Search results matching tag '401k'

4 common money mistakes

Karen Datko — Tue, 15 Sep 2009 14:26:00 GMT

This post comes from Jim Wang at partner blog Bargaineering.com.

One of the biggest challenges in almost anything you do is knowing where your blind spots are. In simpler terms, you don't know what you don't know.

So, today I'll point out four money mistakes you might be making that you don't even realize you're making. Hopefully, you're making none of them. If you are making one of these, don't beat yourself up over it. Now you know you're making it and you can take steps to fix it.

Paying too much tax too early. Would you give the government several hundred dollars a month, for no reason, just for the government to write you a check in April? Would you give the government a zero interest loan? Probably not (if you would, feel free to send me money). However, that's exactly what you're doing when you get a tax refund in April.

Optimize your withholding and adjust it so that you get a very little refund in April. I wouldn't be too aggressive about it -- owing taxes isn't fun -- but adjust it a little so that you keep the money for your needs. You can save it and earn interest, or you can put it toward projects, products or services you've had your eye on. Either way, it's your money. You should keep it.

I listed this mistake first because it's a minor mistake, if one at all. Considering how low high-yield savings account interest rates are, the interest you would have earned by reducing your withholding is minimal. Couple that with the strategy of forced savings -- you can't spend what you don't have -- your withholding can be used as an advantage. You can read more about these ideas in my devil's advocate post on why you shouldn't adjust your withholding.

Overanalyzing things. Analysis paralysis. Paradox of choice. This little demon has many names but the end result is the same: You don't make a decision and it's costing you.

This problem often happens with 401(k) plans where there are dozens of fund options. Do you want a balanced fund? An index fund? What about emerging markets? What about blue chip? Small cap? Bonds? Treasuries?

What happens? You don't pick anything. You don't invest because you don't know what you should have, what amounts, etc.

My advice is to set a deadline for any of the decisions you need to make and stick with it. The reality is that it's better to have made a decision, especially when it concerns investing or saving, than to put it off. Every single day you delay is a day of interest you could be earning. Need some ideas for investing? Consider a lazy portfolio. Not sure where to open a Roth IRA? Check out these discount brokers offering cheap stock trades. Just pick one.

Maintaining too high a checking account balance. This isn't a killer money mistake but one that many people make. If you know how much you're spending each month, you should try to maintain as low a checking account balance as you can and save the difference in a higher yield savings account.

How do you check this? One way is to budget so you know how much you spend. Another way is to look at your daily balance and see how low it gets. If your balance hasn't gone under $5,000 in the last few months, you might want to take at least half of that and put it in a savings account. Savings account rates aren't phenomenal but they're better than getting nothing.

Overpaying for index funds. An index fund is a simple creature -- match the benchmark index. An S&P 500 index fund matches the holdings of the S&P 500. Easy as pie. The mistake here is that you might be overpaying for an otherwise simple product.

Two of the cheapest index funds, and we'll use the S&P 500 index as an example, are the Fidelity Spartan 500 Index Investor Fund and the Vanguard 500 Index Investor Fund. The Fidelity Spartan 500 has an expense ratio of 0.10% and the Vanguard 500 has an expense ratio of 0.18%, which is 80% higher.

If you have your holdings in the Vanguard 500, I'm not advocating you move your funds to Fidelity. However, if you are paying more than 0.18%, which is already an 80% premium over Fidelity, then you're definitely overpaying.

Is there a money mistake you recently discovered that I might be committing but don't know about? Let me know in the comments. We all need help finding our blind spots.

Related reading at Bargaineering:

Are online savings accounts worth it?

2009 federal income tax brackets

Best online discount brokers

Should you borrow to repay a 401(k) loan?

Karen Datko — Fri, 31 Jul 2009 13:33:00 GMT

This post comes from partner blog The Dough Roller.

One of the features of many 401(k) retirement plans is that you can borrow money from your own account. While 401(k) plans are not required to permit plan participants to take out loans, many plans do.

