My fiancé and I are in our late 20s and we contribute to our 401(k) plans. But we'd like to supplement our retirement savings by making additional small contributions (maybe $100 a month) over time. We wouldn't touch this money except in an absolute emergency. Any suggestions? -- M. Barber
My company doesn't offer a 401(k). I invest the max in a Roth IRA, but I know that won't provide enough for retirement. I'd like to invest another $5,000 a year into some sort of retirement plan. What options do I have? -- Daniel J., St. Paul, Minn.
Amid all the rancor in Washington over how to rein in the federal deficit, one thing seems inevitable: If you're a six-figure earner, your tax bill has nowhere to go but up. The good news? A quirk in the tax code gives you a new backdoor opportunity to build your savings and shelter more of your income from the threat of higher taxes.
Q: My husband is retired, and I work part-time. Can we contribute to a Roth IRA for him this year? -- Martha Chamberlain, Lanesville, Ind.
Last August something spooked me in the markets, so I shifted my 401(k) and Roth IRA accounts out of stock funds and into bond funds. What a mistake! It's pretty much been a steady climb upward since then.
Late last year you caught a break. Congress reached a deal that extended the Bush-era tax cuts for two years and renewed perks like the sales tax deduction and the tuition write-off for non-itemizers.
Question: Are minimum distributions from IRA accounts required in 2010? And, if so, what balance do I use to calculate the amount that I have to withdraw? -- M. Strange, Falls Church, Virginia
Question: I'm 27 and contribute enough to my 401(k) to get the maximum match. I also invest a significant amount to a Roth IRA account for which I pay a 5.75% sales charge. My question: Would I be better off putting more in my 401(k) since it has no sales charge or continue with the Roth and eat the 5.75%? -- N.F., Minneapolis, MN
Question: My wife and I have a combined annual income of about $250,000. If we max out our 401(k)s, can we each still contribute the full $5,000 this year to a traditional deductible IRA rather than just investing the money through a normal taxable brokerage account? -- Derek N., Colorado
Older Americans whose retirement accounts took a beating from the market's downturn caught a break last year: The government suspended rules that required them to make annual withdrawals, buying them time for their portfolios to recover.
Question: I participate in a Roth 401(k) plan that also offers company matching funds. My question: Assuming our income isn't too high, can my wife and I also fund Roth IRA accounts? -- Mike Butler, Lindenhurst, Ill.
Question: I'm a full-time student who has a part-time job at a community college. Can I start contributing to an IRA? -- Eiko, Atlanta, Georgia
Question: I'm 27 and have had a Roth IRA since I was 16 years old. I've been maxing out that account since I graduated college, and I now also max out my 401(k). But this year my income will be too high to allow me to contribute to either a Roth IRA or traditional deductible IRA. I still have money I want to save, so I'm wondering whether I should just open a regular taxable account and invest in muni bonds, annuities or something else. Any suggestions? --Donald J.
Question: I'm 40 years old and would like to know whether I should invest in my workplace's tax-deferred retirement plan where expenses average 1.1% for the various options, or put my money into an outside account funded with index funds that charge 0.21% a year. In the long run which option would give me more money? --Michael G., Orangeburg, South Carolina
Question: I'm 24 and my 401(k) plan matches $1.25 for every dollar I contribute up to 6% of salary. I currently contribute 3% of my salary and then put $75 a month into a Roth IRA. I do that because I don't want all my eggs in one basket. I'm wondering, though, whether I should stop the IRA contributions and take advantage of the company match instead? What do you think? --Matthew, Sacramento, Calif.
Question: My wife and I are both over 50 and plan to convert $115,000 in traditional IRAs to Roth IRAs this year to take advantage of the one-year reprieve on income limits on conversions. Our question: can we each also make regular annual contributions to a Roth IRA this year? We earn about $100,000 a year combined, but we're worried that the $115,000 of taxable income we'll have to recognize because of the conversion will put us over the income eligibility limit for annual Roth IRA contributions. Can you clear this up for us? -- Bob, Souderton, Penn.
