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How to Find a Financial Planner

San Francisco, CA, USA — If you think you need help planning for retirement, a financial planner may be a good idea. But how do you find the right one for the right price? Contact4′s Joe Ducey has the answer.

Before you hire a financial planner, you need to know as much about them as they will soon know about you. “Sit down and talk to someone about their credentials,” advises San Francisco certified financial planner David Yeske.

Experts suggest that among other things you want to know are your financial planner’s educational background, types of clients, credentials (are they certified?), organization memberships, and how they are compensated. Are they selling something? “Commission, some fees, some both,” says Yeske. “You have to ask questions and make sure you’re comfortable with that.”

Your employer might offer free or low cost financial help. Yeske also says he’s a member of the Financial Planning Association (www.fpasf.org), which offers referrals.

If you don’t want to talk with a planner face-to-face, you now have hundreds of other options on the Internet. But which ones are best?

It depends on what you want. PC World magazine studied the sites and list these among the best:

• American Savings Education Council (www.asec.org) – A quick way to figure your financial picture.
• Financecenter.com – Answers “how much do I need” retirement questions.
• Financial Engines (www.financialengines.com) – Founded by Nobel Prize winning economist William Sharp. Personal portfolio suggestions cost $15 for three months.
• 401Kafe (www.401kafe.com) — All about employer retirement plans.
• MSN MoneyCentral (www.moneycentral.com) — Microsoft’s huge site offers a bit of everything.
• Quicken (www.quicken.com) — PC World calls it the standard for comprehensive, coordinated, interactive financial information.

Internet sites are growing in popularity. Most are free. But Yeske believes most also are best used as background, saying they don’t encompass your whole financial picture: “If you visit a site online, you may be getting a narrow view of financial planning.”

Beware of Taxes When Exercising Stock Options

Every Tuesday

Stock options, once the province of the corner-office crowd, are becoming as common as paid vacations at many companies. Midlevel workers are going home at night with a fistful of stock options and a head full of dreams.

But before you get carried away and start planning your next vacation, it’s important to understand how your stock options work. Stock options can boost your income, but they also can inflate your tax bill. Worse, mishandled options can become worthless, which is probably how you’ll feel if you let that happen.

There are two types of employee stock options: incentive, which are generally awarded to senior executives, and non-qualified, which are awarded to everybody else. This column focuses on the latter.

A non-qualified option gives you the right to buy a set number of shares of your employer’s stock at a specific price, known as the grant price, during a specified period of time. Buying the shares at the grant price is known as exercising the option. Your profit is the difference between the grant price and the stock’s market price when you exercise. For example, if you have an option to buy 1,000 shares of your company’s stock for $1 a share, and exercise your option when the stock is selling at $5 a share, your profit is $4,000. The down side: If the stock price falls below $1 a share, your option is worthless.

Typically, you can’t exercise right away and must wait until options are vested, which can take one to five years. Options also have an expiration date. If you don’t exercise before then, your option is worthless. So you have to exercise somewhere between the option’s vesting and expiration dates.

Non-qualified stock options usually aren’t taxed until you exercise them, says William Newell, president of Atlantic Capital Management in Sherborn, Mass. But once you exercise your option, you’ll be taxed on the difference between the grant price and the stock’s market price, at your ordinary income tax rate. You might also owe Social Security taxes and state taxes on your gain.

Many workers exercise their options, then immediately sell the stock, limiting taxes to the difference between the exercise price and the market value. But suppose you exercise your option and keep your shares. You’ll still owe taxes on the difference between the grant price and the stock price on the day you exercised. And if the price of the shares continues to rise, you’ll be taxed again when you sell, this time on the difference between the price on the day you exercised your option and the price on the day you sell your shares.

Using the above example, if you exercise an option to buy 1,000 shares for $5 a share and sell them a year later for $10 a share, you’ll owe capital gains taxes on $5,000. That’s on top of the income tax when you exercised the option.

So why would you hold on to your stock after exercising an option? Because in some instances, that strategy can reduce your overall tax hit. Suppose you have three years after you’re vested to exercise. If you wait until the end of that period, the entire difference between your grant price and the stock’s price when you exercise will be taxed at your ordinary income rate. It could even nudge you into a higher tax bracket.

But let’s suppose you exercise your option a year after you’re vested, but hold on to the stock. The difference between your grant price and the stock’s fair market value won’t be as large, meaning a smaller amount will be taxed at your income tax rate. If you hold the stock for at least a year and it continues to rise, any additional gains will be taxed at the lower capital gains rate — 20% for most investors.

Other factors to consider when deciding when to exercise:

* Your tax status. If you believe your income tax rate will fall in a particular year — you’re planning to retire, for example — it might make sense to wait and exercise your options that year, says David Yeske, a financial planner in San Francisco. Similarly, you may want to avoid exercising options in years in which you expect to receive a big bonus.

* Diversification. If half your portfolio is already made up of company stock, unexercised stock options can make you even more dependent on your company’s fortunes. If the company falls on tough times, your salary and the value of your stock options could disappear. A more sensible plan: Exercise some options, sell the stock and use the cash to diversify your portfolio into other investments.

