College tuition increases about 5% to 8% a year. And most students are now just beginning to get their financial aid packages.
Colleges aren't getting any cheaper, but federal student loans are.
Many owners of our country's bonds are worried that the federal government is spending like inebriated sailors on shore leave to try and get the nation out of this economic mess.
One of the great headaches of the American dream is about to get less painful.
Leave it to one of the country's leading gerontologists to capture the gallows humor of planning for retirement in the post-2008 world. "The collapse of the economy has led me to drastically restructure my own retirement plan," says Dr. Richard Besdine, the 69-year-old director of the Brown University Center for Gerontology and Health Care Research. "It's a lot simpler now -- I'm just going to die in the office."
Question: Should I contribute more to my 401(k) than I have to in order to get the company match? --Terry, Kennett, Missouri
Max. It. Out. Of all the personal finance rules -- diversify your portfolio, pay down high-interest debt first -- perhaps no single piece of advice has been so widely touted as this: The key to financial security is putting as much money as you can into your 401(k). After all, what other retirement savings vehicle is portable, benefits from an employer match, provides a tax deduction, and allows the average clock puncher over the course of a career to rack up a seven-figure nest egg?
Old: The 1980s ushered in a lasting change: the systematic transfer of risk from the government and employers down to individuals. Tax cuts on income and capital gains, for example, were meant to encourage you to invest more in stocks, buy homes, and start up businesses. These activities became the pillars of what George W. Bush would later dub the "ownership society."
Constant news of layoffs, pay cuts, and stock declines has all of us tightening our belts: A recent Money poll found that in light of the financial crisis, 89% of us are changing the way we manage our finances, and 88% plan to be more frugal.
Question: I'm planning to invest some money in the stock market, but I'm wondering whether I should buy mutual funds or individual stocks. Which do you think is better? And in the event I decide to go with stocks, which ones do you think are really good buys now? --Monique Thompson
College tuition increases about 5% to 8% a year. And most students are now just beginning to get their financial aid packages.
Colleges aren't getting any cheaper, but federal student loans are.
Many owners of our country's bonds are worried that the federal government is spending like inebriated sailors on shore leave to try and get the nation out of this economic mess.
One of the great headaches of the American dream is about to get less painful.
Leave it to one of the country's leading gerontologists to capture the gallows humor of planning for retirement in the post-2008 world. "The collapse of the economy has led me to drastically restructure my own retirement plan," says Dr. Richard Besdine, the 69-year-old director of the Brown University Center for Gerontology and Health Care Research. "It's a lot simpler now -- I'm just going to die in the office."
Question: Should I contribute more to my 401(k) than I have to in order to get the company match? --Terry, Kennett, Missouri
Max. It. Out. Of all the personal finance rules -- diversify your portfolio, pay down high-interest debt first -- perhaps no single piece of advice has been so widely touted as this: The key to financial security is putting as much money as you can into your 401(k). After all, what other retirement savings vehicle is portable, benefits from an employer match, provides a tax deduction, and allows the average clock puncher over the course of a career to rack up a seven-figure nest egg?
Old: The 1980s ushered in a lasting change: the systematic transfer of risk from the government and employers down to individuals. Tax cuts on income and capital gains, for example, were meant to encourage you to invest more in stocks, buy homes, and start up businesses. These activities became the pillars of what George W. Bush would later dub the "ownership society."
Constant news of layoffs, pay cuts, and stock declines has all of us tightening our belts: A recent Money poll found that in light of the financial crisis, 89% of us are changing the way we manage our finances, and 88% plan to be more frugal.
Question: I'm planning to invest some money in the stock market, but I'm wondering whether I should buy mutual funds or individual stocks. Which do you think is better? And in the event I decide to go with stocks, which ones do you think are really good buys now? --Monique Thompson
Question: I'm in my 50s and I got a late start on my 401(k) plan at work. All my contributions go into a balanced fund, but when I get my statement each quarter, it seems that I'm losing as much as I'm contributing. Should I leave my money where it is or should I switch to another fund? --Linda Mandrell, Tampa, Florida
Before the market imploded last year, turning your nest egg into steady income for 30 or more years of retirement seemed pretty straightforward. Just follow the old 4% rule: Withdraw that much of your portfolio's value initially and then boost that dollar amount annually for inflation.
