Investing For Retirement

Frequently Asked Questions

1. QUESTION:
   What are the different reasons to open a general investing and/or a retirement investing account?
   On Vanguard it has a “General Investing” account and a “Retirement Investment” account. Obviously the latter is for IRAs, but what is the advantages and purpose of the general investing?

   • ANSWER:
     The main reasons are tax considerations.

     In a retirement account, depending on how you set up the account, either the contributions can be tax deductible (traditional IRA) or the withdrawals are tax free (Roth IRA).

     In a general investment account, depending on how long you hold on to the account, the earnings are either taxed as ordinary income (short-term) or taxed at the lower capital gains tax rate (long-term).

2. QUESTION:
   New to retirement investing, how often should I rebalance my accounts?
   I have a 401(a) and a 457(b) thru my employer. The advisor my employer uses is always in a big hurry, acting like he doesn’t have time for such petty questions, and is a bit condescending on top of it all. Any suggestions from well informed, experienced investors or advisors will be greatly appreciated. I am 43, so I need to agressively invest what I can…about 10% of my income. Thanks.

   • ANSWER:
     Ugh! Your advisor needs to be kicked to the curb. In a situation such as your own, I would suggest actually speaking one-on-one with a Financial Advisor. The reason being is you are inquiring about some serious issues and given that this will dramatically affect the quality of your life in your later years, this is not something you want to make an wrong moves in. Most Financial Advisors worth their weight will provide you with an no-obligation first meeting in order to answer your questions and address your concerns regarding your situation. All-in-all, I realize this doesn’t give you specific advise, that is something you just can’t side-step. My parents put their faith and trust in 401(k)s and maxed out their contributions. Now they are within 15 years of retiring and scarcely have enough to even scrape by if they were to retire at 65. Its great you are approaching this now, rather than later, but this should be something brought up to a qualified, independent financial advisor.

3. QUESTION:
   How do I find a reputable tax advisor for investing and retirement questions?
   I have done the route of the big guys for investing but they always try and sell me goods I have no interest in, like plans for “future nursing home needs.” I just want someone who can look at what I have, the years til my retirement and help me figure my best options.

   • ANSWER:
     I hate companies like Edward Jones.
     They sell, sell, sell their products until a person is bone dry.

     Consider going through a discount brokerage like
     Fidelity Investments or
     Charles Schwab 800-435-4000

     Open up a ROTH, buy some cd’s and you’ll be fine.
     Some cd’s at Schwab are still paying 4% – they are long term cd’s.
     Stop getting scammed by people trying to sell you junk.
     Fidelity and Schwab have free advisors and can allocate your funds for you depending on your risk tollerance – free service.
     They can also tell you what kinds of accounts you need.

     I have never paid a dime in any fees.
     And they have never tried to sell me anything.
     /

4. QUESTION:
   How do you work this finance problem, regarding investing for retirement?
   Ross has decided that he wants to build enough retirement wealth that, if invested at 9 percent per year, will provide him with ,250 of monthly income for 32 years. To date, he has saved nothing, but he still has 23 years until he retires.

   Required:
   How much money does he need to contribute per month to reach his goal? (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the “$” sign in your response.)

   • ANSWER:
     Using the present value calculation.
     PV = C(1/r – 1/(r*(1+r)^n)
     where C = 4250, r=0.09/12, n=12*36
     You get PV = 534,513.29
     So ross needs 4,513.29 after 23 years

     Discounting 4,513.29 back at 9% per year using the formula PV = FV / ((1+r)^n) gives a new PV of ,970.96 which is the PV now. Where r=0.09/12, n=12*23

     Using the same formula PV = C(1/r – 1/(r*(1+r)^n) you solve C = 4 per month

     As for the decimal places, only academics care about those because assuming a 9% return every year for that long is very inaccurate anyway.

5. QUESTION:
   Help my friend for investing for retirement please?
   Ok,
   My friend already have 21 lacks and he earning average 2.5 lack per month in uk.He plans for retirement at the end of april and want to stay in india in small town.He oener of the house in india,
   and small business in india ,from indian business he earns Rs 25000/- per month that is extra from above,so can anybody help for proper investment please.He already invest in post office MIC and bank deposite from 21 lacks.
   Ok,
   My friend already have 21 lacks and he earning average 2.5 lack per month in uk.He plans for retirement at the end of april and want to stay in india in small town.He oener of the house in india,
   and small business in india ,from indian business he earns Rs 25000/- per month that is extra from above,so can anybody help for proper investment please.He already invest in post office MIC and bank deposite from 21 lacks.
   HOW TO INVEST PROPER?AND IS THAT ENOUGH MONEY FOR HUSBAND WIFE TWO CHILDREN AND PARENTS?

   • ANSWER:
     -Can invest an amount of rs.3lacksin post office. Rs. 3/-lacks is an amount per person. No TDS deduction . Monthly interest @ 8% available, which can be reinvested in Recurring deposit a/c. to earn the cumulative interest,
     -An anount can also be deposited in Banks, If the period is more than 5 years no TDS. is deducted, Interest Rate of about 9.5%is avilable in the leading Nationalised banks,
     -There are so many good co. dealing / offering Unit linked insurance plans. Equity increases and the Insurance(life) continues, Good returns. Income Tax benefit also.
     -Money can also be invested in purchasing land ,may agri. oor non agri. if properly purchased it must give the returns over a period of time. Liquidity is little,
     -Benefits of Demat a/c. can also be taken by selecting proper co,shares.

6. QUESTION:
   Retirement Investing for a single 42 year old?
   No 401(k) option offered. Any options besides ROTH IRA? I do not get any benefits therefore need to pay for my own. No dependants. Tax deferred investments out there?

   • ANSWER:
     Why not do the ROTH???

     Gains from the Roth are TAX FREE…. gains from a traditional IRA are TAXED..