Questions? Write: Your Money, 1000 Wilson Blvd., Arlington, Va. 22229. Or email: sblock@usatoday.com

TEXT WITHIN GRAPHIC BEGINS HERE

What are my options?

Average lowest salary for employees eligible for stock options:

1996 $58,500 1997 $64,200 1998 $70,900 1999 $58,100

Percent of employees eligible for stock option grants:

1996 12% 1997 15% 1998 12% 1999 19%

Investing for the New Millennium

Assembling a stock portfolio to meet
the changing demands of the future

By GEORGE ANDERS

Think about a financial strategy for the new millennium — and get ready for two thrilling, jarring leaps into the unknown.

First come the classic questions that investors face every month. Where is the economy headed? What investments should do well, and which might stumble? What’s the right way to balance a portfolio to make the most of future opportunities without being reckless?

Wall Street is awash with investment ideas for the new millennium, all of which need to be viewed from the starting point of what we really know about markets’ behavior. It’s a safe bet that the gains of the 1990s won’t continue forever. Markets don’t always go up, and sometimes the drops can be quite painful. Yet if history is any guide, investors with strong enough nerves to keep much of their wealth in stocks over long time spans will consistently outperform people taking more cautious strategies. And with dozens of new technologies promising to make our lives easier, zestier — and longer — the chance to invest at least part of a portfolio in tomorrow’s growth industries has seldom looked more enticing.

Changing Needs

But a second line of questions may deserve more attention. What sort of future needs are we investing for, anyway? Traditionally, people have set aside money for their children’s college education, for a home down payment, and for retirement at age 65. In the new millennium, all those pursuits may be transformed in remarkable ways.

Getting a good education may become a goal that never stops, as experienced workers jump from one career to another. The line between owning and renting property may become a blur. And retirement may no longer be an abrupt event that separates the elderly from everyone else. People of all ages may flit in and out of the work force, using their savings to travel around the world in their 30s, or combining work and play into their 80s and 90s.

“You can’t just plug your age, your income and your life expectancy into a financial model anymore,” says David Yeske, a San Francisco financial planner who advises architects, engineers, doctors and lawyers. “The choices going forward are much more complex, and much more interesting.”

The new investing climate of the millennium is likely to matter most to investors with the longest time horizons. For short-term traders, the first few days of 2000 aren’t anything special. They merely provide another chance to try to squeeze some advantage from following the market’s nearly random zigzags on a minute-to-minute basis. But for people whose horizons stretch out in decades, the millennium’s arrival provides an excellent chance to rethink both investment goals and the tactics used to pursue them.

Putting that principle to the test, The Wall Street Journal asked David Gardner, a cofounder of Motley Fool Inc., to devise an investment portfolio that would best suit the lifetime needs of a newborn this week.

Beyond the Internet

Mr. Gardner’s choices aren’t for the timid. He is an unabashed fan of fast-growing young companies that are business mavericks. By his own acknowledgment, more than a few of his picks turn out to be bitter disappointments. But over the past few years, he has attracted more than 700,000 users to his Web site, thanks to a knack for spotting giant winners. For the first 11 months of 1999, his Rule Breaker portfolio was up 64%. It has averaged yearly gains of nearly 70% since its formation in 1994, benefiting greatly from early bets on America Online Inc. and Amazon.com Inc., two of the Internet economy’s highest fliers.

Mr. Gardner remains as bullish as ever about new technology, but his horizons are rapidly widening beyond the Internet. Now he thinks biotechnology and wireless communications may have the greatest potential — both for investors and the general public — in coming decades.

“Biotechnology has the potential to extend, maybe limitlessly, the lives we live,” Mr. Gardner says. Today, the average American has a life expectancy of about 75 years. But if medical advances make it possible to ward off heart disease, diabetes, strokes and cancer, he figures, life spans of 100 years or more could become common. Many investors shy away from biotech stocks because it’s hard to evaluate the underlying science of each contender. But that just reinforces Mr. Gardner’s belief that biotech provides some great investment opportunities.

In his Millennium Baby portfolio, Mr. Gardner recommends three biotech issues: Amgen Inc., Millennium Pharmaceuticals Inc. and PE Corp.-Celera Genomics Group. Of the triad, Amgen has the strongest track record, with a history of profitability and two top-selling drugs in production. The others are tiny companies posting losses, but Mr. Gardner hopes that brighter things lie ahead. Besides, he observes, “you have to like Millennium for the name alone.”

Mr. Gardner says he’s only partway through picking his wireless-communications favorites, but he expects Cisco Systems Inc. and Qualcomm Inc. to capture top spots. Both stocks have soared for years on the strengths of their core businesses: Cisco’s delivery of Internet infrastructure and Qualcomm’s manufacturing of a wide range of telecom gear. That’s just the warm-up act, Mr. Gardner contends; he sees further gains as the companies pursue wireless initiatives.

