My Wealth.com asked:


There have been a lot of news reports recently about 401(k) plans becoming more transparent.

The government is discussing a new bill “401(k) Fair Disclosure for Retirement Security Act of 2009” in which the funds offered have to disclose their fees and expenses in a plain-English way to their participants. This is excellent news, but this may not be the only answer people need. People need financial education.

If you invested $500/mo in your 401(k) and made a 10% annualized return over 30 years, you would end up with $1.1 million dollars. Sounds great!

But look at the expense ratio of the funds in your 401(k) – some can be as high as 2% per year! That means your $1.1 million dollars is now worth $745,000 (assuming an annualized return of 8%). The fund company took $350,000 of your money!!

How do you make the most of your 401(k) and invest wisely? How can you stop giving your money away to the fund companies?

 A strategy that is frequently used by financial advisors is the “401(k) match / Roth IRA” strategy.

Contribute to your 401(k) and maximize your company match on contributions. Fully fund your Roth IRA. Return to your 401(k) and invest.

Companies mainly do contributions in 2 different ways (however there may be some other variations in your company plan): Contributions on base salary or a match on your contributions. For example:

If your company contributes 3% of your base salary, don’t contribute anything yet. Skip to step 2 immediately. If your company matches the first 3% of your contribution, then only put in 3% to get the full match. You’ve just made a 100% return. FREE MONEY!

Now you should continue your retirement savings using a Roth IRA. This savings vehicle is an amazing tool. It lets you pay taxes on your contribution now, lets it grow tax FREE and you can withdraw the money and use it in your retirement (as well as other situations) TAX FREE. You do not pay taxes on the growth at all!

 

Assuming our example above, if you put $500/mo into a Roth IRA over 30 years, you will have paid taxes on $180,000. However, after those 30 years, you should have around to $1,000,000 to use TAX FREE!

 

Now step 3. A rule of thumb for retirement savings is to try and save 15% of your income. Assuming you have not reached this guideline by steps 1 and 2, it’s time to return to your 401(k).

 

Pick an in-expensive fund (based on the expense ratio and your overall asset allocation) and invest your money there. Do look at the performance of the fund as well, as some cheaper funds are also poor performers, and some expensive funds have outperformed the market for years. Use your judgment as an educated investor we are teaching you to be!

 



MOSBY

temp_186827 asked:


Are you reaching your forties, and you do not have a good savings that will enable you to stop working any time soon? Well, even if you have a poor prospect for retirement, there is good news. There are opportunities to quickly regain the years it looks like you have lost. And there are several options out there, but there is one that far outweighs them all.

It is important to get out of debt, in fact is it imperative. But, believe it or not, a mortgage debt can be your big opportunity! The first step, however, is to target your higher interest debts. After that, your mortgage can prove to be your best chance in life.

Think of this, if you are able to pay off your mortgage ten years early, that is ten years of saving mortgage payments that you can turn into retirement savings. It is one thing to have your house paid off when you retire, but it is another thing to take some of your mortgage payments and then turn and put them into an interest bearing savings account, such as your 401(k) plan or a IRA.

A lesser option is to make extra payments throughout your loan. And there are several ways you can do this. For instance, if you were to take your bonus every year and pay it towards your mortgage’s principle, this will bring your interest down dramatically.

If you do not get a bonus from your employer, you can pay an extra $50,00 or even a $100.00 a month and you will be able to pay off enough principle throughout the life of your loan that will decrease the amount of money you would have paid in interest.

Another possibility–which is still not the best one–is to take part in a mortgage acceleration program, such as the bi-weekly or bi-monthly programs. But you need to know the difference between these two plans.

Essentially, what the bi-weekly program does is it enables you to stealthily make two weeks extra worth of payments towards your mortgage each year. For instance, if you change from paying your mortgage from monthly to weekly, you can pay 26 (the number of weeks in a year) ÷ 2 (the number of checks per month) and make the equivalent of 13 monthly mortgage payments. And the value of this plan is that it enables you to spread out your extra payments throughout the year, and it becomes almost indiscernible to you.

The bi-monthly program, on the other hand, accelerates your mortgage payments without causing you to make extra payments each year. For example, if you make half your mortgage payment at the beginning of the month, before it is due, and the second half in the middle of the month, you can make your mortgage payments essentially a little earlier, and thus drop your interest some. In reality, however, it only drops about a month total from your 30 year mortgage.

The best possibility, however, it to use the equity of your home to leverage against your principle, and thus pay your mortgage down in about a third the time. That would enable you to put up to 20 years or more of your mortgage payments into your retirement program, such as your 401(k). If you are in your forties, that means you can have 10 years of saving your mortgage payments by the time you are in your mid 60s.