7. QUESTION:
   Where do I start with learning about investing and retirement planning?
   I have been an assitant to a financial advisor for 6 months and I am not satisfied with just knowing how to fill out forms and where to send them. I would like to know the meaning behind most of the financial world’s jargon (ETF’s, IRA’s, SIMPLE Plan, etc.) and also how to go about researching stocks. Where would I start? I really don’t have any knowledge of these things besides tid bits I picked up around the office. Any book suggestions for a beginner or any links?

   • ANSWER:
     It’s actually a little surprising that your employer isn’t providing you with more answers. Have you asked him/her? Expressed an interest in learning more? Not only for your own benefit, but it may help you with your career in that office too.

     Another place for assistance may be your own bank. Many banks have financial advisors that help their customers gain a better understanding of the programs they offer. (Granted, they’ll probably be geared toward making you a client – but if you explain how you’re looking for information before making any commitment, they’re usually pretty accomodating.)

     The last alternative, which may cost you a little money, is to check your local community college or continuing education programs. Many local high schools and such will offer evening (or weekend) seminars that offer basic instruction. (Sometimes these are partially funded by local branches of various financial institutions – so be on the look out if they try to push their products.)

     If none of those are options, take a look online. Some companies like Fidelity or Edward Jones may have “tutorial” sections on their website that could help give you some basic information.

     Good Luck!

8. QUESTION:
   What’s another taxed advantaged option for investing for retirement?
   I’m 42 years old, I already max out my IRA, and currently invest in personal money in the stock market. Are they any other ways I can invest in the stock market to save on taxes. Current Income is about 0K

   • ANSWER:
     Does your employer offer a retirement plan where you work like a 401 (k) plan? If so, I’d take advantage of that, especially if they’re going to match contributions. This will give you an immediate tax break.

     Also, consider a growth stock no-load mutual fund. Like the answer above mentioned, taxes will not be owed until you sell at a gain.

9. QUESTION:
   Retirement?
   I’m 55 and have an invested retirement of ,000 with the County I’ve worked for – for 23 years. How can I invest in the next 10 years to get an even bigger retirement? I know I procratinated and now I’m playing catch up. Please help.

   Ready to Retire at 65.

   • ANSWER:
     Invest in investements

10. QUESTION:
    What investments are protected from the IRS? I need to start investing for retirement and I owe back taxes. ?

    • ANSWER:
      Investments are not protected at all. If you have the option to be covered by a pension, that would not be levy bait until after you retire. Deliberately hiding assets is a form of tax evasion that can be prosecuted.

11. QUESTION:
    How to begin investing for retirement?
    I’m 26 and I only have a 401k with just under 4000 dollars in it. I’ve been looking at a Roth IRA but its all so confusing for me. What is the best way to make my money work for me? Any articles or books I should read?

    • ANSWER:
      Try looking at some of the personal finances guru’s websites. They are a WEALTH of knowledge.

      Suze Orman and Dave Ramsey….

12. QUESTION:
    Want to sell Retirement Investing blog (#1 in Google) – what to do?
    I have a blog that is position #1 in Google for ‘retirement investment’. I will not run it any longer.

    But simply leaving a blog like this is stupid, because then all my previous job is wasted.

    So, I want to sell it for good money to those who need ‘retirement investment’ traffic from Google.

    Any recommendations where to sell it?

    • ANSWER:
      It would have been better, if you had mentioned your blog url too. As in the absence of your url, it’ll be difficult to answer with the seriousness the question needs. Still let I try to give you an answer based on the details which you provided.

      From my blogging experience, if the category on blogs about is not a very popular one, or if the blog doesn’t show good context ads, or if the blog doesn’t make people to buy something, then there are very much chances that a blog showing at #1 on Google search, will earn nothing from CTR ads. So if this is the case, with your blog too, then you’ are not be able to get a good valuation if you go to sell it.

      So whatever be the case I suggest you not to sell the blog, no matter what category one blogs about getting #1 position at search is still a big achievement. You only have to make it a blog which earns well. For this you can try many things. Like, incorporating tips for Retired people section in your blog, where you can suggest them how to contribute positively to their families and community. Doing some weekly survey, like what us their favorite pastime. If you know some retied person, invite him/her to guest blog on your site, and so on. The idea is to make your readers more engaged and interactive once they come at your blog.

      A blog needs a lot of effort or time to reach a particular stage, in your case getting #1 slot at search, why sell it when it can get you returns. And you can manage all by yourself and make the blog a success. Just need to have a close look at your blog.

13. QUESTION:
    HELP with Retirement Investing for sole proprietor?
    I recently started my own LLC and need help knowing how much I can deduct for retirement off my taxes. Prior to Nov 1, I was in a regular job and maxed out my 401(k) (,500) and for the final 2 months I will be a sole proprietor.
    How can I maximize the amount to put into retirement and take off my taxes? (Or can I?)

    • ANSWER:
      there is an owner only retirement plan that goes by different names at different companies. Waddell & Reed calls it “Exclusive K”. It allows for contributions up to almost ,000 per year. Can it be used in conjunction with your existing 401k from your previous employer? probably – but you should check that part out with the company that you will be setting up the plan with.

      The Exclusive(k)® is a retirement savings plan specifically designed for self-employed business owners with no common-law employees. As a result of the tax law changes introduced by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), owner-only businesses can contribute the maximum employer and employee contributions allowed under a 401(k) Profit Sharing Plan.

14. QUESTION:
    What are three ways of investing for retirement?

    • ANSWER:
      1. real estate (unless you have a lot of time on your hands or a partner who does you may want to avoid this)

      2. GIC’s (Guaranteed Investment Certificates- no going wrong with these, things like government bonds, they return the principle as well as interest but are not very competitive or aggressive)

      3. Mutual funds (trust your money with a professional or even a few different ones by diversifying among many different funds)

15. QUESTION:
    Are you supposed to invest retirement money only in retirement accounts?
    For example if someone has a ,000 pension and ,000 401K account – both are considered IRAs like retirement products, and you cash out that money or roll it over to a brokerage firm, does it remain Qualified or retirement status or it can change to whatever?