Meanwhile, Mr. Gardner is sticking with three of his longtime Internet favorites, AOL, Amazon.com and eBay Inc., believing they have further to go. AOL already has a lofty $160 billion market capitalization on the strength of its 20 million customers in the U.S. and abroad. But Mr. Gardner thinks a market leader like AOL could add enormous numbers of users among the 500 million personal-computer owners in the world. “We value brands,” he says, “and the Internet is the greatest brand-building technique we’ve ever seen.”

Brand Leaders

Finally, Mr. Gardner encourages investors to look for companies “whose brands are so strong that they almost amount to legalized monopolies.” His top three choices in that respect are Gap Inc., Coca-Cola Co. and Microsoft Corp. Other investors may quibble over those picks, he concedes, but he says brand leadership in one form or another should be an important part of investors’ thinking.

As big as Wall Street is, there’s no shortage of other financial advisers, brokers and pundits with different picks and analytical frameworks for the decades ahead. Many strategists advise putting at least 10% of an equity portfolio into foreign stocks, for example, something that doesn’t figure into Mr. Gardner’s thinking. Meanwhile, value investors prefer companies that sell at much lower price-earnings ratios, albeit with less exciting growth prospects. And many financial planners recommend that their clients put their money in diversified mutual funds, rather than trying to pick winners on their own.

Still, Mr. Gardner’s starting point — a belief that long-term investors ought to concentrate much of their money in the stock market — is widely seen as smart thinking. Since 1926, according to Yale University finance professor Roger Ibbotson, U.S. stocks have averaged nearly 11% in dividends and capital gains each year. That far outstrips the average returns on bonds and money-market instruments.

Dow 100000?

There’s no reason to think such trends won’t continue, Prof. Ibbotson contends, though stock investors will have to endure plenty of volatility along the way. If historic returns stay on track, Prof. Ibbotson argues, the Dow Jones Industrial Average, which darted past 10000 this year, could break the 100000 barrier in the year 2024. Overall, he adds, large-capitalization stocks should climb 11.6% a year in the next 25 years, while government bonds rise just 5.4% a year on average and money-market instruments limp to a third-place finish, with average gains of 4.5%.

Because most individual investors focus on short-term turbulence instead of prospects for long-term gains, they tend to be underinvested in stocks, says Christopher Jones, vice president for research at Financial Engines Inc. His Palo Alto, Calif., company makes sophisticated financial-projection software available to the public over the Internet.

In recent studies, Mr. Jones says, Financial Engines has found that people using its software tend to boost the percentage of their portfolios allocated to stocks. For peace of mind, Mr. Jones says, it’s understandable that individuals don’t want 100% exposure to the stock market. But a 70% to 80% stake may be a prudent choice for long-term investors, he says.

Money to Spend

So how will all that money be used?

Experts aren’t nearly so sure of themselves on this question — but they are willing to speculate. Saving for children’s education will surely be part of many investors’ goals, says Adam Rosier, a Southgate, Mich., financial planner for American Express Co. But Mr. Rosier says it’s unlikely that college costs will keep climbing at the past two decades’ rate of 7% to 8% a year.

“If you just extrapolate that trend, in another generation or two, people will be spending 1 1/2 times their annual incomes just to get one year’s education for their kids,” he observes. “I don’t see that happening.” Recently, in fact, higher-education cost increases have begun to ease a bit. According to the College Board, tuition at the average four-year private college rose just 4.6% this year, to $15,380. Room and board climbed just 3.6%, to $5,989.

Even bigger changes may lie ahead. Motley Fool’s Mr. Gardner speculates that in a generation’s time, much more schooling will be done over the Internet, at lower cost than today’s live-in colleges. And many financial planners believe that lifelong learning will become the norm, rather than a period of intense education in one’s teens and early 20s, followed by almost no formal education for the rest of one’s life. If so, that could lighten the load on parents trying to pay for their children’s schooling. Instead, offspring might shoulder much of the costs themselves after entering the work force.

Leisure World

Saving for retirement, meanwhile, is likely to be transformed by new work habits. Mr. Yeske, the San Francisco financial planner, says some of his clients already are planning their investments so they can quit work for a year or two in their 30s and 40s to live at ski resorts or other pleasant places. Then, when the savings wear down a bit, they plan to return to the daily grind.

“Those kinds of people are in the vanguard,” Mr. Yeske says. “Leisure is becoming more embedded in people’s lives.”

Meanwhile, he says, some white-collar professionals say they don’t want a classic retirement at age 65, with an utter stop to their working lives. Instead, they envision doing some part-time consulting into their 70s and 80s, gaining mental stimulation, social contact and extra income. Such people, Mr. Yeske says, may not need to set aside as much cash for retirement, because they can count on some earnings beyond age 65.

On the other hand, Mr. Yeske says, the prospect of longer life spans in the new millennium makes it likely that people in their 80s, 90s and beyond may need to set aside much more money for nursing care. Currently, disability and long-term-care insurance are two of the more obscure parts of a person’s financial portfolio. But that could change — especially if life spans beyond 100 become common, and age 65 is more like a halfway point in a person’s life than a pause just a few years before the end.

