10 Toughest
Retirement Questions
Previous-
The Answers You Need
Daniel R. Solin, author of 'The Smartest 401(k) Book You'll Ever Read,' takes on 10 of the toughest retirement questions and shares the answers in a straightforward, easy-to-understand style.
From how much you should save for retirement to what you should do if you have a lousy 401(k), click through our gallery to get no-nonsense answers to your biggest retirement concerns.
First Up: How Much Should I Save? -
Question No. 1:
How much should I save for retirement?
Dan's Answer: I have bad news and worse news. Most experts believe you will need 75% of your "pre-retirement" income in order to live with dignity in your later years. In order to reach that goal you need to save 15% of your income, but that number includes any corporate match your employer provides. The really bad news is ...
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Next: What Should I Invest In? -
Question No. 2:
What investments should I select for my 401(k) plan?
Dan's Answer: For most employees with a 401(k) plan, the best investment option is a Target Retirement Fund. These funds have allocations that are generally appropriate, and they automatically rebalance to become more conservative as retirement nears. I like them because of their simplicity: You invest in one fund and have no other choices to make. However, these funds are not for everyone ...
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Next: What About Annuities? -
Question No. 3
Should I invest in annuities as part of my retirement plan?
Dan's Answer: Annuities within a retirement plan are a poor choice. The big selling point of annuities is that they provide for a tax deferral. However, all investments within retirement plans are already tax deferred. You are paying a premium for a benefit you already have. For the majority of investors, annuities make no sense. You would be far better off in ...
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Next: How's My 401(k)? -
Question No. 4
How can I tell if I have a good 401(k) plan?
Dan's Answer: Most 401(k) plans are not good plans. A good plan would have no actively managed funds. It would have Target Retirement Funds, where the underlying funds are low cost index funds. It would also have a broad domestic stock index fund, a broad international stock index fund and a broad domestic bond index fund. All of these funds would have very low expense ratios. In addition ...
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Next: What If 401(k) Is Lousy? -
Question No. 5:
What can I do if I have a lousy 401(k) plan?
Dan's Answer: Complain to your Human Resources Department or your Plan Administrator. Here's how to get their attention. Ask them why your plan is not as good as the one for members of Congress. You can view this plan at www.tsp.gov. This plan covers ...
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Next: 401(k) vs. IRA? -
Question No. 6:
How do I choose between a 401(k) plan and an IRA?
Dan's Answer: You don't necessarily have to make a choice, since you are permitted to invest in both an 401(k) and an IRA, subject to limits on the amount of your contributions to each plan. Most investors should contribute the minimum amount to their 401(k) required to trigger the maximum employer match. Once you have maxed out your 401(k), consider a Roth IRA. It is important to understand ...
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Next: Invest in Company Stock? -
Question No. 7:
Should I invest my 401(k) funds in company stock?
Dan's Answer: No. You want a portfolio that has the right asset allocation for you and is globally diversified. If you invest in company stock, you are violating basic rules of investing by concentrating assets in one stock. This gives you much more risk, without a commensurate increase in expected returns.
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Next: Am I Paying Fees? -
Question No. 8:
How can I find out what fees I'm paying in my 401(k) plan?
Dan's Answer: Most 401(k) plans are polluted with unnecessary fees, some of which are disclosed and many of which are not. Ask your Human Resources Department or Plan Administrator for a breakdown of all fees in your plan. If they can't -- or won't --give it to you, ask them to order a fee audit, where specially trained accountants can make this determination. Remember ...
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Next: What About Emergencies? -
Question No. 9:
What if I need to borrow from my 401(k) plan in an emergency?
Dan's Answer: The maximum you can borrow from your 401(k) plan is 50% of the amount vested, up to a maximum of $50,000 in any rolling 12 month period. Your employer may place additional restrictions on your ability to borrow from your 401(k). Whether or not you are permitted to take a 401(k) loan, it's generally a bad idea. Here's why ...
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Next: Best Way to Withdraw? -
Question No. 10:
How should I proceed to withdraw funds I need in retirement?
Dan's Answer: The first place you should look when considering where to withdraw funds you will need in retirement is assets that will incur no tax. For example, withdrawals from your Roth IRA are currently tax free because you invested with after-tax dollars. While you are still in a higher tax bracket, withdrawing from your Roth IRA or other non-taxable assets is sound financial planning. Plus ...
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Next: More on Daniel Solin -
Dan Solin
More on the Author
Dan Solin is a leading securities arbitration lawyer and a Senior Vice President of Index Funds Advisors, Registered Investment Advisors.
Solin has appeared on 'The O'Reilly Factor,' MSNBC's 'Weekend Economic Review,' CNN's 'Money,' and Bloomberg Television, and is a frequent speaker on investment-related topics.
· More on Dan Solin
· Buy 'The Smartest 401(k) Book'
More AOL: Best Retirement Spots -
More on AOL:
Best Retirement Communities
Click through our gallery to see which retiree-worthy places fit the bill as freelance writer Carol Vinzant picks 14 retirement communities with something special to offer.
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Recent Comments
Cdpwpb 03:03:39 PM Oct 10 2008
what sad shape this country is in....God help America and us all
Mcc8007 09:25:46 AM Oct 05 2008
TO: MJFLAWoffc:What's a "bead dicision?"Is it what you made when you decided to drop out of school?
Mcc8007 09:23:57 AM Oct 05 2008
I CANNOT believe this article is advising people to invest in the stock market. It must have been written by stock brokers looking for commissions! Shame on AOL for displaying this.
Roncolospgs 11:34:15 PM Oct 04 2008
diivia thank you ang god bless tou and god bless america
Akoutdoors24 07:34:02 PM Oct 04 2008
HEREIS THE REAL DEAL ON RETIREMENT { TRUST YOUR GUT ] you made it to this point did you not, so truck on and enjoy every day left, more then likey all this retirement talk is just that only person to trust is your self, just remember this true saying, you cam in to this world with nothing and you will go out with nothing just like every one else, just enjoy today and stop playing the what iff tapes in your head. god bless
Pjimmij 06:09:24 PM Oct 04 2008
be wise and invest wise is what we were told. now the government is going to take what they feel is right for such good advice. wall street will also take their share to cover their asses and we are left out in the cold. well they say that heating bills will not rise as much as they thought. maybe out in the cold is where to be.
RD1064 05:37:05 PM Oct 04 2008
i get 908 from ss1 and 1900 a month from the state..i was badly injured on the job,the company sent me onm a 2 man job alone,i called them and said its to dangerous for 1 man actually i need 2 more they ordered me to do it alone,a 65 lb a/c fell and really hurt my back,after 2 operation i still could not work then the stress caused a heart attack,then open heart surgery,i sued and won,but the state of new jersey pays me monthly for the rest of my life,i dont understand that,i would have rather taken the 2 million settlement but i ended up with this 940 every 2 weeks,if they stop paying i have nothing and with things being so bad who knows they may have too,its just noty fair,but i then got lung cancer,they removed 1/5 of my lung,and a lump in my bile duct was removed,and i have emphazema,yet they fought mr over whether i was disabled.........a guy crossing the boerder is treated better..........good luck to you guys with jobs,you have no idea how lucky you are
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