Money Management Q&A

May 4, 2007

SEP IRA; lost bank accounts; "investor return"

When you put too much into an SEP IRA

I inadvertently overcontributed to my Simplified Employee Pension IRA for 2006. Can I have the extra amount credited toward the limit for 2007?

Yes, but you may instead be better off withdrawing it (and any earnings on it) before the due date of your 2006 return, including extensions. Although you'll owe income tax on any earnings attributed to that cash, you'll avoid a probable 10 percent excise tax on the entire amount of the overage.

I received a letter saying that I may have property due to me from old bank accounts, insurance refunds, or other sources. For a fee, the firm that sent the letter will do a search and help me recover any funds I'm entitled to. How can I check into this possibility myself and avoid that cost?

The simplest way is to check http://www.missingmoney.org, a website run by the National Association of Unclaimed Property Administrators (NAUPA). The nonprofit organization is connected with the National Association of State Treasurers and maintains a searchable national database of unclaimed property records provided by more than 30 participating states. Enter your name into the site's search engine to pull up a list of unclaimed accounts that may apply. If any of them are yours, follow the instructions to file a claim.

You'll also want to check NAUPA's sister site, http://www.unclaimed.org, in case any states you've lived in don't share their records with NAUPA. This site provides the appropriate state contact information (click on State by State Search) and, when available, links to state-run unclaimed property databases.

"Investor return" and what it means

I recently noticed a new Morningstar figure called the investor return. What's that, and is it a better measure of performance than total return?

Unlike total return, which assumes investors never sell shares, Morningstar's investor return reflects the typical person's strategy: flocking to a fund when it's popular and pricey, then selling once it falters. To factor in the resulting effect on returns, the calculation gives particular weight to performance after hefty inflows of cash.

For most people, the investor return presents a truer picture of individual performance than total return. The gap between the two figures also offers a valuable clue: In general, the wider the chasm, the more volatile the fund. So if you're an investor who tends to follow the crowd, you may want to favor funds with modest differences between total and investor returns. To see a fund's investor returns at http://www.morningstar.com, go to the information page for the fund, click on Total Returns, then on the Investor Returns tab.

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics, 123 Tice Blvd., Suite 300, Woodcliff Lake, NJ 07677-7664, or send an e-mail to memoney@advanstar.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.