Much has been written about the pros and cons of 401(k) loans. One of the potential drawbacks comes into play if you leave your job (voluntarily or otherwise) while you still have an outstanding loan from your 401(k) plan.

When this happens, you generally have two options: Pay back the loan in full within 60 days, or don't. If you follow the second option, the IRS will treat the loan as an early withdrawal from your 401(k) plan and, with some exceptions, smack you with a 10% penalty of the outstanding loan amount AND require you to pay taxes on the distribution.

Thus, you could easily end up paying 30% or 40% of the outstanding loan amount in penalties and taxes. It goes without saying that failing to pay back the loan can be a costly decision.

A problem that often arises, however, is that folks want to pay back the 401(k) loan, but can't afford to do so. Particularly in difficult economic times, many people are let go and lack the available funds to repay the loan. And that raises an important question: Should you borrow to repay a 401(k) loan?

The short answer, in my opinion, is absolutely yes. And to my surprise, it's also Dave Ramsey's advice, and we all know how much he preaches against nonmortgage debt. Between the taxes and penalties you'll owe if you don't repay the 401(k) loan, the cost will almost always be greater than a short-term loan at reasonable rates to repay the 401(k) loan. In addition, by not repaying the 401(k) loan, you forever remove that money from your retirement investments, thus losing the tax-deferred return on your 401(k) investments forever.

But the question still remains, where should you look to borrow money to repay a 401(k) loan? Here are a few alternatives:

Home equity line of credit. Perhaps the first option would be to tap a home equity line of credit. Equity lines generally come with reasonable interest rates and are easy to access.
0% balance-transfer cards. Another potential option is to take advantage of one or more 0% balance-transfer offers. Before going this route, however, make sure you can pay off a 401(k) loan with the balance-transfer card. Also keep in mind that the introductory rate periods are now generally just six months. After that, the interest rates adjust to whatever regular APR applies to the card.
LendingClub. LendingClub offers unsecured loans up to $25,000. Depending on your credit history, credit score, and other factors, you can obtain a loan at a reasonable interest rate. All loans must be repaid over three years, although you can choose to pay off the loan sooner.
Unsecured line of credit. You can obtain unsecured lines of credit from most banks and credit unions. Interest rates will vary significantly based on your credit history. I have an unsecured line at Citibank that I rarely use, but it does come in handy for short-term loan needs.

What's your take? Should you borrow to repay a 401(k) loan if you don't have the funds available to repay the debt?

Related reading at The Dough Roller:

OptionsHouse review

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Balance-transfer smackdown

Should you stop saving for retirement to pay off debt?

Karen Datko — Fri, 29 May 2009 13:55:00 GMT

This post comes from partner blog The Dough Roller.

Recently I published an article called "Dave Ramsey unleashed." I learned long ago that any post about Dave Ramsey will receive a passionate response from readers. Those who follow his financial teachings do so with "gazelle-like intensity," as Dave would say.

One response I received in both comments and e-mail is that Dave Ramsey teaches that one should stop contributing to retirement savings (whether 401(k) or IRA) while paying off nonmortgage debt. The question is whether this is the right choice.

The first thing to keep in mind is that there is no "right" choice. There is a reason it's called personal finance, as a reader reminded me just the other day. That's not to say that any choice is a good one. But there is almost always more than one reasonable approach to a money-management decision. For example, while Dave Ramsey would stop saving for retirement to pay off debt, as would Michelle Singletary, Liz Pulliam Weston believes we should not stop saving for retirement to pay off debt.

With that in mind, let's walk through several steps that will help you make the best decision for you and your family:

Evaluate your options

Step 1: Size up your debt. The first step is to write down all of your nonmortgage debt and the interest rates you are paying. Credit card debt can easily be at interest rates in the double digits or even above 20%. Car loans, school loans and home-equity lines of credit are typically at lower interest rates. It's helpful to note the amount of the remaining balance, the minimum monthly payment, and how much of the monthly payment goes to interest.