Question: Is there a listing that would allow me to see how my 401(k) plan compares with other companies' 401(k)s? --Debbie W., Mount Laurel, New Jersey
Q. I lost my job this year. Much of my savings is in a traditional IRA account. If I were forced to tap it, what would be the penalty for early withdrawal?
It's official: 2009 marks the 35th anniversary of the individual retirement account. I will now pause for a moment as spontaneous celebrations break out across the land.
By now, most college-bound high school seniors have accepted an admissions offer and are cruising blissfully toward graduation, summer, and their chosen campus come fall. For parents, on the other hand, the hard work of financing this education is just beginning.
Question: I'm 40 years old, and according to an online calculator I used recently, I should now have $900,000 saved to assure a comfortable retirement. I'm guessing I have only about $100,000 (I'm afraid to look). What is the best way of making up the $800,000 gap over the next 25 years? --Jeff, Canton, Michigan
Q. My company just announced that it is suspending its 401(k) match. Is it still worth contributing?
You've been waiting for this moment for nearly 18 years: Your baby is almost ready for college. Your finances, not so much. The market's protracted free fall means that your college fund is now worth just a fraction of what you need. Your home's value has no doubt dropped sharply too - no help there. The only thing that keeps going up, you guessed it, is college tuition. So it's goodbye, Dream School U., hello, Central State, right?
Will I ever be able to retire now? That's a question you're likely asking yourself these days. After a year in which your 401(k) has been hammered by the biggest stock losses since the Great Depression, your home equity has been whacked by the collapse of the real estate market and the specter of being laid off looms larger every day, no one can blame you for being skeptical.
Despite the steady drum-beat of economic news, therapists say money is still one of the most taboo subjects for American families.
Many students are now receiving their college acceptance letters and with that comes offers of financial aid. Here's how to compare your financial aid offers.
Question: My wife and I hope to retire in five to seven years, but our retirement accounts got clobbered recently. We now have approximately $180,000 in cash that we need a game plan for. Can you help? --Pat C., York, Pennsylvania
The current stock market presents an opportunity for people who have time to watch their investments grow. Individual retirement accounts are one saving vehicle, but converting from one type of IRA to another involves careful consideration.
Question: I've lost a lot of money during this financial mess and I'm wondering when I should go back to putting 15% of my salary into my 401(K)? --Michelle Bonds, Rocky Mount, N.C.
There's an old saying that goes, "You make your money in stocks but keep your money in bonds."
Here are the five things mothers should know to protect their families' finances.
Question: . I was laid off recently and want to roll over the substantial balance in my 401(k) into an IRA. But I don't know whether to do the rollover now and risk locking in losses or wait until the market recovers and then roll it over. What do you think? Steve, Wichita Falls, Texas
Question 1. If you have no credit card debt and have closed your credit card accounts, how can this hurt your credit score? - Nathan
As the economy slows, millions of Americans will cut their budgets to stay afloat. This generates conflicting impulses: If I skip that morning coffee and granola, will my thriftiness put my local coffee shop out of business?
Question: I'm trying to decide whether to participate in my company's 401(k) plan. I'd like to start contributing to it, but given what's going on in the markets and economy, I'm afraid this is just not the right time. Or is it? --Rudy H., Pearland, TX
Retirement may seem like a fantasy if you watched your 401(k) crater over the last year. The average retirement portfolio lost 27% by the end of 2008.
Q. I'm over 50, and I've taken a beating in the market. I'm maxing out my 401(k) and IRA. How can I get the 10% annual return I need to achieve a secure retirement without too much risk? - Matt, St. Louis A.
John Maynard Keynes, the Depression-era economist who's having quite the comeback, once quipped when he was accused of inconsistency: "When the facts change, I change my mind. What do you do, sir?"
Question: I've been told real estate investment trusts offer great diversification. But do they really? Last year REITs lost 38% - that's a bit worse than the S&P 500. --Brian M., Greenwich, Conn.
One of the perks of working for a big blue chip company is that employees can often buy its stock at a discount.
Question: Like many people, I've seen the value of my 401(k) drop considerably over the last year. I am invested for the long haul and am willing to ride out my current losses hoping for recovery. But I'm wondering whether I should re-direct my current and future contributions into my 401(k)'s money-market option until the economy settles. Do you think that's a smart move, or should I just continue investing my new contributions into my current fund allocations? --Mike, Baltimore, Maryland
In case you missed it, some bombshell news came out of the personal finance arena last week. No, I'm not referring to the Federal Reserve's rate cut or the record-breaking price of oil.