Year-end Tax Planning Moves

By TIM TOWNSEND
Staff Reporter of THE WALL STREET JOURNAL

Maybe you’re a procrastinator, or maybe you just worry about money. Either way, you have that uneasy feeling that, with the end of the year looming, you should be doing something about your finances. Well, here are some year-end tips.

Give yourself a tax break. Make your January mortgage payment in December and you can use the interest deduction for your 1999 taxes, says Dave Yeske, a San Francisco financial planner. The same goes for property-tax payments: Make the first-quarter payment now and take the extra deduction for this year.

Check your medical bills. Medical expenses must be greater than 7.5% of your adjusted gross income in order for you to claim them as deductions. So if your combined household income is, say, $100,000 and your family medical expenses are over $7,500, “you’ve crossed the limit, so go buy that new pair of glasses,” says Debra Sawyer, national tax manager at Deloitte & Touche in Washington, D.C. But, “if you haven’t closed in on that limit, hold off on getting your teeth cleaned until we’re into 2000.”

Defer income. If you’re getting a Christmas bonus or just got a raise, ask your employer if you can receive the money in January so you don’t have to pay taxes on it until next year. Also, if you’re selling stock or other investments to pay off holiday bills, it might make sense to wait until January so you can defer paying capital gains taxes. Of course, if you’ve got losses from stocks and bonds, you need to sell the securities by Dec. 31 at the latest to get the deduction for this year.

Watch deadlines. If you have a 401(k) plan, make sure you tell your employer this month how much you want deducted from your salary next year (up to $10,500). If you’re self-employed, you can set up a Keogh account (similar to an IRA) by Dec. 31 and take the full deduction for however much you plan to put in (up to $30,000 a year).

Is Favorite Web Site Best Investment

Every Tuesday

Some rules have been around as long as there have been mothers: Eat your vegetables. Don’t hit your sister. Floss.

The investment world has similar maxims: Buy and hold. Don’t try to time the market. Buy what you know.

Sensible rules. But when it comes to Internet stocks, that last maxim could cost you some serious money.

Mutual fund legend Peter Lynch popularized the “buy what you know” theory of investing a decade ago in his book, One Up On Wall Street: How To Use What You Already Know To Make Money In the Market. Lynch’s success as manager of the Fidelity Magellan mutual fund spurred millions of investors to scour shopping malls and grocery stores for investment inspiration. Long lines at Wal-Mart prompted Lynch-like investors to devour the company’s annual reports.

These days, investors with home computers don’t even have to leave the house for ideas. Rigo Santiago, for example, owns stock in Ameritrade and E-Trade. Santiago, 40, of West Hollywood, Fla., says he was attracted to the on-line brokerages because he has used them to trade stocks.

Likewise, Gwen Hopkins, 45, of Howell, Mich., invested in Amazon.com after buying products from the on-line bookseller. “I feel it’s going to be a tremendous company for years to come,” she says.

That kind of talk unnerves some financial planners. David Yeske, a planner in San Francisco, maintains his firm’s World Wide Web site and uses the Internet to communicate with some of his clients. Because he’s so clearly a fan of technology and the Internet, Yeske says, it’s sometimes difficult for him to convince a client that his or her favorite Internet companies aren’t great investments.

Yeske believes popular e-consumer companies, such as Amazon, eBay and eToys, will have a tough time staying ahead of the competition. Compared with start-up costs at Internet infrastructure companies, it doesn’t cost much to start a retail Web business, Yeske says. But while some companies have established a brand identity with consumers, maintaining that identity requires expensive advertising campaigns, Yeske says. That eats into profits, which may explain why many e-consumer companies don’t have any.

So, if you’re bent on investing in the Internet, you might be much better off investing in infrastructure companies that you’ve never heard of. As the USA TODAY Internet 100 Index (see page 4B) indicates, infrastructure companies fared much better in the recent sell-off than retailers that sell toys, cars and CDs. The average e-infrastructure company is down only 4.9% since June 30, vs. a decline of 26.3% for the average e-retail company.

E-infrastructure companies are like manufacturers of auto components: You can’t see their products, but your car won’t start without them. And because starting an infrastructure company is costly, existing players are less vulnerable to competition. Some even have earnings.

That doesn’t mean e-infrastructure stocks are cheap. While they don’t have the mass appeal of e-consumer companies, infrastructure stocks have benefited tremendously from Internet mania. On Friday, for instance, Copper Mountain Networks, which makes high-speed networking equipment, rose 28%. Since it went public in May, the company’s stock is up 58%.

A safer way to bet on these stocks is to look for a diversified mutual fund with a smart manager and a sprinkling of e-infrastructure stocks. Christine Benz, an analyst for fundtracker Morningstar, says Janus Global Technology, T. Rowe Price Science and Technology and Northern Technology (see chart) all own e-infrastructure stocks but leaven their portfolios with other, less-volatile tech stocks.