    • ANSWER:
      If you change its status to “whatever” you have to pay taxes and penalties on it. (about a 30% loss)

      If you keep it as a retirement account you don’t have to pay the penalties and your taxes are paid when you take the money out (supposedly when you are earning very little and paying little to no taxes)

16. QUESTION:
    Whats a good investment fund , an aggressive fund , I would like to start investing for retirement.?

    Basically im 30 years old , and I would like to retire somewhere around 60-65 , I was checking out a site , It got me interested http://www.finishrich.com/free_resources… … How much do you think would be ideal to have for retirement.. while playing around on that site I was thinking about 500.00 a month to invest, youll notice on that site that the percentage is at 10% but that percentage, the return on you money can go up right

    • ANSWER:
      There are a lot of good sites to learn about investing. Definitely look into more than one.

      You have a lot of time to allow your money to grow. If you consistently put 0 into your account, whether the market is doing well or not, you will be very happy in 30 years. At that time you will easily be able to decide if you want to retire or just keep working.

      Look into the long term results of your investments. Mutual funds buy and sell stocks every year. By investing money in these funds, you are putting your trust in the fund’s management to choose the right companies each year.

      Make sure to diversify your choices, a good portfolio would be broken up this way:
      35% US growth
      30% US Value
      35% Global or International

      GOOD LUCK!!!

17. QUESTION:
    I am 25, looking to start investing for retirement (age 70ish), and going to law school, what should I do?

    • ANSWER:
      1. Establish a backup emergency fund of 3-6K, keep that in a money market, that is your emergency money.

      2. AFTER your emergency money is established, start contributing to a Roth IRA if you are eligible, the tax free compounding for someone 25 is an enormous advantage and the biggest loophole you will ever find. Fund the Roth with a well diversified mix of equity mutual funds where the current manager has a long track record of performing well in a variety of market conditions.

      3. After your monthly contributions to fully fund your yearly Roth contributions are established, additional savings should go to bolster the emergency backup fund, then fund non retirment investments (usually mutual funds).

18. QUESTION:
    Any recommendations on investing for retirement?

    • ANSWER:
      Start early, contribute at regular invervals, keep costs low, and match your risk exposure to your time horizon. Low-cost, index mutual funds are your best friend for retirement investing.

      I have a free downloadable book that will teach you everything you need to know about retirement investing. I am not a financial representative, but am actually a pharmacist with a passion for teaching people about this subject. Click on my profile and email me. I cannot post the site here, as it will get deleted as “spam”, even though I am not selling anything.

19. QUESTION:
    how does a retirement account work? how how does my money grow by investing in a retirement account?
    I know that once I invest money in a retirement account I can’t touch it unless it’s for emergencies but I would like to know how does my money grow in this type of account and how soon can I see results?

    • ANSWER:
      When you are investing, you have to invest for the long term to see any results. In the beginning years, you may be quite emotional to the market fluctuations. If market went down, the value of your portfolio went down. Your natural response would be, “I lost money.” But the fact is you haven’t lost or gain any money because you didn’t touch your money. How your portfolio performs depends on these factors:
      1) What is your average price per share compare to current price per share?
      2) How long have you had the investment?
      3) Dividends and capital gains payout (if any)
      4) Type of investment. Are you invested in conservative funds or large growth funds? If you want higher growth, you need to be willing to accept higher risks.
      5) How disciplined are you? Are you going to pull out when the stock market is down or are you going to stay in and continue to invest?

20. QUESTION:
    How do I go about investing for a retirement account, preferably Roth IRA?
    I have about 12 more years before I retire and I need to retire comfortably. I came very late to the USA and so will not make it on Social security alone. Are there any other safe options where there is zero chance of losing my retirement money?

    • ANSWER:
      That’s wonderful that you are ready to start saving for your retirement. It is never too late.

      A Roth IRA allows you to add money after tax. What makes this a good option is your money grows tax free. Yes, that is correct. Even your earnings. When you start taking the money out after age 59 1/2, you do not pay any tax on the money you’ve put in nor the earnings on it. That’s why so many people have created their Roth IRA’s in brokerage portfolios instead of basic bank cd’s. If you have more than five years to go, you might want to think about a nicely done asset allocated portfolio. Everything out there is at rock bottom prices.

      If you are over 50 years old, their is a catch up clause in the contributions per year. You can add K more than younger people to catch up.

      Banks offer CD’s for Roth IRA’s also. Another great feature is….you are not required to ever take the money out if you don’t want to. A traditional IRA requires you to start taking a required minimum distribution when you turn 701/2 years old.

21. QUESTION:
    I need to start investing for retirement. Can I start a ROTHIRA now, even though I plan to start a 401k soon?

    • ANSWER:
      You can…whether it would be beneficial or not is another question. The ROTH and 401k are mutually exclusive. You can contribute to both. The ROTH though has income limitations while the 401k has dollar amount limitations.

      Now, whether a ROTH is beneficial is dependent upon your age and your income. It is only beneficial if you are a) young and b) at the beginning of your income level. For those people whose income level has peaked it becomes less attractive because they will likely be at the same or HIGHER tax rate then when they retire. Thus they are actually losing a benefit. And yes while your distributions are tax free the contributions were not. So in comparing the two you have to account for the lost income on the taxes paid. That is substantial.

      Enter into a ROTH only if it’s worth it for you. It’s not appropriate for everyone. Also…start the 401k sooner rather than soon. As in tomorrow. Get that money earning…especially if a ROTH doesn’t suit you. If you have the cash then you need ot make sure that your income can support a substantial 401k deferral and that means starting it and allowing your annual income limit to build.

22. QUESTION:
    I am 19 and want to start investing money for retirement.?
    I have an E*Trade savings account getting 3.3% interest, but that is not gaining much. I want to start a retirement account that will have maximum earnings but will allow me to remove funds before the retirement age of 65 without penalties. Thanks in advance for any suggestions.

