section that sanctioned them in 1978. commonly charged rates on 401(k) borrowing plans of usually a percentage point above spouse and children have several accounts with the same fund group, you may want to save a few trees and ease the strain on your mailbox by having all of your statements (and any dividend checks) put in one envelope. @ Powers of attorney. Several fund groups — notably Fidelity and Vanguard — provide powerof-attorney forms so that an investor can grant a relative or 401(k)s are voluntary savings accountsthat let employees designate a portion of pretax incometo be invested in various ways. The money grows, tax-deferred until withdrawn. The IRS, which places penalties on early However. you have to write a check each month rather than repay by payroll deduction. which could makeit easier to default Opponents see other disadvantages to using long-term savings slated for retirement to se- cure routine credit-card charges: Cardholders probably would have to keep their credit line in a money market or fixed- income fund so Banc One could take out credit card charges quickly. Those funds generally have lowerreturns than stock mutual funds Cardholders also would be paying Banc One for the right to use their own money. A 4 percent spread [Banc One could receive] on a fully secured loan! I wish I hada piece of that action.” said Jonathan Pond. a Boston financial adviser. ‘I just don't understand why people would want it. “The reasons you would want to borrow [from a 401(k)] is for big-ticket items buya houseorto educate the kids tive borrowing methodsfirst, such as tax-de- ductible home-equity loans Melvin W. Borleis, a managing partner fer William M. Mercer Inc., a Chicago-based em- The rate of between 10.25 percent and 12.25 percent is below the average bank credit ployee benefits consultant, wasalsoskeptical Employers look at the [401(k)) plan as a retirement plan. They might get litile queasyabout allowing them to buy this week's prime There are several advantages to the credit card. The money comesa lot faster and can be borrowed in smail increments. (Typically there's a $1,000 minimum on a 401(k) loan.) party supplies for a cookout on their 401(k) plan. Usingit as a credit card for every day pur poses psychologically changes the way people think about the plan NEW PRODUCTIS Peintdtied loved onecontroloftheir assets in case they are incapacitated. Powersof attorneyare a valued estate-planning tool, and fre- quently aresigned in conjunction with a will. People who already PCa euCd Pree eed ing between funds in the same group andthe ability to wire monies to your bank, are among other routine options. power-of-attorney; people without one may beable to get some hurry in for best selection. Details about the not-so-obvi- ment accounts with one fund ous fund features may be buried in the prospectus or take up a few lines on an application form. You group, you need more than one power-of-attorney form. And while the formsare free, you may paya fee to have them notarized. @ Automatic address changes. If you summer on Cape Cod and winterin Florida — or make regu- and redemptions, no-cost switch- ean cal} the fund to ask whatit offers (and beg for more), but here are a fewoptions that might make yourlife easier: @ Cross reinvestment. Get your dividend from FundA, reinvestit in Fund B. It’s a favorite tool of investment pros and a simple way to keep a portfolio balanced when one investment outperforms another, the way stocks have been beating bonds. Systematic withdrawals. If you need moneyon regularintervals — monthly, quarterly or annually — this is an easy wayto get it. Not onlyis it ideal for scheduling annual redemptions from individual retirement and Keogh accounts, but it can be a helpful budgeting tool for people living on fixed amounts, as the money arrives regularly on the chosen ay. In addition, some systematic withdrawal programsare sophis- ticated enoughto act as a bill-paying feature, where the money is sent directly to the mortgage company, the bank or any creditor where the monthlybill is a regular, set amount @Check writing. Many people assumetheycan only write checks from a money market fund, but a to Pondsayshe’s even reluctant to recommend individuals tap into their retirement plans for those purposes, preferring they seek alterna- have a will maynot need a fund’s MANY ARE ONE OF A KIND, so peace of mind All clearance merchandise is If you have taxable and retire- PRES PRCT fareateee PU eeUe hls PUR rsa] OCU Ce ees La at time of purchase (with factory warranty where applicable). lar moves between two or more locations — you may want a program that lets your statements follow you, thereby eliminating PRICES VALID THROUGH AUG. 7TH! ' the hassle of having your mail forwarded or doing a complete change of address every few months. And while you get the statements, the monies you re- ceive from the fund through redemptions or systematic eee ee with- drawals can either follow you or go to the bank of your choice. , BRING YOUR TRUCK; VAN OR “Not many people use these features, although theyare tools that professional money managers are awareof,” says Crissy Sny- der of the Denver-based Janus Funds. “Funds keep adding services to makeinvestors’ lives easi- er; people who don’t know how those features work are missing out.” TRAILER, AT THESE PRICES Sais Sa Cee tas ae UOTee iat Pry ove Pre hen as atL ay) Charles A. Jaffe is mutual funds columnist at The Boston Globe. He can be reached by email at jaffe@globe.com or at The Boston Globe, Box 2378, Boston, MA 02107-2378. You'd be aa ates) WUE LLN | people injure their backs climbing the corporate. ladder. KING, QUEEN & FULL SIZE SETS ARE PRICED IN. 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Motors are available trom ‘our main warehouse and can be purchased from $59.99 to 129.99 depending upon the size. Purchases mustbe taken from our Store on the day of purchase. There are no holds or DS elias : lay-a-wayon this product The Salt Lake Tribune's —————- VillianWeb & an Festival verage of the Utah Shakespeare O S http://www. sitrib.com/est ‘ Se Hoble Espa! SALES PRICE OPEN...'til 10:00pm : Tae Nate ee Teeens heenoe 3 Ss Z a oe NCEOUTLET 567-2200 |