LANHAM

Steve Jackson asked:


t comes to IRA retirement savings, you can never have enough. The individual retirement savings account, IRA, can help you save for your future regularly, and hopefully you will have been putting funds away for many years, but we have no idea how long that money has to last you! In some ways, it would be easier if for instance we knew that i would have to last us until we reach one hundred years old, but we have absolutely know way of knowing for sure. This means that we have a tough time budgeting for this unknown length of time.

Now, because of the tough economy, many people who should have been able to retire have had to postpone doing so, as they have found that they have insufficient funds even for the present never mind the future. Even for those who have been able to grow their IRA accounts, they might still have a tough time making ends meet, since what they thought was plenty of money to live on, really doesn’t provide for very much at all for their retirement.

There is a very strong message that is sent here, and that is that everyone should try their hardest to get some savings put into an IRA, an individual savings account, regularly, and save as much as possible for as long as possible. Now, I know that this is not always possible, and through no fault of your own. Circumstances change what we thought was a sure thing, the economy changes the number of jobs available, and the number of people applying for those jobs. Because things happen unexpected, things over which we have no control, we just have to do the best we can to make things work out. Unfortunately, that means low or no funds available for retirement, and since it is unlikely that the government is going to be able to help us out sufficiently, it looks like the times are going to be very hard for our seniors.

When it comes to choosing which type of account to put your savings into, there are plenty of choices. Consider each IRA savings account carefully, because they all have pros and cons which will be different depending on your financial situation. Some savings accounts have you deposit funds into them from money that has already been taxed, which means that when you take the funds out in your retirement, you do not have to pay any tax. For other accounts, you are tax exempt now, but you will have to pay the taxes when you withdraw the funds during your retirement. Both of these have their own advantages, but as always, you should chat with your financial adviser to see what is best in your case for your IRAs.

Check with the company you work for, as many companies have their own retirement program that you can deposit into.This used to be seen as a very secure proposition, but since the Enron disaster, people are more wary about using company retirement plans.The good news is that there are plenty of other plans that you can use. For example, you could invest in a Roth IRA, which is a somewhat newer retirement option. This account means that you pay the federal tax up front, so that when you withdraw the funds during your retirement you will not have to pay any federal tax.

Now, the most important thing of all is for you to have an IRA account, and that you make deposits to it regularly. You can greatly influence the standard of life you have in retirement by the amount of funds you put aside for there years. However, anything you can manage to save is much better than nothing when it comes to your IRA retirement savings. We can not depend on their being sufficient funds in the social security to be able to pay us a reasonable amount to live on, nor can we depend on there being a nice healthy inheritance form our relatives. In these days of economic uncertainty, there is no guarantee that social services will be able to provide us with a decent standard of living during our retirement, so we need to make sure the funds are there, by putting them aside ourselves. Remember that other people are struggling too, and having to eat into their savings, so what you thought might be a large inheritance, may not actually turn out that way. Do not have your retirement depend fully on government funds for your retirement, try to save some of your own each month. With careful planning and plenty of deposits into your IRAs, you will be able to live and enjoy your golden retirement years.

LAYMAN

TV Reporter asked:


Americans have lost $2 trillion in retirement savings since November. Their home values continue to drop and their retirement nest egg has taken a hit. We would like to talk to someone in the San Francisco Bay Area who is trying to adjust to this new economy. The interview would happen tonight (June 25) at 6:30PM. Anyone?
Americans have lost $2 trillion in retirement savings since November. Their home values continue to drop and their retirement nest egg has taken a hit. We would like to talk to someone in the San Francisco Bay Area who is trying to adjust to this new economy. The interview would happen tonight (June 25) at 6:30PM. Anyone?

Also…in response to one reply…we make requests on Yahoo! Answers, Twitter, Facebook…everywhere. We use every platform possible. Expect to see more requests in the future!

BACA

Jukebox_out-of-Order! asked:


This table says one should have 0.9 of your income by age 35 in retirement savings. That means if you earn 40,000 dollars you should have something like 39,000 in retirement accounts.

http://www.bankrate.com/brm/news/retirement/20071003_personal_finance_ratios_a2.asp

Does that mean the actual value of your retirement accounts should be 39,000 (which is dictated by the stock market being up or down), or is it the amount of money you put away?

BOWLING

small_business_CEO asked:


I’m a small business owner (4 full time employees) who does not offer any retirement plan or have one for myself. My employees are commission based only. What would be the best retirement plan for me and for all of us, individually? Thanks!

OTERO