    • ANSWER:
      Troy,
      You are to be commended for being so intelligent at so young an age. If you start saving now, you will definitely be a millionaire when you retire.
      Start a Roth IRA and contribute the maximum amount every year. (That is ,000 per year or 6.67 every month). You won’t get a tax deduction for your contribution but when you take any money out, you won’t be taxed either. The money grows totally tax free. You may also take out any contributions that you have made, without penalty, before the age of 59 1/2. There is only a penalty if you withdraw any of the “growth” before age 59 1/2. Althought you may be able to withdraw some without penalty for a home purchase, but I am not certain.

23. QUESTION:
    I am on ss for a disability. II am 35 and want to begin investing for retirement, What can I do and what is?
    I want to begin a ira and need to know the laws and how much i am able to invest and how to do it

    • ANSWER:
      Invest in an indexed annuity. You will make money if the stock goes up, but you will not lose money if it goes down. Go see an investment broker

24. QUESTION:
    How does Investing for your Retirement work?
    Im 21 college student and I do work and I want to start investing right but I dnt know how this work and need some help and what do you think about these website like etrade and more which one is better to invest

    • ANSWER:
      Save, and then save some more, and then save some more.

      Invest in a diversified portfolio, but don’t think you can invest your way to financial security. Saving a large part of your income is a much better approach than taking a lot of risk in the stock market.

      Work as long as you can to build up your Social Security benefits.

      You might be able to get a pension if you work in government, law enforcement, or education, or if you serve in the military. A pension is a good thing, if you can last long enough in the job to qualify for the pension (usually 20 or more years).

25. QUESTION:
    How wise is to carry on investing in Insurance Retirement Plan?
    I have taken up an ENRICHMENT policy 3 yrs back. In the present market scenario how wise is to keep paying premium for 15 yrs more? Or is it better to surrender it and invest it in other avenues like Real estate? Your opinion please.

    • ANSWER:
      Since you don’t state the Insurance Company (and “ENRICHMENT policy” gives 1,430 ‘hits’ in google) I can’t be bothered to track it down and find out how well it’s performing ..

      Pension Plans are long term (25 years) .. right now the market is depressed so any ‘transfer value’ is likley to be quite low ..

      However you MIGHT be better off transferring into another scheme, especially since it would seem you do not have an actual Pension (which would get Tax Relief at your marginal rate) but rather some sort of ‘Insurance’ policy (which typically attracts high charges) .. if £10,000′s are involved you need to speak to an IFA (Independent Financial Adviser)

26. QUESTION:
    im looking to start investing money for retirement question.?
    how much money should i put aside per month to retire in 20 years. what should i talk to my invester about investing in. any help would be appreciated. i live in mississippi and my income is approx 90,000/year.

    • ANSWER:
      Start by adding the maximum to your retirement plan at work. After you max that out, invest the maximum in a Roth IRA each year. If you still have extra investable money after that, put it into a non-qualified account. I would use mutual funds, but you could also go with an annuity in order to defer paying the taxes until you retire.

      Good luck

27. QUESTION:
    Need help with retirement investing?
    I am 41 years old, have a wife and 2 middle school children, semi-retired making about K a year…everything is paid for. I am thinking of investing in municipal bonds or cd’s. Current net worth is about 2.5m, of which 2m is cash. I really need about ,500 a month income. I was thinking of investing 1.5m in municipal bonds and 0k in 90 day cd’s, leaving 0k in the bank. Any suggestions ?

    • ANSWER:
      You sir need a financial adviser. Pay one upfront that is not associated with any Brokerage House. We found one locally and We were very pleased with the outline given to us. They can lay out the next 10 years for you. No pressure because you are paying a flat rate for the service.

28. QUESTION:
    Investing for retirement while unemployed?
    I would like to continue to invest in my retirement while looking for a new job. Is this possible as I already maxed out my Roth IRA for 2009 already? Any suggestions would be appreciated

    • ANSWER:

29. QUESTION:
    Primerica in Canada – Investing for Retirement?
    I had Primerica representative in my house approximately 8 or 9 months ago to discuss investing for retirement. Although I receive a pension from my company, my husband company does nothing. After speaking with the representative and because we hate doing business with banks, we decided to to do monthly payment for RSP (in the form of mutual funds). I did some research about Primerica and although their products are not for everyone, they did meet our needs. But I am wondering if we made a mistake. I was wondering if other people have had a positive/negative experience with Primerica in regards to their investments?

    • ANSWER:
      I open my Roth IRA through them and later became an agent with the company. I don’t know what its like in Canada, but my experience been good. My investments been doing pretty well with an average rate of return of 12% in the past 2 years. I can check my investments anytime by going online at Primerica.com. I can’t tell that you are going to get an average rate of 12% until retirement because every investor is different. I don’t even know if I’m going to get 12% in the next 30 years. For me, I’m young and so I should invest into more aggressive growth mutual funds.

      Anyway, I hope the agent you dealt with was able to explain everything to you. If you have concerns, you should talk to him or her.

30. QUESTION:
    What do you save for first – home or retirement?
    I’m a working college student – working my butt off, to be precise, so I don’t have any debt. I want to buy a house in the next year or so. I’m already 26, and I know I should have a retirement account – but getting your hands on a piece of real estate is a really important investment, too. My plan so far has been to put every dollar into savings for a down payment to get the house ASAP – ignoring starting a retirement account for now. But I also know that time is on your side as far as retirement investing- when money is tight and you’re aiming to buy a house, how do you decide?

    • ANSWER:
      You can serve both purposes at the same time. If you dont plan to buy a house for atleast five years, invest in a Roth IRA. You can contribute up to ,000 in 2006 amd 2007. Starting in 2008 you can contribute up to ,000 per year. You also have until April 15 of any year to contribute money for the previous year. First time home buyers can take up to ,000 (lifetime limit) out of a Roth tax and penalty free, as long as you have had the IRA for atleast 5 years. You can also take out your own contributions to a Roth IRA tax and penalty free at any time. If you take money from a 401k plan to buy a house, you either have to take a loan from the plan, which you have to pay back or else it becomes taxable as well as pay a 10 percent early withdrawal penalty. Or you have to qualify for a Hardship Distribution, which you have to pay the 10 percent early withdrawal penalty on. If you take the money from a Roth there are no strings attached, other than the ,000 lifetime limit, and the 5-year rule. So, theoretically if you start a Roth in 2006, in 5 years you could take out ,000 (your contributions from 2006-2010 plus ,000) free of any taxes and penalties. And if you make a contribution before April 15 2006. for the 2005 tax year, you can meet the 5 year rule in less than 5 years.