Question: I'm changing jobs and would like to roll over my $150,000 401(k) into an IRA account. Since I already have other IRAs in individual mutual funds, I would like to put those funds as well as my new IRA rollover in one place so I can split the percentages invested in each individual fund just like my old 401(k) with 15 options. Do you recommend this approach? --Randy P., Montezuma, Iowa
Question: My company currently matches my 401(k) contributions dollar-for-dollar up to 5% of salary. But starting in January my employer plans to do away with the match due to the poor economic conditions. I'm still early in my career and don't want to cut back on my retirement savings, so I plan on picking up the slack. I wonder, though, whether I should contribute an additional 5% of salary to my 401(k) or put the extra savings into a Roth IRA. What do you think? --Wes, Conshohocken, Pennsylvania
Huge, scary numbers are lurking everywhere these days: The massive federal bailout (now on the taxpayers' tab)...the unemployment rate, which is now at a 26-year high...that daunting sum you are constantly told you will need if you want to retire comfortably...the six-figure mortgage balance you barely chip away at each month.
Question: I'm 29 and I contribute 12% of my $109,000 annual pay to my 401(k). My company matches 100% up to the first 6% of salary I save. I'm concerned, though, that I could give up a lot of my 401(k) to taxes after I retire, so I'm considering diverting some of my 401(k) contributions to a Roth IRA account each year. Do you think that's a good idea and, if so, how much do you think I should be putting into the Roth? --Eric, Newark, NJ
For years a cardinal rule of retirement investing has been to put every penny you can into IRAs, 401(k)s, and other tax-deferred accounts. That advice rested on a commonsense assumption: that after you stopped working you'd move into a lower tax bracket. That was important because the money you take out of a tax-deferred account is subject to ordinary income taxes.
Question: I'm 25 years old and am considering upping my contribution to my 401(k) from 20% of my salary to 30%. My only hesitation is that I don't currently have any other savings. What do you think? Should I just go ahead and build my 401(k) as much as I can or should I set aside some savings in another account? --Jonathan M., Rockville, Maryland
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?
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.
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.
Question: My wife and I are 27 years old and have contributed to a Roth IRA the past two years. Our money is in a 2040 target-date retirement fund that has about 90% of its assets invested in stocks and the rest in bonds and money-market funds. Should we continue to contribute the maximum to our Roth IRA if this is our only retirement vehicle? And is a portfolio mix of 90% stocks and 10% bonds and cash right for this volatile market? Joe, Lancaster, Ohio
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.
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: 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
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.
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.
With most Americans doing a lousy job saving for their Golden Years, Barack Obama says the government has to step in.
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'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
Question: I'm 24 and my employer matches up to 5 percent of my salary in my 401(k) plan. If I want to save, say, 8 percent of my salary, would I be better off putting it all in the 401(k), or limiting my 401(k) contribution to 5 percent of pay and putting the rest in a Roth IRA? -Dave Meyer, Corpus Christi, Texas
Question: I pay $300 a month on my credit-card balance of roughly $11,000. I have an extra $350 a month that I can use to further reduce my credit-card balance, or that I can invest in a Roth IRA. Which will give me the biggest bang for my buck? - William Scott, Spotsylvania, Virginia
Question: I'm 46 and have about $350,000 set aside in my workplace retirement savings plan in what I would call a moderately aggressive mix of stock and bonds funds.
Question: I've been out of college a year and I want to be sure I'm on the right track to retire early. I currently contribute 5 percent of my salary to my 401(k), which is matched in full by my employer, plus I invest $200 a month in a stock fund. I just got a raise and am now trying to decide whether I should consider putting some of that money into an IRA or boost my investment in the stock fund. What do you suggest?
As you invest your money, shop for a home or tackle any one of the many financial decisions you have to make over your lifetime, do you sometimes wish you'd paid more attention in math class? Do you find yourself having to "run the numbers" and wondering how?
Question: I have a chance to pick up two ocean-front condos on the east coast of Florida for about $85,000. I was thinking of buying them in an all-cash deal with my IRA account, but I'm not sure whether you're allowed to own real estate inside an IRA. Can I do this? - Bernard Grossman, Hallendale Beach, Florida
You probably don't know what your federal tax liability will be for 2007, and Congress certainly isn't helping. Lawmakers have yet to pass a temporary fix to the Alternative Minimum Tax, to prevent 21 million of us from having to pay the so-called wealth tax.
Question: My employer offers a 401(k), but no match. Given that I'm already maxing out my Roth IRA, would I be better off investing in a taxable account rather than contributing to my no-match 401(k)? - Luis Gonzalez, Denver, Colorado
Question: I have a company managing my IRA, they charge a high fee - up to 2.5 percent depending on the account. I see in their quarterly report that they often don't beat the Lipper averages for certain sectors. With such a management fee, should I expect to consistently beat the averages?