If you chose to delve into the e-infrastructure arena, either through individual stocks or mutual funds, do your research. Peter Lynch never told investors to buy stock in a company based on what they saw at the mall. That’s just the starting point. He said you also need to study a company’s balance sheet, read its annual report, and find out what its competitors are doing.

That rule still holds, whether you’re investing in semiconductors or laundry detergent. Buying stocks or funds without researching them first is like running with scissors. And you know what Mom has to say about that.

Your Money appears Tuesdays and Fridays.

More Commentary on Internet Stocks

By Sandra Block

FINAL EDITION
Section: MONEY
Page 3B

If you’ve ever been stuck on an Amtrak train that has run out of sandwiches, you may have difficulty imagining a time when railways were heralded as an innovation that would forever change the way we live. But in 1845, a British journalist declared that railways would herald ”the arrival of a time when the whole world will become one great family, speaking one language, governed in unity by like laws and adoring one God.”

That was more than a century before e-mail, but the mania that accompanied the development of the railroad bears a remarkable resemblance to the modern ballyhoo over Internet stocks. Thousands of investors sank money into railroads, convinced they couldn’t lose, according to Devil Take the Hindmost, a new book by Edward Chancellor that chronicles the history of financial speculation.

By 1850, however, the railway industry was plagued by overbuilding, competition and rising costs. Shares fell 85% from their peak. The automobile appeared. Many railways went out of business, and investors were wiped out.

Chancellor’s meticulous research offers some valuable lessons for investors who are tempted to wade into the Internet pool. True, Internet stocks are considerably less expensive than they were three months ago, with some stocks off as much as 50% since their peak on April 22. But just because these stocks have dropped in price doesn’t mean they’re a bargain. And like the early railways, they’re anything but safe.

Many well-known Internet stocks — those that have earnings — are still trading at enormous price-earnings ratios, that is, the share price divided by earnings per share. And most start-up Internet companies have yet to make a profit. Still, just a few months ago, fans of Internet stocks defended their lofty prices, arguing they represented the companies’ tremendous potential.

Undoubtedly, a few existing Internet companies will outlast the inevitable shakeout. But even if you’re convinced you’ve found the winners, don’t bet the farm.

”I wouldn’t put any money in these stocks that I couldn’t afford to lose,” says David Kathman, a stock analyst for Morningstar. ”I would consider buying these stocks basically a form of gambling, with the odds just a little better than the slot machines.”

If picking winners were easy, every investor and fund manager with a handful of cash would have invested in Microsoft 10 years ago. But then, many investors thought Microsoft was incredibly overpriced and stayed away, Kathman says. Since August 1989, Microsoft’s stock has split seven times and risen more than 10,000%. ”In retrospect, it was a bargain,” Kathman says.

Internet funds

Of course, you could entrust your money to an Internet mutual fund, in hopes the fund’s manager will have better luck picking winners than you. But Kathman is skeptical of that approach. As the chart shows, the Internet funds have fallen at about the same rate since mid-July. ”I don’t know if any of those Internet funds is better than any of the others at picking winners,” he says. ”I kind of doubt it.”

Investing in Internet funds carries another risk. If the sector continues to slide, and the funds’ returns suffer, that could prompt investors to redeem their shares. If enough investors bail, fund managers will have to sell some of their stocks to raise cash. Not only would that hurt the funds’ returns, it could also create taxable capital gains distributions. Come December, you could find yourself stuck with a fund that hasn’t gone anywhere — and a big tax bill.

Managing Your Money appears Tuesdays and Fridays.

Questions? Write: Your Money, USA TODAY, 1000 Wilson Blvd., Arlington, Va. 22229. E-mail: sblock@usatoday.com.

TEXT OF INFO BOX BEGINS HERE

Net performance

Performance of Internet funds since mid-July:

 Total return{+1}
Fund                             July 15-Aug. 5              1999
 Internet Fund                        -20.8%                  69.3%
Monument Internet Fund               -20.4%                  67.7%
Munder NetNet                        -19.2%                  33.7%
WWW Internet Fund                    -15.5%                  25.0%

Source: Lipper. 1 – Dividends and gains reinvested through Aug. 5

Got Your Gold Watch? Now Get a Job

For many, it makes sense to stay in the workforce

After making a bundle and retiring at 55, Henry Hirsch set out one morning to develop a routine for the years ahead. He had spread out his papers on the kitchen table and was placing phone calls when his wife came in and said, ”You’re taking up my space. That’s where I sit in the morning.”

”That’s when I said to myself, ‘You know, maybe I should go back to work,”’ says Hirsch. So six months after retiring as vice-chairman and chief executive at Williams Telecommunications Group in May, 1997, he answered a headhunter’s call and became chairman and CEO of Bellevue (Wash.)-based startup Advanced Radio Telecom. Now, he’s working 65 hours a week. Says Hirsch: ”I’m back in the race.”

