General Stock Investment Strategies/401k via a trust?


QUESTION: Hello. Kind of fell into this.  My accountant said I needed to get an IRA for this tax year. At the same time I have people from Primerica, WFG, and others talking to me about 401k and IRAs. Trying to cut through all the stuff I am hearing. Trying to get two questions answered (assuming I get mey license) WFG rep said I cant do my own IRA.  Is that true?  For 401k - people here said they can offer a 401k through there trust as long as I become a member. I thought only a company can offer a 401k to its employees.  Thank you.

ANSWER: Hi Terrance-
To simplify this a little - a 401k is a retirement account tied to a job/employer, funded by payroll deductions and employer contributions. You can only use one if your employer offers one. An IRA is a retirement account you open yourself at a bank, brokerage firm, mutual fund company, etc. Anyone can contribute to an IRA as long as you or your spouse (if you're married) has enough "job" income. mentioned that you're getting your license for something. I'm guessing that you might have your own biz, or are self-employed? In that case you're the "employer" even if it's just you in the business. So not only could you open an IRA, you could also set up a retirement plan like a 401k for your biz, even if you are the only one in it. Many people do that because it lets you save more each year than you can in an IRA.

A good first step is talking to your accountant again to see exactly what the recommendation is, and what your options are. If you want to post a follow-up with more detail, I'll reply with more.


---------- FOLLOW-UP ----------

QUESTION: Thank you.  I did talk to my accountant and she said it was not possible for this company to offer me a 401k if I become a member.  Do you agree or disagree.  From your reply it sounds like what this non-profit is saying is not possible.  I am not their employee - just a member like with AAA.

My second question is with WFG World Financial Group.  They said I could join their company - get my license - then help people with their IRAs and 401ks.  They said I could not "write my own paper" i.e. do my own IRA in my own name.  My mentor would have to do my policy.  Is that true or not.

OK I think I get it now - but again talk this through with your accountant.

If you want to open an IRA, you can do so through companies like those you mentioned, where you pay commissions on whatever you invest in within the IRA (an IRA is just a type of account, you can buy all kinds of things in one). You can also just open an IRA directly with dozens of low-cost companies where you don't pay commissions - mutual fund companies like Vanguard or T.Rowe Price, brokerage firms like Fidelity or Schwab, any bank or credit union, etc. also sounds like you're talking with an WFG rep to not only open an IRA, but also to become a licensed rep for WFG. I believe that is part of WFG's business, where the reps recruit reps and get paid for it. That's a career question rather than an investing question. But I think the rep is telling you that as a new WFG rep you wouldn't get credited for your own IRA, for commissions or sales quotas or something like that. I'm just guessing here, and that is something to clarify with that company and rep.

But it wouldn't make sense to say you can't open an IRA in your own name - it has to be in your name, otherwise it isn't your account. If I opened all of my clients' accounts in my own name instead of theirs I could retire early! That's a joke of course.

And on the 401k - yes, you need to be an employee to participate in a 401k plan. I don't know that organization but they might be a payroll-services company that offers 401k plans as part of what they do. If that's what they do, you'd need to be a business owner and use them to do your payroll, and then you could add a 401k plan as part of it. But it would be your business's 401k plan.

General Stock Investment Strategies

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Tad Borek


I am a San Francisco-based investment adviser and attorney.


I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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