As a current Supreme Court case shows, even investors with the best intentions can lose big when their 401(k) plans mess up. The lesson: You should take advantage of a host of new investments that make sure that never happens to you.
You might be listening to the symphony of financial experts extolling the virtues of a 401(k) plan, often touted as the best way to save for your golden years. But that's not necessarily the case.
Last week, the federal government began sending out more than $100 billion in "tax rebates" to millions of Americans in an effort to stimulate the sluggish economy.
Last week's West Virginia election should frighten you.
I may write about retirement for a living, but that doesn't mean I like seeing my 401(k) crater any more than you do. Given what's been happening in the market, I sometimes catch myself thinking how great it would be if my financial future weren't tied to something as volatile as Wall Street's mood.
All money missteps matter, but there are ways to keep your financial foibles from costing you big bucks.
Given the havoc the market has wreaked on your 401(k) over the past year, you may be wondering what you might have done differently to stay in better shape for retirement.
The personal savings rate has been rising: In the last three months of 2008, it hit its highest level in six years.
Consumer spending rose more than expected in January, after declining for six consecutive months, according to government figures released Monday.
Question: I'm 25 and currently contribute 8% of my salary to my 401(k) since that percentage assures I get the full employer match. But since stocks are so cheap right now, I'm considering bumping up my contribution for a few months. I won't miss the extra amount coming out of my paycheck, so do you think I should go through with this plan? --Mike, Houston, Texas
If the economic downturn has you frazzled, here are some tips on dealing with your money anxieties.
Alicia Munnell is a Harvard-trained economist. She served as an assistant secretary of the Treasury and is regarded as one of America's foremost experts on 401(k)s. You'd think she'd be terrific at managing her own retirement, but even she has to fess up to some mistakes. "When my son got married, I took some money out of my plan to help," says Munnell, who heads Boston College's Center for Retirement Research (CRR). "And I ended up paying a 10% penalty and taxes."
It wasn't that long ago that many economists worried that Americans were saving too little.
Question: I want to better diversify my portfolio. So I'm thinking of getting rid of some funds that focus on specific industries or geographic areas and investing in funds with broader holdings. The problem is that the funds I want to get rid of tanked hard in 2008. Would it be better for me to hold onto them until the sector recovers? Or should I sell them and create a more diversified portfolio right now? Josef Werne, Duluth, Minnesota
Question: I've been sticking with my investments in the hopes that the market will recover, but I'm tired of seeing the value of my portfolio continue to drop. Should I just sell everything, put the proceeds into money-market funds and bonds and wait until we see an upturn before getting back in the market? Or should I hang in there with my present portfolio of stocks and mutual funds? Eric Rosenberg, Little River, South Carolina
Questions: I currently contribute 10% of pay to my company retirement savings plan -- my employer matches half of that amount -- and I'm heavily invested in both domestic and foreign stock index funds. I plan to retire in 16 years. Should I continue to ride out this market with risky funds or should I think about cutting back my losses? --Mike, Washington, DC
Consumers continued to retrench in December, capping off the worst year for consumer spending since 1961, according to a government report released Monday.
Ever since Joseph decoded Pharaoh's dream about fat cows and thin ones and delivered his policy response - save in the fat years to survive in the lean times - consumers have followed that model.
Mark Vilrokx, 37, and Carine Beysen, 35, ought to ace retirement. The San Mateo, Calif. couple have great jobs - he's a manager at Oracle, she's a research director for a biotech company - and they earn a combined $210,000 a year. They have no mortgage, no student loans, no car loans, no credit-card debt. They're also diligent savers who put away a hefty chunk of their income every year for retirement.
Question: All the financial gurus tell me to diversify my investments. But if I am making money on some investments but losing on others, how is this a great investment plan? Why not just buy a CD and not worry? --John D., Idabel, Oklahoma
There could be help on the horizon for families worried about paying for college tuition if Congress passes the American Recovery and Reinvestment Act of 2009. Here is what this bill may do for college students.
Question: I'm 57 and planning to retire at 66. Before this year's stock market turmoil my 401(k) was balanced at 70% stock mutual funds and 30% bond funds. Now it's 59% stock and 41% bonds. To take advantage of very low stock prices I was thinking about re-balancing to 75% stocks and 25% bonds. Does this sound like a good plan or should I just re-balance to 70% and 30%?