Hirsch’s story may be extreme, but more and more retirees are deciding that they’re not ready for full-time leisure. A survey this year by the Employee Benefit Research Institute found that 68% of workers expect to work for pay after retiring, up from 61% who said so in 1998. True, some of the people who plan on working actually won’t. Still, economist Joseph Quinn of Boston College calculates that at a minimum, about one-third of men and nearly one-half of women will take bridge jobs after their last career job and before completely retiring.

Indeed, it’s hard to tell whether some folks are really retired at all. ”A growing number of people just don’t buy into the traditional notion of retirement,” says David Yeske, a certified financial planner in San Francisco. Instead of preparing his clients for full retirement, says Yeske, ”I tell them to accumulate enough capital so that they’re able to work by choice, not necessity. People can buy into that.”

If you want to work after retirement, it pays to plan ahead. Talk to your current boss about opportunities, and start networking among business associates for leads. By not planning, you could slide into a job that is less than ideal. And you could end up paying more taxes than necessary, as well.

What kind of work do you want to do? A sensible choice is to keep doing what you have done before. If you’re the adventurous type, however, retirement can be a good time to try something different. The right decision boils down to your temperament and the options available.

SOCIALLY SECURE. The fading dividing line between work and retirement raises important financial planning issues. When should you start drawing Social Security, pension, or 401(k) benefits? The first step, planners say, is to calculate your cash-flow needs. Then figure out how a job will change your cash income.

Don’t forget that your Social Security benefits are reduced if you work. Under age 65, you lose $1 in benefits for every $2 in earnings above $9,600. From age 65 to 69, you lose $1 in benefits for every $3 in earnings above $15,500. But the thresholds are rising. By 2002, recipients of Social Security age 65 to 69 will be able to earn $30,000 a year without losing any benefits. If you’re 70 or over, you’re in luck: Even today you can earn as much as you want with no loss of Social Security benefits.

Working should make it more affordable to delay when you start taking Social Security benefits, and that can be a good thing. It used to be that your annual benefits would rise only 3% for each year past age 65 that you delayed starting to draw them. But the Social Security Administration is gradually raising that credit, so by 2009, it will be 8% per year of delay. If you expect to live a longer-than-average life and you can afford to do without Social Security for a while, it will pay to wait.

TEMP JOBS. For retirees in their 50s, a bridge job can be a smart alternative to tapping your pension early. Dipping into a pension in your 50s will leave you with less later on. And early pension withdrawals are hard to stop if circumstances change and you don’t need the money. Here’s why: The only way to get early payouts from your pension without paying a 10% penalty is to commit to a schedule of equal-size payouts. If you then go back to work and don’t need the payouts, you have to take them anyway for five years or until age 59 1/2, whichever comes last. For that reason, ”it’s critical for you to decide up front whether you’re going back to work or not,” says Maureen Tsu, a certified financial planner in San Juan Capistrano, Calif.

Some retirees who go back to work enjoy the security and esprit de corps that come with a permanent job. Peter Andrews, 63, a technical writer in Raleigh, N.C., who took early retirement from IBM, did seven years of temp work before landing a permanent job this June at Square D, a manufacturer of electrical equipment. ”I feel more part of a team now,” says Andrews. ”I’m doing exactly the same work I did a month ago, but now it means more to me.”

However, many working retirees prefer part-time or temporary work. Luckily, those are the kinds of jobs Corporate America is producing a lot of these days, says John Challenger, CEO of the Chicago-based outplacement firm of Challenger, Gray & Christmas.

Temporary-help agencies can be an excellent place to turn. They don’t supply just clerical jobs anymore. Such companies as Manpower and Kelly Services can place people in engineering, software, and other technical fields at rates of up to $50 an hour. Temp firms also provide training, skills assessment, and medical benefits–the latter a key concern for retirees who have not reached the Medicare-qualifying age of 65. Manpower estimates that a quarter of its temporary workers are 50 or over.

PC FOR DUMMIES. The rap on retirees is that they can’t handle technology–and sometimes that’s true. Tom Buck, 82, of Evanston, Ill., uses a 1930 Underwood typewriter to write features for a Blue Cross & Blue Shield of Illinois newsletter. Says the Chicago Tribune veteran: ”I’m sitting here with a beautiful computer at my desk, and I don’t know how to use it.”

O.K., Tom, but don’t assume that computers are beyond your grasp. Take Scott Bird, 74, of Scottsdale, Ariz. Bird also was a clueless newbie when he retired. Now, he is a certified trainer in Microsoft’s Windows NT 4.0 operating system.

Today’s booming economy desperately needs seasoned workers. By answering the call, you can keep your mind sharp, your wallet fat–and still find time for golf.

Stocks? No Thank You Says Nation's Top Economist

3:28 EDT WASHINGTON (AP) — So where does Federal Reserve Chairman Alan Greenspan, who knows more about the economy than almost anybody, put his own money? No irrational exuberance for him. He shuns the stock market for the safest investment of all — short-term Treasury bills.

Greenspan’s desire to avoid any conflict of interest guides that decision, says Fed spokeswoman Lynn Fox. But investment advisers caution that others shouldn’t necessarily follow his lead, even with the market’s recent rocky course.

