Clark Hoover

Alan, your question is a fair one and I would recommend that every client ask this question of their advisor. While it is highly likely that the client's investment needs will differ from those of the advisor, here are some red flag questions I would recommend that you keep in mind:

(1) Does the advisor have investment funds in his/her account that have lower fees than those recommended to the client? For example, if client accounts have mutual funds while the advisor invests in lower-fee exchange traded funds (ETFs) for his/her own portfolio, then there may be a serious problem here.

(2) Is the risk profile of the advisor's allocation significantly higher/lower than those of clients? (Higher risk investments tend to have higher fees, so if clients have riskier portfolios than the advisor, such as more equities and less fixed income, this could be a sign of the advisor recommending an allocation to clients in order to generate higher fees.)

(3) Is the duration of time the advisor holds positions in his/her portfolio similar to clients? If the trading activity in client accounts is much higher than that for the client, this could be a sign of "churning" whereby the advisor is making trades in order to generate trading commissions. (Fee-only advisors, by the way, do not collect any of the fees generated by the investments they recommend or any of the trading commission.)

I hope this is helpful. Good luck.

Zoe, The answer to your question really depends on your individual situation. You may want to keep the money in cash as an emergency fund just in case. If you want to invest it, then be sure that you understand the potential risk and return associated with your investments. If you want to designate this investment portfolio as a sort of "emergency fund" then you may want to consider liquid, low volatile investments such as cash and fixed income. CDs may also be worth considering. I would need to know more about your overall situation in order to answer more specifically. I hope this is helpful. Best of luck.

Disclosure: This material is for your private use and should not be construed as financial advice; nor is it intended as an offer or solicitation to buy or sell any securities. Acacia Blue does not provide tax or legal advice. Consult your tax or legal professional on any such issues.

As you probably know, tapping into your 401(k) should be a last resort, but in these difficult times many people must use this option. Fortunately most 401(k) plans have a loan provision that allows you to borrow from your 401(k) without penalty, i.e. withdraw the money, as long as you pay it back withint 5 years at a competitive interest rate. Typically you can borrow up to half of your vested amount but it cannot exceed $50,000. As for the mechanics, you should contact the HR department and/or the fund administrator named on your account statements. They should provide you the necessary paperwork needed to withdraw the money. Keep in mind that if you do not pay the money back, then it will be treated as an early withdrawal and early penalties and taxes will apply. I hope this helps. Best of luck.