Personal Finance: Q & A

It's Not Too Late To Build Nest Egg

Holding stocks in a broker's 'street name' saves paperwork, has little risk

Q I am a single woman, 42 years old. I work as a caseworker. How can I create my retirement nest egg?

- M.C., Brooklyn, N.Y.

A "You have ample time to create a plan, since you still have many years ahead of you in which you can work," says Kenneth Huggins, a professor of finance at Metropolitan State College of Denver.

Ask your employer how much, if any, pension you will receive. And find out how much Social Security income you can expect by calling 800-772-1213.

Your nest egg will have to generate the rest of your retirement income.

"Create a budget," Mr. Huggins says, that includes saving a set amount each month.

A financial planner, for a fee, can help you calculate a nest-egg goal. Many mutual-fund companies also offer free worksheets. Find out how much you need to save, at what rate of return, to reach your goal.

Save tax-free in an employer-sponsored 401(k) plan, an individual retirement account, or both, Huggins says.

Q Is there any risk when a brokerage firm holds a client's stock certificates in "street name"? What if the brokerage firm became financially distressed?

- D.M. Rochester, N.Y.

A You can either hold stock certificates in your own name or in a brokerage account - known as a "street account." Holding in a street name has advantages and disadvantages, notes market-expert Marshall Loeb in his first-rate book "Marshall Loeb's Lifetime Financial Strategies" (Little Brown). If the brokerage house has financial troubles, your holdings could be tied up in litigation. But you would eventually get your assets back, because they are insured by the Securities Investor Protection Corp., a government-chartered corporation.

The advantage is that paperwork is handled by the broker. You need not worry about losing the certificate or misplacing a dividend check. Also, the broker may let you use the stock as collateral for a margin loan - that is, let you borrow money.

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Guy Halverson

The Christian Science Monitor

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