Archive for the ‘Retirement’ Category

Are You Still Contributing to Your IRA?

By: Green Panda | Date posted: July 28, 2010 (5:00 am)

I’m amazed at how quickly this year has gone by. The heatwave reminds me it’s summer, but I can’t believe we’re in the last week of July.

I’m a bit late, but I usually like to check my IRA asset allocation and see if I need to make any adjustments to contributions. I made a few tweaks, but I’m pretty much keeping to my plan.

Asset allocation has a big impact on your account’s performance. You basically determine your assets allocation on factors, such as:

  • Time -How long will it be before you retire and start withdrawing? The longer you have, the more risk you can take.
  • Risk Tolerance – Some people are naturally more conservative than others. If the recent ups and downs have you wondered, then you may not want to put all you money in emerging markets for example.

Not Too Late to Contribute

Don’t get discouraged if you haven’t opened an account up. It’s still not too late to contribute. You have until you file taxes to make your contributions. If you file your taxes mid February 2011, you can make contributions that count for 2010 until mid February.

How much can you contribute to your IRA?

Right now you can contribute $5,000/year to a Roth IRA if your modified AGI is :

  • $167,000 for married filing jointly or qualifying widow(er),
  • $116,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and
  • $10,000 for married filing separately and you lived with your spouse at any time during the year.

Source: IRS Publication 590

Curious to Learn More?

Mike has some great posts here on getting the right asset allocation for you.

Don’t be afraid to ask others about what they’re asset allocation is and how they chose it. While there are some principals people should follow with how they design their portfolio, there is a lot of leeway based on individuals risk tolerance.

If you don’t have the time or interest in adjusting and balancing your portfolio, you may want to check out a target retirement fund. It is supposed to adjust as the years pass and it will become more conservative the closer you get towards retirement.

How are your retirement accounts doing? What’s your current allocation for your investment account? Are you going to change them?

My IRA’s Asset Allocation (March ‘10 Update)

By: Green Panda | Date posted: March 31, 2010 (8:00 am)

The first quarter of 2010 is finishing up and it’s about time to check up on my Roth IRA. I don’t like to check constantly as I’m investing for the long term and I don’t want to get caught up in the weekly hype of what to buy and what to sell.

What exactly is asset allocation and why is it important?

In short, your asset allocation is your plan for your investment contributions. How are you going to invest? Are you going to put it in stocks, mutual funds, bonds, ETFs, etc? While that may seem like a simple decision to make, it carries risks and rewards.

Historically, while stocks tend to perform well in the long run, it’s volatile in the short term. Bonds offer less risk in volatility but you also tend to get a smaller return. It’s a trade off you have to weigh for yourself and budget accordingly. Having the proper asset allocation means adjusting your allocation to fit your goal of either aggressive growth in the long term, stability of your money in the short term (for people retiring soon), or somewhere in between.

If you’re retiring in a few years, you want to be be conservative and not have most of your investments in stock. Your focus is probably going to be on stability as you’re planning on living off of it for a couple of decades. I have decades before I retire, so I’m focusing on more aggressive mutual funds.

My Roth IRA’s Asset Allocation

I currently have my Roth IRA at Sharebuilder and it’s been pretty cheap to keep it there. However, there are plenty of options if you’re looking for a place to open up an IRA:

  • E-Trade (Annual fee and minimum are waived when you sign up for electronic statements)
  • Vanguard (Some funds require $3,000 minimum)
  • T. Rowe Price
  • Charles Schwab ($1,000 minimum is waived if you direct deposit $100/month)

Right now, here’s what the asset allocation is:

I have a decent amount in cash because I want to buy into a Vanguard mutual fund, but they have a large minimum to purchase. I’ll probably pick it up next month.

Ask Reader’s Thoughts

How are your retirement accounts doing? What’s your current allocation for your investment account? Are you going to change them?

If you haven’t gotten started, now is a great time to start. The sooner you start saving for retirement, the better compound interest will treat you when you retire.

How My Retirement is Currently Doing? (June 09 Update)

By: Green Panda | Date posted: June 11, 2009 (8:38 pm)

My Retirement Account Update 

It’s been a while since I shared how my Roth IRA was doing. I checked my retirement account in October 2008 and shared how it went down over 20%. That certainly stung, but I didn’t withdraw money in reaction to the market. 

Since I’m investing for the long term, I realize that sometimes you have to accept the losses.

I’m happy to say things can climbing back up slowly. Here’s a screenshot from Mint of my Roth IRA’s returns for the last 6 months:

2009 IRA Returns

It looks good, but I’m anticipating more ups and downs with this market as I invest for retirement. 

Talking a bit more about the fluctuating returns of the stock market, here’s some information from Behaviorial Gap on the average returns from the stock market:

Average Is Not Normal       

As you look at slide #9, you notice that returns rarely fall into the average range of 9-11%. It can be easy for someone to get emotional based on the markets performance. Don’t do anything rash though. 