“If you don’t have a growth element in your portfolio, you’re not keeping up with inflation,” said David B. Yeske, a certified financial planner in San Francisco on Tuesday. “So he’s probably losing ground with each passing year.”

Not that the central bank chairman has much to worry about in that department, according to Greenspan’s financial statement, made available Tuesday.

The man with his finger on the economy’s pulse owned at least $2.4 million in short-term Treasury securities and had at least $466,000 in money market and credit union accounts at the end of 1997, according to the statement dated June 29.

He also owned a Norfolk Southern Corp. bond worth at least $500,000 and a Massachusetts state bond worth at least $100,000.

That’s on top of his annual salary of $136,700, not to mention the salary and assets of his wife, NBC-TV correspondent Andrea Mitchell, 51, whom he married in April 1997. Unlike Greenspan’s holdings, his wife’s portfolio is weighted heavily toward stocks.

The asset figures are not precise because the value of each asset is given as a range.

Greenspan wasn’t required to disclose gifts from friends but he listed wedding gifts from colleagues in government, anyway. They included glass servers and a silver ladle, valued at $300, from Treasury Secretary Robert Rubin, and folk art of undetermined value from House Banking Committee Chairman Jim Leach, R-Iowa.

Greenspan has filed an annual financial disclosure every year since he was sworn in as Federal Reserve chairman in August 1987. But until this year it said simply that most of his assets were in a blind trust worth more than $1 million. He chose to liquidate the trust after his marriage to Mitchell so the couple could make joint financial plans, Fox said.

It was probably an expensive decision.

“He probably gave up a couple hundred thousand dollars a year in investment income,” Yeske guessed.

Many people of Greenspan’s age tend to shun stocks in favor of investments such as Treasury securities, which protect against loss of principal, said Scott M. Kahan, president of Financial Asset Management Corp. in New York City.

But that can be a mistake. If Greenspan were his client, Kahan said, he’d warn the chairman he can’t count on inflation remaining as low as it is now. Prices have risen at a 1.5 percent annual rate so far this year.

“A 72-year-old man in good health could live another 20 years, or even 25,” Kahan said. “Plus his wife is 20 years younger.”

But then Greenspan is the Federal Reserve chairman and he does have some influence over inflation and the stock market.

Maybe he knows more than the investment advisers?

Two years ago, Greenspan warned of “irrational exuberance” in financial markets. Last month, he told Congress that “history tells us there will be a correction of some significant dimension.”

The Dow Jones industrial average had just hit a record high five days earlier. Since then, it’s been declining and, despite some recovery, closed Tuesday more than 600 points below the peak.

Science & Tech Funds' May Slow Down

By RICHARD C. TEN WOLDE
Dow Jones Newswires

NEW YORK — Science and technology mutual funds have risen from their ashes this year, but whether they can maintain their current climb is far from certain.

After crumbling in the fourth quarter, science and technology funds posted an average return of 9.66% in 1997, according to Lipper Analytical Services Inc. That hurt, because the average fund investing in the Standard & Poor’s 500 Index stocks gained 32.6%.

However, science and tech funds have been leaders this year, with the average fund in the sector gaining 15.64%. The stocks in which they invest have soared over the competition and pushed the Nasdaq Composite Index to record levels. The Nasdaq index has risen more than 13% this year, compared with the S&P 500′s roughly 8% gain.

Some money managers warn the sector isn’t for the faint-hearted, and that the funds’ strong climb may be short-lived.

Turbulence Seen

Managers expect the sector to experience continued turbulence this year with potential for the stock market to cool and as the U.S. market is influenced by the economic turmoil in Asia.

“I’m wary of the recent run-up. It could be a head fake,” said Paul Meeks, director of technology research for Jurika & Voyles Inc. in Oakland, Calif.

Mr. Meeks also manages the Jurika & Voyles Mini-Cap Fund, a portfolio that invests about 13% of its assets in the technology sector, according to fund-tracker Morningstar Inc. That fund has an annualized gain of 33.90% during the past three years.

Mr. Meeks said that while companies’ earnings haven’t shown the full brunt of the Asian economic turmoil, the trouble could become evident as firms report first-quarter performance. “I’m not jumping on the bull bandwagon yet,” he added.

Warning From Planner

Furthermore, some financial advisers are recommending that clients pause before jumping into a tech fund. David Yeske, a certified financial planner in San Francisco, said he warns investors that all the growth potential is factored into the stock prices.

“I believe technology is going to continue to grow and our economy is going to get better because of the technology they provide,” Mr. Yeske said, “but I don’t think every good company makes a good investment.”

Mr. Yeske said the tech stocks have price tags that make him search for other values. Fund managers agree that the picture isn’t as appealing as the recent gains may indicate.

Manager’s View

Though the sector is less likely than the overall market to cool off, said Chip Morris, portfolio manager of the T. Rowe Price Science & Tech Fund, “a lot will depend on the broad market.