Question: I have a modest salary and can set aside only $50 a month toward my nine-year-old son's college fund. My problem is that the 529 college-savings account I would like to open requires a minimum of $1,000. I don't want to raid my savings account to open this fund, so what I should do to begin saving for my son's future college expenses? - Shelly Losoya, Sacramento, California
Target-date funds are the rare eat-your-vegetables financial product that have actually caught on with investors. These funds hold a mix of stocks and bonds that changes as an investor's anticipated retirement year approaches. For instance, the equity allocation of the Fidelity Freedom 2045 shrinks from 90% in 2005 to 40% by 2045.
Question: I contribute 15 percent of my salary to my 401(k) and put money into an IRA and a taxable investment account, but I don't have much investing experience. I've heard that I should rebalance my portfolio each year, but I'm not sure how to do that.
The Dow Jones had its third worst day of the year on Friday. Add to that worries about the economy and estimates that by 2017, Social Security will start paying out more in benefits than it collects every year in taxes.
Dear FSB: I'm thinking of withdrawing funds from my IRA early to invest in building the next phase of our guest ranch - Mongolian-style yurts - on the land we own. My partners and I expect the expansion to generate solid revenues. Should we consider using retirement savings as a source of capital?
Question: An adviser helped us set up an IRA account and on his recommendation we began investing in a target-date retirement fund that charges a 6.5 percent sales fee. We've asked him to switch us to another target-date fund that has no sales fee and invests in low-cost index funds, but he says the fund we're in now has a shot at better returns because it's actively managed. Do you think we should stay with the fund our adviser recommended? - Dinh Ho
To everything (turn, turn, turn) there is a season (turn, turn, turn) ... a time to enroll in a retirement plan and a time to withdraw, a time to put your money in savings and a time to transfer it to a money market account. Decade by decade, financial freedom can be yours -- Suze Orman swears it's not too late.
Question: I'm 44, and after maxing out my 401(k) and Roth IRA, I still have about $400 a month I'd like to invest outside these accounts for early retirement. Would you suggest I invest this money in an annuity? - Angie Tyrie, Hinton, West Virginia
Why spend decades carefully cultivating your 401(k) plan, only to fritter away your hard-earned investment gains through taxes or penalties when you change jobs or retire?
Question: If you contribute to a traditional IRA, after many years most of your account value will be in the form of investment earnings, which are taxable when you withdraw them. With a Roth, on the other hand, your balance will be tax-free. So it seems to me that the advantage of tax-free withdrawals from the Roth in the future greatly outweighs any tax-deduction benefit you get from a traditional IRA. Doesn't that make the Roth a better deal? - Daniel Siroky
Question: I'm 25 years old and I would like to retire in my 50's. I already contribute to my 401(k), but I'd like to fund an IRA as well. How do I do that? - Steve Henry, Lakeland, Florida
Question: My daughter is 16 and has earned about $2,000. I'm trying to convince her to put some or all of it into a Roth IRA. If I'm able to convince her, what investments would you recommend for her since this is money she won't touch for 40 or 50 years. - Marianne Morris, Santa Barbara, Calif.
Question: Our granddaughter fully funds her 401(k). But to give her an incentive to save even more, we give her $2,000 a year to invest in a Roth IRA, provided she invests $2,000 of her own money first. She recently married, however, and now her and her spouse's combined income make her ineligible to fund a Roth. We'd like to continue our matching-fund arrangement with a non-deductible IRA. Is that possible? - Lauri Shafer
Like most 19-year-olds, Jennifer Leon took a job to help save extra money for a secret splurge. Unlike her peers, though, her splurge was retirement. "I could already see myself older, stepping out of my beach house and right onto the sand," says Jennifer, who worked as a bank teller back then.
Question: I'm 65 and my husband is 70. We're both retired and receiving Social Security and pensions. We have about $150,000 in traditional IRAs, but we don't want to take money from these accounts for another 10 years, unless we're forced to. We're also wondering how our IRA funds should be invested. We're thinking 80 percent in stocks and 20 percent in bonds. Does that make sense to you? - Dana Chaoxia, San Francisco, California
Question: I've contributed to a Roth IRA in the past and plan to do so again this year. My wife isn't employed, but I was wondering whether I can make a Roth IRA contribution for her too. If so, can we have a joint account or do we need two separate IRA accounts? - Raj, Edison, N.J.
