Fullerton Tax & Planning is a financial planning firm located in Riverside, Illinois. We've been assisting in personal and corporate financial planning for over 35 years!
Retirement Planning
This is a monthly column that discusses options for small business owners and participants in 401(k) Plans.
This month’s topic, Company Stock.
Ever since Enron, Color Tile, UAL, etc. there is a concern about the amount of company stock held in Employee Benefit Type plans.
Despite the high-profile exposure of these companies, statistics show that participants are still investing and are invested in their own company stock. Some participants who want to break up the percentages into small portions can’t because of the plan rules.
So See Where You Stand. Take assessment of your personal situation in terms of how much stock you have both inside the profit sharing environment and outside. Most planners give 10% or less as the acceptable level of investment in a company stock. Even at that level, you should be diligent in asking how solvent is the company? What are the financial reports and analysts telling you and the world about the company? How is the competition doing in comparison with the company? Has there been a lot of executive trading in the stock? Has the trading been to sell or to buy on a general basis.
Sell Outside Your Plan. The best way to begin to break down the percentages is to unload the after tax portion of the company stock that you own. It has been surveyed and documented that where a participant holds stock in the company in the profit sharing environment, they generally own shares outright in an after tax account as well. By selling these shares first, you avoid the issue of any restrictions that may be imposed on your profit sharing plan stocks. Make sure the sale is of long term holdings to take advantage of the lower tax brackets.
Sell Inside Your Plan. When it is possible, lower the amount of stock in the plan. If the company is on an upswing in the market, a wise move would be to deposit your monies in a money market and buy shares over a long time period. As the company stock slides, you then reverse the trend and sell the shares back into the money market until (hopefully) the company comes back on line.
Remember, keep the percentages of overall holdings low, buy into stock over long periods of time and start an organized sell off of the stock over time as the company news indicates lower earnings, executive sell offs, and competition starts to heat up.
The end result will hopefully be a success story you can tell your grandchildren as you enjoy the fruits of a wise investor.
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Disclaimer and Compliance……
is a disclaimer regarding the activities and information provided in past months by Fullerton Tax & Planning.
Currently, the website for Fullerton Tax & Planning is under the scrutiny of the Securities Exchange Commission. Though few hits have been recorded to that site, the content of the news is being reviewed for its marketing content and accuracy of material.
To that extent, this is to inform you that Fullerton Tax & Planning will continue to host a website, however, the news to anyone who is a newsletter recipient will be of general financial planning nature. Any specific information regarding individual plans and clients is and will continue to be exclusive between client and Fullerton Tax & Planning.
In the future, we will not publish general or specific calculations on Bond, Stocks, Certificates of Deposit, Brokerage accounts, etc. We will not issue statements regarding total returns, actual returns, specific stock or bond fund total returns, etc. If an inquiry is made as to the actual or stated return of mutual funds, stocks, bonds or certificates of deposits, the individual will be forwarded to the appropriate site that publishes those numbers on an ongoing basis. Such as CBSMarketwatch, Big Charts, S&P, Fidelity, etc.
Furthermore, I am issuing this letter to each "Snail Mail" client as well as to all E-Mail recipients concerning the Newsletters of December, 2002 and January, 2003. Any reference to total returns in those two letters was meant to be in general scope and information only, and was not intended to imply that I or any one specific individual was responsible for or caused specific accounts to actually incur the total returns published.
The returns were a composite of several clients who had similarities in their approach to Banking, Brokerage, and money market accounts. There was no intent to make a promise that you could make those returns with Fullerton Tax & Planning or any other specific Bank or Brokerage, or Insurance Agency.
Daily, we are inundated by E-Mail spam that promises such thousands of percent returns on our money and to that end, Fullerton Tax & Planning will not be a contributor to what is construed to be junk E-Mail that advertises great returns for your investments. We offer planning for your present and future based on current market conditions, current tax pictures, current needs analysis. We offer no products, no commission products, no annuities, etc. We will direct clients to those individuals or institutions that are licensed and capable of offering the appropriate services being requested.
If you have any questions concerning this letter, please contact me.
Timothy T. Fullerton, Sr.