31. QUESTION:
    The small company I work for does not have a pension program or a 401k. Best retirement strategy besides IRA?
    I max out my Roth IRA contribution every year, but I have a lot of money left over that I could invest. Besides investing in mutual funds or cash-value life insurance, are there any other good long-term retirement investing strategies?

    • ANSWER:
      best strategy? Talk to your boss about installing a 401k. Costs are minimal nowdays. startup costs are about 2k and annual costs are about the same. Both are deductible expenses and small businesses even get a credit for first year (I think it’s still available anyways). Many plans that I set up for my clients involve some contributions on side of ownership but in most the amount that they have to contribute to the staff through matches and contributions is LESS then they would have to pay to the IRS in taxes if they didn’t have the plan. Essentially like this…install a 401k and provide 3% of pay to your 10 employees who average 50k in salary. That’s 15k in 3% contributions. Boss then puts away 15k of his own (20k if he’s over 50 years old) and receives his own 3%. If we assume boss makes 200k then his total tax deductable contributions is his 15k PLUS the 21k in other contributions for 36k. Boss’s tax rate is 38% which equates to a tax savings of about 14k. So, Boss is now able to put away 21k of his own money and it cost him a total of 3k to do it. 1k to his employees (uncle sam funds the rest through lower taxes) and 2k to the company doing the recordkeeping.

      You wanted the best…I gave it to you. Talk to your boss and get him to start a 401k. Make sure it has Roth contributions and fund them at 7,500 each. You’ll be glad you did.

32. QUESTION:
    Retirement/investing/saving?
    I am 25 with Roth IRA of only 0ish currently. I only add like /month to it. It’s through my bank, USAA, called cornerstone strategy fund(moderate risk). I don’t know much about investing, but should I actually be putting more money into it(since poor market)? I also have a mutual fund for emergency savings purposes with like K(low risk). I add 0/month to it. I also add 0/month into ING savings account with 2.5% rate return(only 0 in it now). How does my savings and retirement plan need improvement?
    The only debt I have is K on my Civic. The rest are regular bills like rent, cell phone, etc.

    • ANSWER:
      We are in unique economic times with a collapsing financial system. Even most seasoned investors were probably stunned in 2008. But it sounds like you are doing well in putting money into investments. However, are you saving as much as you want available for retirement and for emergency savings? Have you considered different kinds of CDs, their rates and conditions (some allow early withdrawal without penalty)?

      Inflation seems to be expected in 2009 which might not be good for many investments — a physical precious metal investment might be an exception this year, like an investment in precious metals that are bought at a good price off of ebay and stored. However, such an investment is volatile (often gains or loses money fast) and has costs like postage and could get stolen. People often overpay for precious metal coins when they don’t know how much they are worth.

      I’m pretty sure that you may add ,000 this year to a Roth IRA. Can you afford that much — or do you need it now? It might not be worth going into debt and making interest payments on the debt.

      If you need savings for the future and you have no need to purchase much else to help you along currently since you already have a new car, maybe putting money in savings is a good idea even if will lose some purchasing value. If you want to play it safe cashwise, you could try putting some money into a USAA money market fund. It might not keep up with inflation but it might retain some value for the future when you need it. Even losing investments can be worth it, just to have money in the future when much more in need of money.

      I invested in Brita filters and corresponding pitchers and I double filter well water to save on spring water. I invested in long distance telephone cards from Costco that don’t cost much per minute and last me a long time. I invested in supermarket food and stopped using restaurants. I drive less in spite of low gasoline cost.

      ADDENDUM: coach is sort of right but to answer his question about why: it’s because you can withdraw from the savings account, while paying off the car loan cannot be undone. So emergency funds are sometimes more important than paying off debt. However, if you can afford to pay off the debt, it’s different.

33. QUESTION:
    How safe is it to invest for Retirement Benefit fund plan with UTI?
    Please advise about how safe our money will be after investing in Retirement Benefit Fund Plan for the next 30 odd years or so?

    Is our money safe? If the company falters anytime in the future, are we guaranteed the money?

    Thanks a lot for all the answers in advance..

    • ANSWER:
      No guarantees in this kind of investment, sorry

34. QUESTION:
    Do you have to invest for retirement or can you just save?
    Do you have to invest for your retirement, or can you just save up your money in a savings account without investing? I don’t want to lose money by investing and saving in a saving’s account just seems safer, any advice?

    • ANSWER:
      Savings accounts pay pretty low interest its taxable and subject to inflation. If you are eligible for a 401k through an employer and/or an IRA you would be able to save and or invest tax-free, at least until you take it out. Even if you arent eligible for a tax sheltered retirement account, if you have a long enough time horizon to invest and if you invested in mutual funds, for example, and added to it periodically you most likely have quite a bit more than if you put it in a savings account. Unless you absolutely need the money in the short term. You should have about six months worth of living expenses in a savings account or CD in case of emergencies.

35. QUESTION:
    I’m told variable annuities have become safer for retirement investing. Don’t know who to believe. Are they?

    • ANSWER:
      Depends on how long till retirement and the type of VA. Some have options that no matter how the market does, you just don’t lose.

36. QUESTION:
    Thinking about retirement investing…?
    My husband and I are interested in beginning to plan for retirement. We are able to contribute about 00/year. We are 23 and would like to retire between 55-60. He works for the gov’t so he will get a pension, probably somewhere in the range of ,000 a year after he retires.

    My question is this – if we begin to invest 00 a year now, in 35 years, how much (approximately) will our annual income be including his pension?

