QUESTION: I now work at a job where there is no pension or retirement plan; in addition, I have a car-waxing business on weekends. Three years ago I started a Keogh plan from the business income. Can I also start an IRA now for my full-time job?
ANSWER: Not if you intend to deposit money in both plans. You may not make contributions to both a Keogh and an IRA plan in the same calendar year, since Keogh is considered a qualified retirement plan. Here are your options:
If your earnings from self-employment (the car-waxing business) are greater than $10,000 a year, then using the Keogh will permit you to invest more than the $1,500 annual IRA maximum. (The dollar ceiling on Keogh is $7,500.)
If self-employment income is less than $10,000 but your salary on the regular job exceeds that amount, then disregard the Keogh because you can qualify for a larger tax-sheltered investment in the IRA.
But if income from each of the two sources is less than $10,000, then you have another alternative. You are eligible to use an IRA (rather than a Koegh) as the vehicle for your self-employment plan.
Going this route, you can then invest in the one IRA 15 percent of your income from self-employment PLUS 15 percent of your wages, up to a combined maximum (from both sources) of $1,500 a year.
If you make no deposit in your Keogh plan in 1979, you can start an IRA this year. Rentention of an existing Keogh in which there is no investment of funds (other than the custodian's accumulation of earnings on deposits from prior years) is not "active participation" and therefore is not disqualifying.
Q: I have in my possession two certificates of 500 shares each in a mining company in South Dakota. These shares were bought by my grandfather in 1902. Is there any way to find out if they have any value?
A: There are several companies that specialize in tracing old stock certificates. Your broker should be familiar with one or more of them; or -- depending on the size of the firm -- he or she may even offer to handle the job for you.
If you write to a tracing organization yourself, describe the securities in full, or -- better yet -- send them fascimile copies of the certificates (as you did to me). Their fees are quite reasonable.
If you prefer doing it yourself, start by writing to the Secretary of State in Pierre, South Dakota; ask for the present status or known whereabouts of the company.
Usually these old mining stocks turn out to be worthless; but pleasant surprises show up often enough to make it worth the trouble and minor expenses of checking it out.
Q: I cashed in two four-year bank certificates before the due date. They were both bought at the same time but at two different banks; but each bank figured the reduction in interest differently. I thought the rules were set by the government and were the same by everyone?
A: The regulation of bank certificates of deposit is the responsibility of the Federal Reserve Board. The rules on forfeiture of interest for early withdrawal (that is, before maturity) were changed effective July 1, 1979.
Certificates issued on and after that date are governed by the new rules. For CDs running a year or longer, the penalty is loss of six months interest; the interest rate for the balance of the expired period remains at the contract rate. (For CDs of less than a year three months interest is forfeited.)
Under the old rule, early termination of a certificate resulted in loss of three months interest plus roll-back of the interest rate for the rest of the period to the standard passbook rate.
It isn't "cricket" to legislate changes in the terms of a contract retroactively (and a CD is a contract between the bank and the depositor). So for those certificates issued before July 1, 1979, the issuing banks were given the option of selecting either penalty method for early withdrawals.
Obviously your two banks made different decisions, one using the old method and one the new. You ended up with a different interest penalty for each CD -- but they were both right.
I'm not qualified to render legal opinions; but my guess is that if a bank elected to use the new method and it resulted in a greater loss to you, you could properly require them to use instead the method in effect when you purchased the CD.