How can you prevent yourself from getting emotional and pulling money out from retirement? 

Automating your retirement contributions is way to invest without stressing over how the market is fluctuating. 

Short-term investors read magazines and watch TV shows that keep announcing THE stocks and mutual funds to buy every 3 months or so. Unfortunately this strategy rarely pays off. 

Long term investors focus on setting up their Roth (or traditional) IRAs, decide what to invest in, and automate their contributions. As you check on it, you may rebalance it to keep you asset allocation on track.  If you have a lifecycle fund, this is already done for you as it adjust as you get closer to retirement.

Have about you?

Have you been steady with your retirement contributions?  Have you taken money out of your retirement fund? If so, why? Any tips or suggestions? 

 

IRAs | Roth or Traditional Individual Retirement Accounts

By: Green Panda | Date posted: June 09, 2009 (2:10 pm)

Having an individual retirement account (IRA) can help you get started with retirement. Retirement planning is usually one of the furthest things on the minds of college students and new graduates. However, it’s a lot easier than many people think.

Individual retirement accounts allow you to easily set aside money for your retirement with some tax benefits.

What is the difference between a Roth IRA and a Traditional IRA?

Wikipedia defines Traditional and Roth individual retirement accounts:

  • Roth IRA – contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. Named for Senator William Roth.
  • Traditional IRA – contributions are often tax-deductible (often simplified as “money is deposited before tax” or “contributions are made with pre-tax assets”), all transactions and earnings within the IRA have no tax impact, and withdrawals at retirement are taxed as income.

As you can see, Roth IRA withdrawals are tax free while traditional IRA withdrawals are taxed.

How much can you contribute your Roth IRA?

The IRS has specific income limits with contributing to Roth IRAs. Right now you can contribute $5,000/year to a Roth IRA if your modified AGI is :

  • $169,000 for married filing jointly or qualifying widow(er),
  • $116,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and
  • $10,000 for married filing separately and you lived with your spouse at any time during the year.

How much can you contribute your traditional IRA?

Traditional IRAs have a different income limits with contributions. Right now you can contribute $5,000/year to a traditional IRA if your modified AGI is :

  • More than $85,000 but less than $105,000 for a married couple filing a joint return or a qualifyingwidow(er),
  • More than $53,000 but less than $63,000 for a single individual or head of household,
  • Less than $10,000 for a married individual filing a separate return.

Where can you open an IRA?

The good news is many banks, brokerages, and credit unions offer both traditional and Roth IRAs. Some charge a flat fee for the year, some take a fee for each transaction made, others can take a percentage, and some do all of this.

The idea is to keep your fees as low as possible and get the best performance.

Some online options for opening an IRA:

  • E-Trade (Annual fee and minimum are waived when you sign up for electronic statements)
  • Vanguard (Some funds require $3,000 minimum)
  • T. Rowe Price
  • Charles Schwab ($1,000 minimum is waived if you direct deposit $100/month)
  • Sharebuilder (No minimum to open; no admin annual fee)
  • Zecco( No minimum to open; $30 annual fee)

The sooner you start the better. It’s generally accepted that the sooner you start the better compound interest will treat you.

More Information on Individual Retirement Accounts

How My Retirement is Currently Doing?

By: Green Panda | Date posted: October 30, 2008 (1:48 pm)

 

My Retirement Account Update 

I checked my retirement account today, just to see what shape it is in. I knew it was going to be down, but I didn’t he an exact number. I check my portfolio in detail about once a quarter. So far this year, my portfolio is down 21.07%. I’m not happy about it, but I’m not panicking. 

Looking at the big picture we see that the average return from the stock market has been 11.69% from 1928 to 2007. Past performance doesn’t predict future prospects with certainty, but it does give us an idea of what to expect. 

Another reason I’m not going to pull money out of my retirement fund is because I’ll be hit with tax penalties.

How Dollar Cost Averaging with Investing Helps

Each time you invest, you’re buying a bit at a time. Many choose to automate their investments at a fixed rate. The same amount is spent but the amount of shares you buy changes. I like index funds and when the price is low, I can get more shares for the same price I’ve been putting in.

As time progresses, I’m hoping that overall my investments will grow and put me in a better position to retire (either earlier or have more cash).

Photo Credit:  NessieNoodle

Rolled Over Into a Vanguard IRA

By: Green Panda | Date posted: September 23, 2008 (9:04 pm)

Ok, so we finally mailed the paperwork to rollover my husband’s 401(k) into a Vanguard Roth IRA. The actual process took around total of 30 minutes. Sending out the paperwork? Over 2 weeks. We want to make sure his retirement investing goes further as we rollover his 401k account. 

Here’s how we rolled over my husband’s 401(k) into a Roth IRA:

Organized his old account’s paperwork. Before you rollover a 401(k) account, make sure you have the old account information by your side to save some time. I was still missing some information, so I also had to log in to the old account’s website.

