Know Where Your Pension Is?
I am trying to find out exactly what happened to my profit-sharing fund. I never received a payout and am wondering if it is too late to do anything. Do you have any advice?
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, July 2006
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When the deal is complete (it's expected to close in December), GMAC should escape some of the taint of GM's diminished credit rating and presumably will no longer be liable for the automaker's pension obligations. If GM were to stumble into bankruptcy, the fall wouldn't bring down GMAC directly, even though 28% of GMAC's 2005 profits come from auto loans.
For now, GMAC bonds remain on the junk heap. Standard & Poor's rates GMAC debt BB. When the sale to Cerberus goes through, S&P might move GMAC one rung up the ratings ladder to BB+, its highest junk grade. Moody's, on the other hand, plans to keep its junk rating on GMAC debt, regardless of an ownership change, because of the company's close business ties to GM.
Risky BRIC funds
I'm looking for a BRIC fund. Can you help? -- W.S., Laurel Springs, N.J.
It's tough to build a BRIC portfolio because your choices are expensive and limited. BRIC stands for Brazil, Russia, India and China -- four countries that Goldman Sachs economist Dominic Wilson, who coined the acronym, believes could rank among the world's dominant economies by mid century.
Franklin Templeton will launch Templeton BRIC fund (800-632-2301) as soon as it gets regulatory approval. The fund, however, comes with a 5.75% sales charge plus annual expenses of 2.15%. Some brokers also offer Emerging Opportunities Select 1 (symbol FTEOPX), a unit investment trust run by First Trust Portfolios.
The trust holds 20 stocks (which it doesn't trade), levies a 3.95% sales charge and will terminate in two years. Schroder funds is considering starting a BRIC fund.
But any fund limited to stocks from those four countries would be plenty risky. As an alternative, consider a diversified developing-countries fund, such as no-load SSgA Emerging Markets (SSEMX; 800-647-7327). The fund invests in all emerging markets, including the BRIC countries, and charges just 1.25% annually.
A spousal IRA
I opened my Roth IRA with Vanguard in 1998 when I was single. I married in 2000 and left my job in October 2005 to be a stay-at-home mom. Do I have to shift my Roth IRA to a spousal IRA? -- Laurie Damian, Stevenson, Wash.
Good news: Not only are you smart to contribute to a spousal IRA, but you also don't need to make any changes to do it. As long as the adjusted gross income on your joint return is less than $160,000 per year, you can continue to contribute to your Vanguard Roth IRA.
You generally need earned income to contribute to a Roth IRA. But if your husband is employed, he can contribute up to $4,000 this year to a spousal Roth IRA on your behalf. Because you already have a Roth IRA with Vanguard, you don't need to open a new account.
My thanks to Tom Anderson and Steve Goldberg for their help this month.