Question: I've reached the age where I've got to start taking mandatory withdrawals from my retirement accounts. I don't need the money, so I'm wondering where I can stash it to earn more gains and possibly get some tax advantages as well. Any suggestions? --Joe, Redondo Beach, Calif.
The American consumer, hunkered down since this past September, is showing no signs of rebounding any time soon, remaining on the defensive in the midst of a historic economic downturn compounded by a headline-grabbing banking sector crisis.
Question: My company has suspended matching contributions in my 401(k). I'm unsure what to do, but I'm thinking of rolling my 401(k) into an IRA account. Is that a good idea? --Brian, Taylor, Michigan
Question: Since I'm getting close to retirement, I've moved my money into the target-date retirement fund offered in my company's 401(k). Do you think these funds are good investments? --Lucia Cannon, Johnson City, New York
Ever made a financial decision you wish you hadn't, like buying a mutual fund that turned out to be a dog? Wouldn't it be neat if you could simply act as if it had never happened? Well, you have that choice when you convert a 401(k) or traditional IRA to a Roth IRA. That's right: Change your mind and you may be able to get a do-over.
Question: I'm 48 years old and have about 90% of my 401(k) invested in my company's stock and the rest in an international equity fund. I want to diversify further, but don't know where to turn. Any suggestions? --J.D., Glenville, New York
When it comes to retirement, I've got a whole laundry list of issues I wish President-elect Barack Obama and his counterparts in Congress would tackle as soon as they are sworn in this month. But the U.S. deficit has hit record levels, so I'm trying to be realistic about what we can afford. With that in mind, I'm paring down my retirement wish list to three things that can make a big impact - without blowing a hole in the nation's finances.
Question: I've lost money in my 401(k) and I'm not interested in losing any more. So I'm thinking of moving my money into more secure investments. I know I can always change my allocations later, but what's the best way to keep my 401(k) stable until this roller coaster ride is over? --Michelle, Moravian Falls, North Carolina
Seventy years ago in 1938, Richard Whitney, the chief executive of the New York Stock Exchange (NYSE), was sentenced to 40 months in Sing Sing for embezzling funds from clients, including the widows and orphans benefit fund of the NYSE.
Question: My adviser charges me between 5% and 6% of what I invest in the mutual funds for my IRA. He says this fee is extremely fair to me. But I previously had an IRA for which I paid only $20 a year. What is an acceptable fee for an IRA? --Teresa Nagengast, Deptford, New Jersey
Question: I'm 60 years old and in good health. I can afford to put off drawing Social Security until after age 62 to get a higher monthly check, but I'm not sure if I should. What factors should I consider when deciding whether I should hold off collecting Social Security? Robert Walker, Austin, Texas
The news on the economic front is grim. But there are strategies you can do now to help make the best out of a bad year.
As the economic crisis continues to hammer Americans, many are turning to desperate measures by dipping into their retirement funds to make ends meet, according to a survey released Thursday.
Paul Heck owns EveryHome, A successful real estate brokerage in suburban Philadelphia. The 53-year-old never considered making a Roth IRA part of his retirement plan. While Heck understands the substantial tax advantages of a Roth, he makes too much money to qualify. Recently, however, he got a tip from his financial planner about an upcoming change in the tax law that will allow Heck - and many other business owners - to seize a back-door opportunity to open a Roth.
Without a doubt, the past few months have ranked as the most tumultuous - and scariest - times that I've seen in the more than 20 years I've been at Money magazine. We've witnessed events that up to now had been almost unimaginable: the stock market fluctuating wildly and governments around the globe taking extraordinary steps to unlock frozen credit markets. And it's still unclear when the economy and the markets will hit bottom.
It's one of the most widely accepted benchmarks in retirement planning: You'll need just 70% to 80% of your pre-retirement income to maintain the same standard of living when you leave work behind. This rule of thumb can be traced to the replacement-ratio studies done for 20 years by Aon Consulting and Georgia State University. The idea is that since you'll no longer have to plow money into 401(k)s and other accounts and your expenses and taxes are likely to drop, you'll be able to live well on less.
Given the recent wave of lay offs, people around the country are contemplating their next step. Hiring has slowed. Job seekers are taking an average 4.5 months today to land a new gig, according to the Bureau of Labor Statistics. So more adults are thinking now is the time to return to the classroom.
