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1.
As part of the 1997 Taxpayer Relief Act, employers can no longer direct more than _______ of their employees' retirement plan contributions into company stock.
10%. The Taxpayer Relief Act aimed to limit employers' use of company stock for retirement plans.
2.
Overinvesting in your own company's stock will lead to financial ruin.
False. Though it has done so in some high-profile cases, it has also worked out well in others. Some people have done very well by overinvesting in their company's stock, even though it is a risky move nevertheless.
3.
It's possible to own shares of your company's stock in places other than your company retirement plan or stock options.
True. For example, mutual funds might hold them, or you might have an additional retirement plan that holds them.
4.
If their investment goal is less than five years away, how much of their company's stock should most investors own at most?
10%. If your company's stock hits a bad streak right before you need the money, you may not be able to reach your goal.
5.
What is a disadvantage of owning a lot of your company's stock?
You're putting both your present and your future financial security in your employer's hands. Investing in your company can be highly profitable. However, by over-concentrating in your company's stock, you're tying your current and future financial well-being to your employer's well-being. That's a risk.