Question: My company 401(k) plan has no match. So I'm debating whether I'd be better off contributing to the plan or instead just buying index funds on a monthly basis. What do you think? - Matthew
Question: My wife and I are in our 30's and have $380,000 invested in three annuities and $166,000 invested in 401(k)s, one of which I'm still funding with 6 percent of my paycheck. Do you think it makes sense to have so much invested in annuities at our age? - Craig, Clinton, Michigan
Question: I'm in my early 30s and have yet to save for retirement. Unfortunately, my job doesn't provide a pension or a 401(k), so I need to rely on myself to save money. Can you give me some advice on how I can get started? - Annette, Ewing, New Jersey
Question: I'm 25, make about $50,000 a year and invest $150 a month in an insurance policy for retirement. I do plan on contributing to my workplace retirement savings plan soon and also hope to open a Roth IRA, but in the meantime my adviser has suggested I increase my investment in the insurance policy to $300 a month. What do you think I should do? - Rob
Question: I contribute to my 401(k), but a firm that doesn't offer a 401(k) recently bought my wife's company. We both contribute the maximum to Roth IRAs, but I'm wondering what we can do to make up for the loss of her 401(k). Since she no longer has a retirement plan at work can she now also contribute to a traditional IRA as well as a Roth? - Chris, Austin, Texas
ANNE SCHUETTE, SADLY, WAS NOT SURPRISED WHEN HER mother Dorothy died in 2003 after years of battling cancer. But discovering that her mother had left her and her two siblings $400,000 each was a shock. "I had no idea she had that much money," says Anne, 48, who described the revelation as "bittersweet."
Question: My wife and I are planning to retire next year when I'll be 59 and she'll be 60. Together we have about $600,000 in a 401(k), plus I have a pension that I can take as a lump sum of approximately $1 million or as an annuity that will pay $60,000 a year to me or my wife as long as one of us is alive. I'd prefer to take the lump sum and invest the money myself. I'm thinking of laddering bonds plus investing in some mutual funds to hedge inflation. What do you think of my plan? - Peter, Princeton, New Jersey
WITH ALL DUE RESPECT TO BEN FRANKLIN, death may be certain, but taxes are not. At least not the amount of taxes you will have to pay on your retirement savings. Yes, Uncle Sam lies in wait for the day you retire, but you can still control how much money you fork over in the end. Inside, we have the tools you'll need to build a better retirement plan and keep your savings intact. You'll want to make your IRA plumb and level by placing exactly the right asset classes into it. You'll want to know why a high-yield stock can be better than a bond. You worked hard to build your savings. Why not keep as much as you can? OPEN FOLDOUT
Question: My understanding is that due to the tax-deferred nature of retirement accounts, I ought to steer risky investments like international funds and individual stocks into my IRA and 401(k), while keeping mainstays like bonds and large-company stocks in taxable accounts. Is this a good policy? - Gary Banks, Santa Fe, New Mexico
Anne Schuette, sadly, was not surprised when her mother, Dorothy, died in 2003 after years of battling cancer. But discovering that her mother had left her and her two siblings $400,000 each was a shock. "I had no idea she had that much money," says Anne, 48, who described the revelation as "bittersweet."
Question: My wife recently left her job and is going to work part-time for herself. We have been advised by our financial adviser to roll her 401(k) into something called an "IRA annuity." What are the benefits and drawbacks to doing this as opposed to simply rolling the money into a regular IRA invested in low-cost mutual funds? -Todd, Lebanon, Pennsylvania
Last November, Dave Hanrahan, 37, of Vineland, N.J., decided to try something different to improve the returns in his retirement account. Rather than putting his money into the latest hot stock or ...
As a teenager, Lori Smith decided she would someday adopt children. "I promised myself that I would help kids who needed homes," says Lori, now 41 and a mom to three little Smiths - two of whom she and husband Steve, 40, adopted from China. "What I didn't know was that I should have started saving back then."
Launching a business was Ryan McBryde's first priority, but a close second was finding the best way to save for retirement. Specifically, the 38-year-old professional land surveyor - and now owner ...
What would you do with a million bucks? That's easy. But what about five grand? With a handful of broad goals in mind, here are Money Magazine's picks.
Question: My wife and I are working parents in our mid-40s. We max out our company savings plans and currently have about $200,000 in various 401(k) and IRA accounts.