As the stock market goes through stomach-turning ups and downs, Sen. Barack Obama is accusing Sen. John McCain of wanting to "gamble with Social Security," a charge the Republican presidential nominee rejects as fear mongering.
Eric Hahn thought his financial situation was set after he was approved for a private student loan with an 8 percent interest rate to supplement his federal education loans.
The decade before you quit the work force, along with the five years immediately after, is the most sensitive period in an entire lifetime of retirement planning. The saving, investment and career decisions you make during this time will dictate in a major way whether you'll spend the next 30 to 40 years enjoying the life you've always looked forward to or eating the early-bird special at Denny's.
New York Private Bank & Trust, the holding company of Emigrant Bancorp, Inc., unveiled a new online savings account Monday that the company claims will provide the highest interest rate in the country.
Question: I recently retired and visited a Certified Financial Planner on the advice of a friend. He developed a portfolio for me, at no charge, and presented me with an investment plan for a fee of 1.35% per annum. I scrutinized all the paperwork he sent me. It seems that in addition to the 1.35%, there are a number of hidden fees, including various fund fees within the portfolio that he said nothing about. What should I do?
Since their introduction in 1996, the now ubiquitous state-sponsored 529 college savings plans have been lauded again and again as one of the best tax breaks since the IRA.
With most Americans doing a lousy job saving for their Golden Years, Barack Obama says the government has to step in.
How bad is inflation for your portfolio? Let us count the ways.
For families with children heading off to college, this has been the year from hell. First, a record number of applicants made 2008 the most competitive year ever for college admissions. Then the credit crunch hit the college market in a big way, igniting fears of a drought in financing for all students this fall.
From groceries to gasoline, everything is costing more. As schools compete to be the best by expanding campuses and adding research centers, the cost of an education is growing.
Question: I am reluctant to get a financial planner. Will they do an analysis of your portfolio? Does that commit me to use them? How do you get their advice without hiring them as a financial planner?
Question: I'm looking for a financial planner. Should I find one with who is a Certified Financial Planner (CFP)?
A lot of jobs are in trouble in today's tough climate, but doom and gloom are the bread and butter of a personal financial planner.
Patrick and Laura Matheny began saving early for their children's college education. After stashing some $50,000 in college savings accounts for their son Daniel, now 20, and their daughter Natalie, 18, they began paying down their mortgage in earnest with the intention of tapping their home equity once the bills began rolling in.
Paying for college is rarely easy, but this year parents and students could have a tougher time securing the necessary financing.
Americans are becoming increasingly worried about saving for their retirement as the nation's economic outlook continues to darken, according to a new survey of workers and retirees released Wednesday.
As college acceptance letters arrive this month, families will be celebrating the good news (we hope!), then bracing for the grueling process of figuring out how to pay for four years' tuition.
Question: I have a continuing debate with a classmate of mine regarding why a financial adviser does not include calculations/spreadsheets when determining asset allocation. My classmate claims it is trade secrets. I claim that the adviser doesn't know how to do/explain the calculations and blindly plugs the client's financial information in a system and reports the answer. Who do you think is right?
At first glance, Justin and Kim Ritchie seem in perfect financial sync. The couple, who grew up on the same street in Georgia and both went to college in Atlanta, are saving more than half of their combined six-figure income so they can buy a bigger house in their hometown of Bonaire, Ga., cover college tuition costs for sons Giuseppe, 2, and Gianluca, 1, and retire together before they hit 60.
The credit crunch is hitting the college classroom.
Question: It's my understanding that starting in 2010 the rule that prohibits you from converting from a traditional IRA to a Roth IRA (for modified adjusted gross incomes over $100,000) will be eliminated. If that's the case, can I convert all types of IRAs - deductible IRAs, nondeductible and even rollover IRAs that contain money moved from a 401(k) plan? How long do I have to do this? Do the new conversion rules expire at some point? --Hussam, Bergenfield, New Jersey
Question: I'm 23 and make $50,000 a year. I put 8% into a 401(k) with a 4% match and $1,800 a year into a Roth IRA, but I would like to start saving to buy a house. I currently have $10,000 in an online savings account that earns 5% interest. Are stocks too risky for money I want to spend in the next couple years? Will bonds make more than 5% a year?
Question: I'd like to reduce my tax liability for 2007. Can I still make a contribution to my 401(k) or to an IRA and have it count toward the 2007 tax year? Or is too late for me to do that now? --J. Scott
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