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.
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.
Question: I'm looking to retire in the near future and want to know how an "everyday" investor like me can develop a good strategy for taking income from my savings. Any advice? --Nate, Carbondale, Illinois
Question: I've been contributing 15% of my salary and bonus to my 401(k), as well as investing in a Roth IRA and other accounts. With everyone so sure we're headed for a recession, I'm wondering whether I should move my money into more stable investments to avoid losses as some people suggest or whether I should just view this time as an opportunity to buy in at cheaper prices. What do you think? --Sandy R., Los Angeles, Calif.
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. I contribute the maximum every year to this plan, and my wife and I also contribute to Roth IRAs (although not the max).
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.
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.
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.
Question: I'm looking to retire in the near future and want to know how an "everyday" investor like me can develop a good strategy for taking income from my savings. Any advice? --Nate, Carbondale, Illinois
Question: I've been contributing 15% of my salary and bonus to my 401(k), as well as investing in a Roth IRA and other accounts. With everyone so sure we're headed for a recession, I'm wondering whether I should move my money into more stable investments to avoid losses as some people suggest or whether I should just view this time as an opportunity to buy in at cheaper prices. What do you think? --Sandy R., Los Angeles, Calif.
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. I contribute the maximum every year to this plan, and my wife and I also contribute to Roth IRAs (although not the max).
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
Question: I'm 59 years old, earn $125,000 a year and plan on working until I am eligible for full Social Security benefits. I have about $1.6 million that's invested in a number of retirement accounts (mostly tax-deferred, but I have a Roth IRA too) and I own an investment property worth about $390,000.
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: My father-in-law is 58 years old and has about $300,000 saved for retirement. He plans to retire with this amount plus whatever he can save in the next seven years. I expect he will qualify for only a little in the way of Social Security. I've read that retirees shouldn't withdraw more than 4 percent to 4.5 percent of their nest egg annually in retirement. But my father-in-law claims he can easily get a double-A or triple-A rated bond that will pay 6.5 percent to 7.5 percent, so a higher withdrawal rate should be no problem. Am I right to be concerned about his retirement security? - J. Jordan
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 want to estimate the effect inflation will have on my retirement income. For example, if I have a retirement income of $60,000 a year and inflation runs 3 percent a year, how much will inflation affect my buying power in say, 10 or 20 years? How do I do this? Is there some sort of formula I can use? - Carl Willis, Atlanta, Georgia
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.
Question: I'm 30 years old and invest regularly in my 401(k). So far, my account has been doing well, but I wonder whether that might change when retiring baby boomers stop making investment contributions and begin taking money out of their retirement accounts. Are we in for a bump down the road when the boomers retire? - Jason, Salt Lake City, Utah
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.
Democratic presidential candidate Joe Biden released a plan Wednesday to protect Americans' retirement savings and even help children begin to sock away money.
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
Some Countrywide Financial Corp. employees sued the mortgage lender Wednesday, claiming they suffered heavy losses in their 401k retirement accounts after the company failed to warn them about the depth of its financial troubles.
Question: I'm 34 and am concerned about how to invest my retirement savings in this market. I currently have 100 percent of my portfolio in a mix of funds that invest in large-to-small-cap stocks as well as international funds. But I'm wondering how much I should change that mix given these turbulent times. What do you suggest? - Brian, Mitchell, South Dakota
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 read that if I withdraw roughly 4 percent of my retirement savings each year to live on, my money will last virtually forever. But does this 4 percent include the money my portfolio already kicks off in dividends and interest? Or is the 4 percent withdrawal on top of that? - Doug Martin, Syracuse, New York
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 ...
Question: I am 31 and have $200,000 in savings. According to the savings calculator on your site, I need to save only about 6 percent of my salary, assuming I make around $80,000 a year.
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 ...
Question: My wife and I are currently renting, but we'd like to buy a house. Problem is, we happen to live in somewhat expensive area where single-family homes cost at least $300,000. Our combined income is low and we barely have enough savings for even a small down payment.
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: I don't understand the rule that you need 85 percent of your pre-retirement salary in retirement. After all, if you're contributing 15 percent to a 401(k) or other savings plan and you're paying Social Security and other taxes, you're already living on much less than 85 percent of your salary. And if you pay off your mortgage before retiring, I figure you're still ahead of the game if you shoot for 70 percent. What do you think? -Clifford, Orange, Conn.
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.
Question: I'm 74 years old and currently have my IRA invested in a 2040 target-retirement fund. I want more income, however, so I'm thinking of switching to a growth and income fund. What do you think? -Yolanda R., San Diego, Calif.
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...
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....
Finish this sentence: "I've always wanted to_____."
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...
Senior computer scientists at Adobe take home an average of $161,127 in total compensation annually. Which other Best Companies to Work For offer big paychecks?
Like so many romances today, Kim and Brian O'Donnell's story began with a visit to an online dating Web site.
When Cynthia Centeno and Richard Rivera started dating, they quickly realized they had a lot in common. Both had grown up in the Bronx, earned master's degrees in public administration and pursued careers in the nonprofit world.
Question: I'm 28, married and I recently started a new job. I contribute 10% to my 401(k) and my employer matches the first 4%. I also contribute to a Roth IRA. If I'm only able to fund one retirement plan, or if I wanted to think of one as being a higher priority than the other, which plan should it be? - Ryan Bergan, St. Paul, Minn.
Ten years ago, Anne and Joe Raspanti said "I do" in Hawaii. Among the things those two words changed for Joe were his plans for how, and where, he'd spend the rest of his working life.
Question: I'd like your view on what percentage of pay I should be putting in my 401(k) for retirement. I'm currently saving 15 percent of my annual salary of $74,000 a year, and have accumulated $392,000 so far. There is no company match in my company plan, nor any pension beyond the 401(k). I have another $46,000 in mutual funds and own a home that's worth about $320,000, although I owe about $95,000 on a home equity loan.
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 a lower tax bill is on your holiday wish list, don't leave it all up to Santa. There are some things you can do, even before the new year, to cut your bill. We'll tell you all the strategies in top tips.
Face it: Time is running out. With just a few weeks left in 2006, you know you can't lose those 10 pounds, learn to play the piano or accomplish any of those other New Year's resolutions you made l...
These strategies will cut your taxes and prep you for the new year. But you have to act by Dec. 31. By George Mannes, Money Magazine senior writer
Question: My wife and I are self-employed. In addition to a mortgage of just under $400,000, we have a home equity line of credit on which we've borrowed $41,000, credit-card debt of $25,000, plus two car loans.
Question: My husband and I are trying very hard to get our finances in order and save for retirement. But just when we thought we'd be able to contribute the maximum $15,000 this year to my husband's 401(k) because he got a nice raise, we found out he is considered a "highly compensated employee."
Despite the year's end looming, your tax fate is not yet sealed - there are still some chances to optimize your tax filing and save some money, says the nation's largest state accountant group.
Question: I'm twenty-two years old and earn $45,000 a year. Based on the percentage of pay I contribute to my company savings plan (25%), the company match (6%), my projected salary growth (4% or more a year) and a decent investment return (about 10% this year), I estimate using my 401(k) calculator that I'll end up with about $5 million dollars by the time I want to retire at age 59.
Follow these guidelines and feel confident that you\'ll be making the right financial decisions.
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