    • ANSWER:
      My quick answer is “about ,000/yr from your investments (doesn’t include the pension)”. After inflation, that would be the same as earning about ,800/yr from your investments in 2008. However, take these numbers with a grain of salt. I’ll tell you how I came up with them, then you can recalculate however (and whenever) you please.

      First, if you’re investing ,600/yr for retirement at age 23, you are *way* ahead of your peers and stand a good chance of reaching your retirement goals. Many folks wait until their 40′s to think about retirement (bad move!)

      Second, consider that in the next 35 years: 1) we can only guess at the performance of the stock market, 2) we can only guess at inflation, and 3) your income will likely increase and you’ll be able to contribute far more than ,600 in the future.

      Okay, here’s what I assumed: 1) the stock market averages a return of 8% over the next 35 years, 2) you invest in a low-cost, no-load index fund (I recommend Vanguard Total Market Index), and 3) inflation averages 4%.

      After 35 years, your retirement account balance will be 3,568. One rule of thumb says that, when you begin retirement, begin by withdrawing 4% from your savings. You can increase the withdrawals each year to account for inflation. If you do it this way, you can probably make your money last forever despite the ups and downs of the stock market. You can withdraw more, if you’d like, since you probably won’t live forever – be make sure it’ll last for your entire retirement (which could last 40 years!)

      So, 4% of that balance is ,943 to spend in your first year of retirement. Sound like a lot? Well, if inflation averages 4% in that time, your money will only buy what ,828 will buy in 2008.

      If you invested in a low cost index fund from Vanguard, and put your money in a Roth IRA, that income will be tax free. Also, in addition to your husband’s pension benefits, remember you’ll be getting a modest amount of income from social security, too.

      You’re on the right track! Just start socking away money today. Once a year, take a look at how you’re doing and adjust your plan accordingly.

      Good luck!

37. QUESTION:
    T Rowe Price retirement investing?
    am new to T Rowe Price as the company I just started working for offers 401k.
    I am only 20 years old and will probably work at this job for awhile.
    How should I invest my money with t rowe price. I would like to set
    up a portfolio and keep track of my investments. My choices are as follows;:

    AMERICAN BEACON LGE CAP VALUE
    ARTIO INTL EQUITY II, I
    BLUE CHIP GROWTH FUND
    COLUMBIA ACORN INTL Z
    DREYFUS/BOSTON SM CAP VAL FD
    PIMCO TOTAL RETURN INSTL %
    RETIREMENT 2005 FUND
    RETIREMENT 2010 FUND
    RETIREMENT 2015 FUND
    RETIREMENT 2020 FUND
    RETIREMENT 2025 FUND
    RETIREMENT 2030 FUND
    RETIREMENT 2035 FUND
    RETIREMENT 2040 FUND
    RETIREMENT 2045 FUND 100.0%
    RETIREMENT 2050 FUND
    RETIREMENT 2055 FUND
    RETIREMENT INCOME FUND
    TRP STABLE VALUE FUND SCH E
    VANGUARD 500 INDEX SIGNAL
    VANGUARD SM-CAP GR INDEX; INV

    • ANSWER:
      You have some respectable individual funds, with which to build a portfolio. Study your offerings, set your asset allocation, and then pick your funds.
      In the meantime, why not choose one of the target date retirement funds – 2055. That’s what I did initially.

38. QUESTION:
    How can I start to plan financially for retirement?
    I’m in my mid 30′s and have always had low paying jobs, and had to live paycheck to paycheck just to pay my bills. At this point I have no money saved towards retirement. Now I’m wondering what is the best way to start saving/investing towards retirement after losing so many years.

    • ANSWER:
      First step:
      Put away 6 months worth of living expenses in a savings account.
      Before saving for your retirement I would like to see you pay off any debts such as credit cards or car loans.
      First you need a solid tile to step on before saving for your retirement.
      Without the savings, you could be tempted to take the money out of the retirement account –
      this will only cost you penalties.
      /

39. QUESTION:
    How can I get my fiance to discuss finances and investing before we get married?
    I have always been responsible with money. I have a good amt of emergency savings, an excellent credit score, and started investing for retirement and long-term goals like a home. My fiance on the other hand does not. He does not make very much money and has quite a bit of debt, he claims he cannot open a retirement account yet since he does not make enough and he is 6 years older than I am. He pays high interest on his debt and has no money for investing in our future. I am concerned that we might someday have problems with money, even though we are okay now. However I know once kids enter the picture things may change. When I try to talk to him about it things can get heated because he says he is doing everything he can and feels put down when I lecture him about money. I don’t have a problem being the main supporter of the family, I just don’t want him or us to be in a bad situation down the road. Are there any suggestions to get him to begin investing or any books on this subject?

    • ANSWER:
      You both need to sign a pre-nup. Then: Take a night and put it all on the table-> earning power, savings, investments. If it looks dim, dump him.

40. QUESTION:
    Retirement investing: Vanguard funds or a local “investment” person?
    I’ve been saving for my & my wife’s retirement (per ROTH and Traditional IRAs) for quite a while now. At first, I used Morgan Stanley (loaded funds w/ great histories); this was for about 5 years. Needless to say, the “broker” there didn’t give a rat’s dropping about my account, probably because I wasn’t a big fish. I never received phone calls from her – I was always the one who intitated (some) interest. I changed careers, moved back to my hometown, and am now using a local “investment” person for retirement. The family of funds he offers (through NYLife) are also loaded; and they all have great histories. Problem is, those histories don’t take into account inflation (3% per year) NOR the amount they ding you for managing funds year after year after year. WHY DOESN’T EVERYONE USE VANGUARD & PAY AS LITTLE AS 0.25% PER YEAR TO MANAGE RETIREMENT MONEY? Am I a TOTAL idiot for purchasing loaded funds in the first place? If I switch to Vanguard now, I’ll pay some hefty fees.