“If interest rates stay low and valuations for the broad market stay at high levels compared to the historic norm, the market and the tech stocks should continue up,” he added.

That won’t necessarily be the case, but managers see some good bets in the technology sector. Mr. Morris said firms designing networking software and providing data services are among the most promising. He has picked First Data Corp. and Electronic Data Systems Corp. to be breadwinners for the $4 billion fund.

Moreover, T. Rowe’s Mr. Morris sees promise in Oracle Corp., a maker of database and networking software and the world’s second-largest software company. The stock has been pummeled in the past year, but Mr. Morris thinks management will improve profit margins and earnings. “We think management has gotten religion. They have evaluated the religion. We don’t know if they will practice the religion,” he added.

Mr. Morris has the record to prove he can find values — his fund has a five-year annualized return of 25.02% — but his fund only managed a 1.71% gain last year. It has slipped in performance from a sector leader to near the bottom of the group.

While there are picks that still show promise, such as Applied Materials Inc., Mr. Morris is wary of semiconductor manufacturers and firms that provide Internet services, such as Yahoo! Inc.

But Tony Rizza, a managing director at Columbus Circle Investors, Stamford, Conn., sees plenty of promise from semiconductor firms. Columbus Circle, which is a division of Pacific Investment Management Co., runs the $300 million Pimco Innovation Fund. “If you look at chart patterns in the semiconductor group, there aren’t many that didn’t see a 40% to 60% haircut in their stock price,” he said, making them a value now.

Mr. Rizza likes Xilinx Inc. and agrees with Mr. Morris’s Applied Materials play. “I don’t see those leadership companies getting hurt. They’ll still do well,” Mr. Rizza said. “As we get a better grasp of the effect of the Asia crisis, I think we will see the market broaden again [to the other tech companies].”

Many See Finances Through Rose-Colored Glasses

THE LOVE OF MONEY MAY not be the root of all evil. But it sure influences our values, our behaviors, our psychologies – for better or worse.

Look at the San Francisco lawyer who foolishly spent her money or loaned it to family or friends each time she neared $100,000 in earnings.

Her fear? That her blue-collar siblings and pals from the old neighborhood would resent her professional success.

“She was the first in her family to have a college education, which carried her into another class,” said Aislyn O’Coyle, a financial counselor and the owner of Reversal of Fortune, a San Francisco firm that advises people on money management and psychological issues.

“The more money she made, the more she feared rejection from her loved ones.”

Or take the young Peninsula couple who had hoped to get married last year. The woman was $30,000 in debt from educational loans. She wanted to spread out the payments. But her fiance, worried about their credit, urged her to pay off the loans.

“It became very emotional, and they eventually broke up,” said Cheryl Broussard, author of “The Black Woman’s Guide to Financial Independence” and a principal at Broussard & Douglas Inc. in Palo Alto. “They agreed it was good they talked through the problem before they got married.”

Or consider the frugal Marin County businessman – a

“money bulimic” – who would go on wild saving and spending binges. He’d save $5,000 or $10,000, then blow it on gambling vacations at Lake Tahoe or Reno.

“He feared he was becoming as parsimonious as his father,” O’Coyle said. “He was also worried that this was the end of his youth.”

Financial experts say that money may be the scariest taboo next to sex. Nearly everyone gets tense when talking about their spending and savings habits, and for good reason: Money reflects some of our deepest values.

“There’s an emotional component to money that’s so deeply rooted that most people don’t see it or acknowledge it,” said David Yeske, a financial planner at Yeske & Co. in San Francisco.

Financial experts and counselors say that people learn their cultural and family attitudes toward money as children.

Their fathers or mothers may have been compulsive spenders or savers. Religious parents may see money as an evil temptation. Other families might hide their wealth, or never talk about it. Families who survived the Depression may have cracked down too hard on their kids, who rebel as adults and spend too much.

Broussard said that schools and colleges also fail to teach vulnerable students about wise money management, and the cycle of ignorance keeps spinning from generation to generation.

Society’s attitudes toward the sexes also come into play, according to O’Coyle. It’s fine for a businessman to boast about his new yacht. But it’s frowned upon for a successful businesswoman to talk up her big salary or promotion.

Often, people in financial denial are forced to take action by a crisis or a personal disaster, such as a divorce or death in the family.

Good advisors will act as counselors and create a warm, supportive environment for clients to talk freely. They’ll listen to their clients’ needs, probe for their attitudes about money, watch their body language, unearth hidden issues.

“I’ll ask a lot of questions,” said Norman Boone, a financial planner and registered investment advisor at Boone & Associates in San Francisco. “What’s important to them about money? What drives their values?”

One spouse may favor a better lifestyle, a larger home, a fancier car. The other spouse may place a greater value on economic safety and security, Boone said.

Advisors will then match the clients’ values and philosophical goals with the right savings and investment strategies.

“People may have wonderful earning power, but they don’t have much knowledge about how money affects them emotionally,” O’Coyle said. “There’s a lot of silence around money, and hopefully that will change.” <