Opened An Account At Vanguard. We went to Vanguard’s to start the process. You can fill out the paperwork online, but you have to print, sign, and mail it.

Chose Initial Investments.  Vanguard has wonderful index funds to choose from that are low cost and perform well long term.

Took 17 days to mail the paperwork. Someimes you’re just your own worst enemy.

Lesson learned

If you’ve been putting off getting your finances in order, get it down now. Don’t wait like we did.

Photo Credit: Strevo

Rolling Over 401(k)s

By: admin | Date posted: March 19, 2008 (11:13 am)

We’re doing alright preparing for this move. I’m dead tired, but once this is done, I’ll be able to rest easy. Something that I’m keeping in the back of mind for now is the plan for our retirement funds.

money2.jpg

We both have 401(k)s with our employers. My 401(k) is considerably less than my husband; one reason being I just got qualified this year.

What to Do with Your 401(k) When You Switch Jobs

There are basically three options for us (and everyone else in this situation).

  • Roll it over to your new job’s 401(k) or to your IRA. This isn’t a hard process, but it takes some time to fill out the paperwork. Since I already have an IRA it’ll be less paperwork than my husband if he decides to go this route.
  • Keep it at its current spot. I can’t do this as I don’t have enough vested to have my employer keep it in there. My husband has to decide if he wants to do this option. If he’s happy with the service and selection that he has, this is fine.
  • Spend it. (DO NOT DO THIS!!!!!) You’ll be taxed for early withdrawal and you’re undo the work you’ve put towards retirement. If you spend your retirement money, it will also effect your income when you d your taxes.

We haven’t made a decision on either the first or the second option. We haven’t even discussed it since we’re more concerned with more immediate needs like making arrangements for the moving truck and turning on utilities.

Hopefully, I’ll be able to relax on Monday.

Photo Credit: Zzzack

I enrolled in my company’s 401(k)

By: Green Panda | Date posted: February 15, 2008 (1:38 pm)

ducks_daviddennis.jpg 

Photo Credit: David Dennis

I’m excited! My one year anniversary was a bit more than month ago, so I can enroll in my company’s 401(k) program. I’ve been bugging Human Resources to try and get my benefits. I wasn’t pushing for the health insurance since my husband’s plan is cheaper and has better coverage.

When we did our taxes, we were advised to contribute more to retirement. I currently have an IRA and my husband has a 401(k) with his company.

I’ve been bugging Human Resources to try and get my benefits. I wasn’t pushing for the health insurance since my husband’s plan is cheaper and has better coverage.

I’m currently signed up to contribute 5% of my income which is the maximum that the company matches. I want to get as much free money as possible. I’m not allocating a higher percentage yet because I need whatever money I can save going towards paying down the car loan. Once the car loan has been pay then my retirement contributions will increase.

I want to continue on my retirement contributions. They not much in amount but I’m trying to maximize on the power of compound interest (Thanks Ramit!)

There some choices for allocation, but less than what expected from a company this size.

I’ve currently divided it with an aggressive target fund, an index fund of the S&P 500, and an index fund of ‘stable and established’ international companies. Surprisingly those were the only two index funds I saw.  I went with the aggressive target fund because the expense fees were low and it fit my goal of aggressive growth. The other options didn’t appeal to me as many of them had high expense fees and they were did worse on the 5 year average then index funds.

I made sure that I got no load funds. I’m already on a budget, no need to give my money away. How do I know this? Researching on line gave me this information:

It’s a commission that has no real benefit for you. The Fool.com observed:

….that there is no real difference historically between the performance of load funds and no-load funds in terms of year-to-year performance. In fact, according to the latest survey by the mutual fund data analyzer Morningstar, even excluding the drag on returns if the load were included in the calculation, no-load funds actually have a superior record to load funds over the last 3-year and 5-year periods.

This fact is also confirmed on the U.S. Securities and Exchange Commission’s site!

One thing that bothered me was the customer service. The representative was nice and friendly, but did not recommend the best fund for me. She had me birth date and other my account in front of her. Here’s the gist of what happened:

Me: “I’d like to get a target fund for my age.”

CSR: “Ok, ma’am (wow, I’m a ma’am now  J  ), *talking to self* 26…ok we have a target fund for 2020. Would that be fine?”

Me: “*pause* …excuse me did you say 2020?”

CSR: “Yes. Would you like to enroll in it?”

Me:: “No, I’m looking for something more distant and aggressive. I’m 26.”

CSR: “*pause* We have a 2030 and a 2040.”

Me: “I’ll sign up with the 2040 if that’s your most aggressive.”

CSR: “Yes. It is.”

So she was originally thinking of giving a 26 year old a retirement fund set to expire in 12 years. Well, it’s Friday, so maybe she started the weekend early. I know I would if I could. After I got my account set up I went online and tweaked everything in my account.

How is the 401(k) at your jobs? Do they give you options or is it limited? When did you qualify to enroll in it? When did you actually enroll?

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