    • ANSWER:
      No, you are not an idiot…you are just looking for something ” better”.. you’re getting closer to retirement so you’re paying more attention…I guess you could just call that ” education”.
      Seems to me, now that you’re paying more attention, you could manage your own funds ..on-line… with Vanguard, Schwab..I love Fidelity.
      Pay the fees to transfer…if that’s the case….BUT …then just invest in a couple or three solid funds that beat that 3% inflation rate handily… FAIRX ? JSVAX ? FBALX ?
      …but start reading a little more about funds and ETF’s and put about 10 or15% to work in international or ” sector” funds.

      You could very easily recoup those fees in a couple of weeks in one or two ” aggressive” funds.

      Believe me, it pays to get involved and take care of things with or without a broker’s help. My wife and her friend , 30+ years in a company managed 401 type plan…. made a nice bundle…BUT…BUT.. in the last 4 years by paying attention and getting involved..I have almost doubled both nest-eggs… you cannot believe how much brighter their retirement looks !!

      P.S. It’s not rocket science… if something doesn’t meet your expectations ( say 8-10% ) after a while you move on…. ( with Fidelity…in their funds…some of the short-term trading periods are as little as 30 days ..( small fee for trading before that time) .. but most buys and sells can be done with NO transaction fees….and as far as management fees…I gladly pay the 1.2% any time to get returns in the high teens and better. ( FLVCX..FLATX..FEMKX..ICBMX..)
      If those are tooooo scary..try something like FNMIX…monthly divs just keep your balance growing…with more shares…on top of more shares.
      Good luck.

41. QUESTION:
    What are the best vehicles for retirement investing for a combination of salaried, self-employed, and pension?
    I’m retiring from the military after 20 years and moving on to a second career (still about 20 years from ultimate retirement), and looking for the best plan for accumulating retirement funds. I expect to have considerably more income than my current standard of living and would like to invest the maximum possible in IRAs and similar vehicles with tax advantages.

    I am married (wife is not employed outside the home) and will have three sources of income next year: my primary job will be salaried at K/year including an employer-matched (to 6% of salary) 401K plan; I’ll have a K/year self-employed consulting contract (potential for Keogh?), and I’ll receive K/year military retirement pension (unearned income). The sum AGI puts me over the limit for contributing to Roth IRAs, but I’m confused as to whether the 401K, Traditional IRA (for self and wife), or a Keogh plan are better, or can be used simultaneously. Assuming lots of $$$ to invest, where should I throw my money?

    • ANSWER:
      Invest at least the 6% in your 401K since that is what they match. IRA’s have pretty small contribution limits, so unless you open multiple IRA’s you won’t get much benefit here. I would max your investment in the 401K (after a year – usually – you can increase your investment significantly. I can put up to 22% in mine and I do). You can use them simultaneously. Rather than open a Keogh additionally (although you can certainly do so-I just think they are a hassle) you can just open an investment account with your local bank to invest in stocks similar to your 401k (if they are good ones) because since you will already be following them you can invest more with less research.

42. QUESTION:
    IRA Investing for retirement?
    I want to start an IRA the will have 0,000 in it when I retire in 27 years. How much do I need to invest semiannually in the IRA to do this if the interest is 13% compounded semiannually?

    • ANSWER:
      Are you referring to a traditional or a roth IRA?
      For a roth, you would have to put around ,300 a year…
      but for a traditional it would be around ,900 a year… depending on the retirement tax and the amount you plan on making in retirement.

      Check out these sites:

      http://www.dinkytown.net/java/RegularIRA.html

      http://www.dinkytown.net/java/RothIRA.html

43. QUESTION:
    Which is best way to save for retirement: on my own, with bank, through employer?
    I’m about to start my career next year, but am unsure the best way to start saving. I have an economics degree, and have pretty strong knowledge of investments. What are the advantages of the following ways to save for retirement?

    Investing on my own with a risk appropriate portfolio mostly comprised of an index ETF.

    Getting a financial advisor/planner and using one of their bank’s programs.

    Or going through my employer (Brevard County Public Schools – I am a math teacher).

    • ANSWER:
      No one plan is best for all situations.
      With your skill set you are well equiped analyze these.
      And one futher note that book knowledge tends to overlook.

      1. As a math teacher, you should have a grasp on the impact on the difference between paying taxes on contributions today vs. paying taxes on withdrawls during retirement.

      2. As an economist, you should be able to grasp the concept of today’s tax rates as a known constant and your future tax rate during retirement being a variable.

      3. As an economist, you’ll also have a grasp on the concept of tax brackets now and during retirement.

      Use those skills to see if you’re better off with pre-tax investing like 401k and traditional IRAs vs. post tax investing like Roth.

      Neither of those skill sets teach this common sense nugget: diversification is usually the best. Do some of both.

      More common sense: banks are good at banking, not so good at investing, go with a brokerage like Vanguard.

44. QUESTION:
    investing, how do you invest for retirement on a limited income?
    how do i get a roth going , and are mutual funds a good way to go cd’s??? please help if you can

    • ANSWER:
      Hard to say…..first, we need to know how near retirement you are and how limited we are talking here. If you have a long time until retirement and very limited money ( to 0 a month) I would have to say use a money market account until you get about 00 to 00 saved, then start a Roth IRA at Sharebuilder.com. They are very low cost. Invest your money in several diversified ETFs (Exchange traded funds) and then continue to contribute and invest it in those ETFs until you have around 00 in an ETF. At that point, dump the ETF and move the money into a mutual fund. Contribute and invest monthly. Use the source as a guide.

45. QUESTION:
    What are the best ways to start saving /investing for my future/retirement???
    If I open a ROTH IRA with 00, and put in 0 a month, is that a good enough start? (I just graduated from high school and am eager to start saving) And what about CD’s??? Should I open any certificates of deposits? any other things that i could look into investing in, information, and any help would be very much appreciated!

    • ANSWER:
      There is no “best” way to start, the best thing to do is exactly what you are doing and the is to “start”. If you don’t think you’ll ever need to dip into the IRA, that would be an excellent way to begin your investment career.

