I’m getting ready to join the ranks of Independent Contractors and have already lined-up my first client. Since I have been regularly participating in a 401(k) from my (former) employer, now that I’m going to be independent, what should I do? -- Mike L.

Dear Mike:

First, congratulations on finding your first gig. I’m sure you’ll find your new independence both rewarding and a challenge. Remember, the second client can be the most difficult, so always be working in that direction! And before you get started, take a look at some information we’ve put together to help.

Now, financially what should you do? First, I assume you have taken care of essentials such as health insurance, life insurance, disability insurance and the like. If not, start there. When you’re independent, you have no one else to rely on, and the “corporate umbrella” no longer protects you.

Next, be sure that you have an emergency/contingency fund established. Experts suggest enough to cover your living expenses for a 3-to-6-months. I think that works best when you are a typical corporate employee. Being independent with no steady paycheck on a regular basis, you should think about doubling the amount in order to cover emergencies AND the time between contracts. And, it’s time to think about retirement.

Rollover. No, not you, your retirement plan assets. Go to your local bank or discount broker. Bring your paperwork on your 401(k) and tell them you need to arrange an IRA for a direct transfer rollover.

• DO NOT allow your former employer to give you a direct distribution. It will cost you a lot of taxes!
• DO NOT allow the bank or broker to deposit the proceeds into any other IRA account. If they do, it could prevent you from taking advantage of other opportunities in the future.
• DO NOT commit to any investment purchases until you’ve had a chance to complete your retirement plan. (You may want to visit our site to look at our planning software Your Retirement Architect)

If you like the investments from your current plan, see if your employer will allow you to leave your money invested there. Sometimes, this can be a real value if the investments offered can not be purchased elsewhere. If they’re mutual funds, see if you can get a ‘distribution in kind’. That’s where the 401(k) sends your shares of the funds to your account – could save you commissions later and keeps your money invested until you finish reviewing your retirement plan.

Finally, review the options you have available to you to continue building your retirement. Talk to your CPA. Are you eligible for a Keogh or SEP-IRA? Can you take advantage of an IRA? Whatever is available to you, make sure you do all you can. Remember, you’re independent now. You’re responsible for your own welfare.

Submit a New Question
Return to Top

I’m in the middle of doing some retirement planning and I’m not sure whether or not to allow for Social Security. Can you give me some thoughts? (By the way, I’m 34, if that matters). -- Andy

Dear Andy:

According to the latest report from the Social (in)Security Administration, the fund will be bankrupt by 2034. Given that you won’t be eligible, under current guidelines until about 2035, things don’t look so rosy. Congress and the President (and the 2 leading candidates) are all giving this a lot of attention, and they promise they’ll fix it. But isn’t Congress the one who broke it? (No pun intended.) Not a very appealing situation. Take a look at our article on this very topic.

At Good-Info.com we take the position that you should take responsibility for yourself. Plan properly to support your retirement, know you can do it, and then any Social Security becomes the supplemental benefit it was originally intended to be.

After all, wouldn’t you rather have the choice of eating hamburger or steak instead of the choice of eating Tuesday or Wednesday?

Submit a New Question
Return to Top

I’ve been at this contracting for a while, and fortunately, took advantage of establishing some retirement plans and investments. But I’m at the point where I think I need some professional advice to be sure I’m doing it right. I’ve looked at some of the on-line brokers. I also spoke with two different financial planners here in town – one who stressed he was “fee only” and another who works for a big insurance company who said he charges a fee for a plan, but that fee gets credited when I buy investment from him. Which type is best to use? -- Doug

Unfortunately, not knowing the actual people you would be dealing with, that’s an impossible-to -answer question. But, I’m glad to see that you have the foresight to recognize that at some point in time, we all need to defer to the expertise of others who specialize in this field. And, you’ve hit on a big issue in terms of retirement planning: just how much does it cost and what am I getting for it. We have a comparison of costs and services on our site that hopefully will clear up some of the confusion for you.

But please understand, I think the most important thing you can do when choosing someone to help you with your retirement planning is to be sure it is someone you trust – with your life. After all, the decisions they make (or help you make) will determine how you will live in the future.

Once you have done that, it is then time to compare such things as service, price, method of compensation, and biases (if any). Check with other clients. Check with local and national organizations related to the investments and financial planning industry, such as the SEC, NASD, IAFP, NEFE. All of these organizations maintain websites that can be of help to you in your search and assessment.

Submit a New Question
Return to Top

I’ve been looking at a number of investment sites that offer retirement help. In fact, I just visited a site that allows you to put in all your investment information, and they’ll come back with investment recommendations tailored to my needs and wants. What do you think about that? Are they any good? -- Cindy

Dear Cindy:

You bring up a great point – security and confidentiality. Cindy, I think that we live in a great age, with unbelievable amounts of information and support available to us to help us plan our retirement.

In fact, it can get overwhelming. There’s almost too much information out there. It makes one want to throw-up her hands and say, “It’s too confusing. Just do this for me.” And that’s the danger, in my opinion. First, why would you want to give all your financial information to someone – anyone – that you have no idea to whom they will then give it to? Did you know that financial services companies (banks, brokers, insurance companies, mutual funds) can now sell your personal information to marketing companies? Including account information, like – account balances, transaction history, etc. Scary, isn’t it? So why do it?

Whether you choose to use our planning software or one from someone else, get one where you control the information – not them.

Second, take a longer look at the ‘retirement’ planning being offered. Is it focused on things like: budget (now and retirement)? Your current financial situation? Does it allow you to accurately project your retirement needs, or does it rely on ‘averages’ and ‘rules of thumb’? I don’t know about you, but I want to know that I can afford to live the way I want when I retire, not the way some average says I should be able to live.

Third, is it retirement planning being offered? Or is it investment planning being offered? Look at the focus of the information. Then look at the main business the provider of the information is in. You’ll probably find the focus is on how you’ve invested and what investment products you should think about buying. And you’ll probably find the provider is either a ‘maker’ or seller or facilitator of investment products. That doesn’t make the information bad or wrong – just be sure you are getting what you think you are.

Submit a New Question
Return to Top