Newspaper article St Louis Post-Dispatch (MO)

It's Bail Time If You Own Too Much Company Stock

Newspaper article St Louis Post-Dispatch (MO)

It's Bail Time If You Own Too Much Company Stock

Article excerpt

Florida financial planner Linda Lubitz worked for a major savings and loan for 18 years and left with $10,000 worth of company stock in her retirement plan. She felt good about it and the firm's future.

But a year later, the S&L had gone under and was being managed by the federal government.

Her stock was worthless.

It was an expensive lesson for Lubitz, who now tells her clients to sell their company shares as soon as they legally own them. Her advice is particularly resonant this year: The stock market rally has pulled many company share prices up to the point where their values dominate the retirement portfolios of corporate employees.

Last year, according to mutual fund company Scudder, Stevens & Clark, a quarter of all U.S. retirement plan assets were invested in company stock. That's a frighteningly high percentage, and that was in 1994, before stock prices boomed.

This is common because many companies match employee retirement plan contributions with corporate stock, says Howard Golden, a principal in the Fort Lee, N.J., benefits consulting firm of Kwasha Lipton.

Even as companies have gone toward providing more investment choices for the employee-paid part of the retirement plan, they are depending as much as ever on their own shares for their part of the contribution. This is particularly true with multinational corporations that are seeking to engender shareholding among their foreign employees.

Lubitz argues that stock ownership of the company you work for is a bad idea because it is as far from diversification as you can get. You not only have your investment eggs in one basket, your career future is in the same basket.

"If you company is doing well you will personally profit anyway," she said. "You'll get promotions and raises. But if things don't go well, you may get a pay cut, you may get laid off and your stock can drop in value. …

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