      Since you are at the ripe old age of 16, you may want to consider a traditional IRA to start with. With these you’ll have the added advantage of current income tax savings.

      http://personal.fidelity.com/products/retirement/getstart/aboutira.shtml.cvsr

      Once you’ve established your IRA, you can fund it with an indexed mutual fund. There are many excellent one’s from which to choose. Start with an index fund. These have low fees and low volatility.
      ///

46. QUESTION:
    Who is the best broker for cash management (checking, atm), investing (brokerage, trading), and retirement inv
    I am a young professional who wants to get more active in my financial planning. I am not an expert, will not be investing huge sums, and will not be actively changing. I suspect I will mainly invest in money markets, mutual funds, IRA, and a few stocks. I am hoping to get good service, but with the lowest costs. Value is important. thanks!

    • ANSWER:
      i us edward jones — they have small offices in most small towns and gladly work with the little investor!!!

47. QUESTION:
    I want to start saving for retirement, Im 16 and im not sure what the easiest, safest most rewarding choice is?
    Saving and investing for retirement

    • ANSWER:
      You need earned income to invest in a ROTH ira.
      Just save in a savings account for now – that way you can buy a car and not have to finance it.
      /

48. QUESTION:
    What is your current investing strategy? How do you feel about the different investment…?
    …opportunities available today?
    Interest rates are great for savings accounts right now, the housing market looks like it could be in for trouble in the near future, the stock market has been volatile this week, but lots of companies are announcing earnings and many of them look good. The Dow has hit 14,000, and some say it could get to 15,000 by the end of the year.

    How do you like the various investments available today? How would you split your money up? Are you investing for retirement, short term gain, additional income, or trying to get rich quick?

    • ANSWER:
      I will focus on my approach for IRAs here. I also own rental properties to hedge against a weak dollar and inflation. The properties are professionally managed and throw off small before-tax gains. Never buy real estate unless you have renters taking care of your mortgage, tax and insurance costs for you. And get yourself a tax accountant who owns investment properties him/herself to maximize your after-tax gains.

      If you want to get rich quick, stop reading here. Feel free to hand over your money to the scamster or casino of your choice. Investing means buying assets that produce income. Buying assets in hope of unusual price gains is called speculation and should be discussed separately. The two terms are constantly confused. Some people call buying overpriced luxury goods “an investment”. I recently saw a posting for a ,000 Hummer from a guy who claims he “invested over 0,000″. I disagree with his choice of words.

      It is challenging to condense my investment portfolio approach into a short answer. Let me try:
      - The first thing to do is to stop feeding the broker. Brokers get fat from the commissions. I use FOLIOfn.com and pay 0 a year to make hundreds of trades per month.
      - The next thing is to acknowledge that even the professional stock-pickers produce poor average results. 80% of the fund managers don’t even beat S&P500 results. So why should we, on our limited time, try to beat them? Select a bunch of low-cost (ideally below 0.2%) ETFs with good P/E (price per earning, 16 or lower) and P/B (price per book value, below 2) numbers to build a diversified value-focused portfolio. Include about 20%-40% bond funds. With no end in sight for the weakness of the dollar, make sure you include basic material, energy and international ETFs. Then stick to that portfolio and only make changes when better (lower cost, better value) ETFs present themselves or when you want to cash out on unusual gains. NEVER change your portfolio after a crash. Build your portfolio with a crash in mind. You might also want to keep 5% of your assets in cash to profit from an unusual drop in asset prices.
      - If you just get started (let’s say with a lump sum from an IRA rollover), never buy into your new portfolio all at once. Ease into it with a small initial buy, the do buy-rebalancing transactions over a period of several months. This method is a sophisticated version of dollar-cost-averaging.
      - Do not believe what most financial advisors tell you about risk. The riskiest portfolio is the one that somebody else is managing for you for a fee. The second riskiest portfolio is the one that you don’t rebalance on a regular basis. Rebalancing your portfolio allows you to manage risk by cashing in on the winning assets and buying more of the cheaper ones. Notice that I’m not using the word “losing assets”. If you followed my advice and assembled a portfolio based on asset values (P/E, P/B), rather than on current price movements, so-called “performance” or “expert opinion”, you will not own ETFs that force you to sell at a loss. I rebalance my IRA portfolio about 2 to 4 times a week. (See commissions above)
      - For every 12-month period over the past four years, using these guidelines, I averaged 17% 12-month returns. S&P 500 (without dividends) averaged about half of that, during the same time period. It’s doable, and it does not take a rocket scientist, just a patient, consistent approach.

49. QUESTION:
    Investments for my dad’s retirement?
    I have educated myself with a lot of information on investing, retirement planning, and income growth since I’ve graduated from college and started working in the real world. I have conveyed this information to my dad and he seemed interested. He didn’t have the luxury that I have in planning for his financial future because he was too busy working hard to raise and support the family. All he did was save money in a bank account and possibly opened a few CDS. He is currently 52 years and will be retiring around 60+. I would like to help him out by setting up a retirement account for him. I have considered a Traditional IRA and/or a Roth IRA, but I was wondering if there were any alternative options. Right now, I am strongly leaning towards an IRA and will need to determine the most conservative approach for him in terms of growth, risk, and his age. Any help or suggestion would be much appreciated?

    • ANSWER:
      If he has a 401k plan, you can’t do an IRA. If he has nothing, you can. If he has a 401k, he can also do a Roth IRA if he is under the income limits. If you want to set one of these up, the best possible place would be with Vanguard. They have the lowest fees among any mutual fund. You can do something as simple as to pick a target retirement fund (in his case Target 2015 or 2020). Good job on helping him out.

50. QUESTION:
    What is the best place for me to invest my retirement money? I am 42.?
    Want to get more aggressive about investing my IRA. What is the best bet long term? Any suggestions?

    • ANSWER:
      GET A FINANCIAL PLANNER. Mine has been wonderful. Without her, I would have lost it all. She has grown my portfolio my 30% in 6 years.

      -MM