SmallCapInvestor.com: Retirement Planning

Roth IRA's: Planning for the Future

Tue, 17 Jun 08 00:00:00 -0400

Before she passed away a few years ago, my mother told me I was bossy and a nag, and I have to admit, she was right! Specifically, I admit that I am maybe the world's worst nag on the subject of financial do's and don'ts to my friends and family.

However, I have a good excuse. For as long as I've been in the investment world, I have witnessed countless, seemingly small mistakes and omissions that people have made that ultimately turn into gigantic, colossal financial disasters. And the worst part is that most of these blunders -- if caught or avoided early on -- can actually result in tremendous opportunities to radically increase your financial stature.

Case in point: not opening and regularly contributing to a retirement plan. The Employee Benefit Research Institute found that just 33.1% of workers, aged 21 to 64, have a 401(k) plan and a mere 23% own an individual retirement account (IRA).

Those figures are absolutely amazing to me, especially in light of the Bureau of Labor and Statistics, that only some 11% -- less than 30,000 -- employers now offer their employees a pension plan. That's down from 112,000 in 1995. To add more salt to that wound, need I remind you that the old, fail-safe Social Security plan is in deep trouble. A recent article in Fortune magazine analyzed the latest Social Security Trustee's Report, concluding that by 2016 or 2017, the plan will be all but bankrupt. Yep, that's just around the corner, so don't count on that monthly stipend for your golden years, either.

Now, I realize I have covered this subject before in Financially Fit. But since our country is beset by severe economic woes, an uncertain election climate, and accelerating, as well as fierce, international competition, I'm going to "nag" you once again, as I believe it is imperative that folks take control of their financial future. And opening and contributing to a retirement account is crucial.

Time to Max Out Those Retirement Plans

Tue, 26 Feb 08 00:00:00 -0500

My parents and many of their contemporaries didn’t have to worry too much about saving for their retirement years, since many of them were covered by defined benefit plans funded by their employers.

My, how times have changed! Fewer and fewer employees are that lucky today. Instead, most of us are solely responsible for funding our golden years. Fortunately, Uncle Sam has provided a couple of vehicles that make it easy to save and come with significant tax advantages.

The first is a defined contribution plan – the 401(k), a savings and investing plan that Congress created via the Revenue Act of 1978. In this plan, the individual makes contributions, deducted from your paycheck on a pre-tax basis according to a stipulated formula. And then your employer may elect to match part or all of your contributions, in essence, giving you free money.

Right now, you can contribute up to 15% of your income to your 401(k) plan, which can over time add up to a lot of cruises, golf games and fancy retirement villas!

Why You Need a Roth IRA

Tue, 15 Jan 08 00:00:00 -0500

Individual Retirement Accounts (IRAs) were created in 1974, a boon to folks who either were not fortunate enough to participate in a company retirement plan and to others who just needed an impetus to begin saving for retirement. They were an almost immediate success. And by the end of 2005, according to the Investment Company Institute (ICI), IRA assets across the country totaled more than $3.3 trillion dollars.

And in today's world, with pensions few and far between, the need to personally save for retirement is more important than ever, propelling the growth of IRAs even faster and further!

The reasons for this success are twofold: tax advantages (as long as you meet the income requirements), and the allure of compounding—both benefits that can significantly increase long-term returns.

In 1998, Congress added a new twist, when legislation authorized the creation of the Roth IRA. By the end of 2005, also according to the ICI, Americans held some $145 billion in Roth IRA assets.

Roth contribution limits are the same as traditional IRAs, but are reduced by any contributions you make to traditional IRAs. Here is the current schedule for contributions for both types of IRAs:

2007                      $4,000
2008                      $5,000
2009 (and after)       $5,000

Employers, Pay Yourself First: Invest in Your Retirement

Tue, 20 Mar 07 10:53:42 -0400

Retirement Planning: Part 2

Tue, 24 Oct 06 00:00:00 -0400

Retirement Planning: It's Not Too Late to Start!

Thu, 19 Oct 06 00:00:00 -0400

Making the Most of your 401(k)

Wed, 09 Aug 06 00:00:00 -0400