The stock market hit yet another high last week and analysts attribute this to a number of blue-chip companies reporting higher profits. We're going to tell you how to take advantage of this.
Question: I'm 26, single and have no student loans, credit-card debt or car payments. After much consideration I've decided to forego saving money for a house or retirement for now and instead use my savings for a 15-month around-the-world trip in 2009 while I'm still young.
Question: I'm 25 and recently switched employers. Although my new company provides a lucrative profit-sharing plan that everyone is automatically enrolled in after one year of work, my new employer does not offer a match in the 401(k). I can budget approximately 20 percent of my income for retirement savings, but I'm confused about how to allocate those savings.
Tick....tick...tick. Tax Day is almost here.
Quinn Thompson launched his women's fashion label, Saint Grace (saintgrace.com), with $1,000, one type of fabric, and a vision to change the fit and feel of the T-shirt. Over the past six years his luxurious vintage-inspired knitwear company has grown each season with new styles, new customers - and new debt.
As surely as seasons change, entrepreneurs face a new personal finance challenge at every turn, whether it's a sudden cash flow squeeze or a hike in taxes. And with stocks now wobbly, the path to w...
It's virtually guaranteed to happen every year - the IRS gets a slew of tax returns loaded with errors.
Question: I'm considering contributing after-tax dollars to my 401(k), but I'm wondering whether it would be better to put this money in a traditional deductible or Roth IRA. What do you think? - Richard Smarz, Dallas, Texas
Joe Powers takes a methodical approach to life. Two years ago, when he decided to look for a new job, he embarked on an exhaustive search to find the perfect one.
Question: My husband and I are retiring in 10 years, but haven't set up any retirement accounts. We need some advice on what we can do in such a short time. Any suggestions? - Debra, Bakersfield, Calif.
Question: I retired in October 2005 and left my 401(k) account with my former employer. Right now I've got my money divided among a large-company stock fund, a small-cap fund, an international fund and an emerging market fund. The account has been doing well and I'm fairly happy with its performance.
Making your money last through decades of retirement requires, first of all, a mental adjustment. You must make the transition from career mode, where the prospect of future raises allows a somewhat freespending lifestyle, to retirement mode, which requires more caution.
Question: I'm a 24-year-old woman looking to start a saving plan. I've cleared all my debt and have started an emergency fund, but I'm unsure how to proceed from there. I've read so many books and articles that I'm more confused than when I started.
You've been trying to save as much as you can for retirement. Honest! Trouble is, over the years you've had a few other expenditures, like, say, buying a house, paying college tuition for your kids...
Finish this sentence: "I've always wanted to_____."
Travis and Peggy Otto both entered the work force young. Travis has supported himself since he was in high school; Peggy, 43, has worked at University of Michigan Hospital since she was a teenager....
Question: My wife and I are 55 years old and considering retiring in the next seven years. We have a retirement portfolio of more than $500,000 that includes $50,000 in annuities that we bought 20 years ago.
Travis and Peggy Otto both entered the work force young. Travis has supported himself since he was in high school; Peggy, 43, has worked at University of Michigan Hospital since she was a teenager.
Here's yet another way to save for retirement. Starting in 2006, the law will allow employers to offer a new option in 401(k) plans: to contribute after-tax money that will grow tax-free.
The 'R' moment looms closer than ever, but if you get serious now, you can still catch the magic bus.
Stefanie Alley became a lobsterman the day her husband fell off his bicycle. It was a freak accident about 10 years ago: Rick's foot slipped off the pedal and was caught in the spokes, and he went ...
Question: I have a traditional IRA with assets valued at about $200,000 in it, $37,000 of which consists of non-deductible contributions I've made. My income is low enough so that I qualify to do a Roth conversion. So can I convert the $37,000 into a Roth IRA tax free? -Eberhard, Clemmons, North Carolina
Question: When I retired, I chose a lump-sum from my company's pension plan and rolled the money into an IRA instead of taking an annuity. I did this because it's my understanding that if my wife and I were to die after receiving just a couple of months of annuity payments, none of the annuity's value would be passed on to our children or other heirs.
Question: I'm 24 years old and make $34,000 a year. I've been contributing 10 percent of each paycheck to my 401(k), which my company does not match. I also put 5 percent of each paycheck into a savings account that pays 5 percent.
When it comes to saving for retirement, it's natural to think you can never have too much of a good thing: The more you sock away in tax-deferred IRAs and 401(k)s the better, right? Not so fast. If...
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