Step 2: Size up your retirement savings options. Here, the big key is to look at any company contribution matches you're entitled to receive. A typical match might be 50 cents for each $1 you contribute to a 401(k), up to 6% of your salary. Some companies will match 401(k) contributions dollar for dollar, although that is becoming more rare. You'll want to understand how much money you'll leave on the table if you do not take advantage of the matching contributions from your employer.

It's also important to note whether your employer matching contributions vest immediately, or if you have to wait some period of time before the contributions actually belong to you.

Step 3: Calculate your debt-free date. It's helpful to calculate how long it will take you to pay off the debt if: (1) you continue to contribute to your retirement, or (2) if you stop contributing to retirement and use the money to pay down debt. Keep in mind that contributions to a traditional 401(k) are tax-deferred. As a result, if you stop making those contributions, you won't have the full amount to put toward debt; you'll need to subtract the amount that will be withheld for taxes.

Why Step 3? Calculating your debt-free date can be a real eye-opening experience. You may be pleasantly surprised or completely depressed.

To see these steps in action, let's take a look at the following hypothetical financial situation:

Household income: $80,000.
Credit card debit: $20,000 at 15% interest.
401(k) matching: $1 for $1 up to 6%.

By setting out this example, we've taken care of Steps 1 and 2 above. We've listed our debt and know what the interest rate is. We also know what our 401(k) matching contributions will be if we contribute to our retirement. Now let's look at how long it will take us to pay off the debt.

As a rule of thumb, the minimum monthly payment on a credit card is 2% of the balance plus interest. This does vary from card to card, so if credit card debt is what you're up against, you'll want to contact the credit card issuer to see how it determines your minimum payment. But using this assumption, our next credit card payment on $20,000 of debt at 15% would be $487.50. If we continued to make that exact payment each month (even though our minimum monthly payment would decrease as our balance went down), we'd pay off the debt in 58 months, paying more than $8,200 in interest.

If you are wondering how I calculated that time period and total interest payments, I used an Excel debt-reduction spreadsheet calculator. It's easy to use, very flexible, and free. Here's the link to check it out.

Now let's assume that instead of contributing 6% to retirement (which would total $4,800 on $80,000 in income), we put retirement savings toward the debt. Since we'll have to pay state and federal taxes on the $4,800, let's further assume that we'll actually take home $3,840 of this amount (after 20% in taxes), or $320 a month.

According to the spreadsheet debt-reduction calculator, the extra $320 reduces the time to pay off the debt from 58 months to 30 months. It also reduces our total interest payments from about $8,200 down to about $4,100. During the 30 months to pay down the debt, you would have given up 6% matching contributions totaling $12,000.

We can now compare the results between paying the debt off in 58 months while we contributed to our 401(k) with paying off our debt in 30 months by forgoing retirement contributions. Here's how it looks:

	Retirement + Debt	Debt Only
Retirement Savings (Months 1-30)	$24,000	$0
Retirement Savings (Months 31-58)	$22,400	$22,400
Interest Paid	$8,200	$4,100
Extra Savings (Months 31-58)	$0	$13,650
Total Savings - Interest	$38,200	$31,950

A few things about these numbers: First, investment gains or losses have not been factored in. Second, the $13,650 for "extra savings" represents the amount that was being put toward the debt. Once the debt is paid off, that amount can go to savings.

At first glance, the numbers seem to strongly support continuing to contribute to retirement while paying down debt. The difference of $6,250 is a lot of money. But one thing to keep in mind is that the retirement contributions eventually will be taxed. Assuming a 20% state and federal tax rate, the extra $24,000 put toward retirement in the first column of numbers will eventually get reduced by 20%, or $4,800. Factor that tax into the math, and the difference between these two options is a lot smaller.

Making a decision

When all is said and done, here are the things to consider:

Matching retirement contributions. The better the employer match, the more likely one should continue to save for retirement to take advantage of the match. If there is no employer match, focusing on debt is often the best choice. Even with a dollar-for-dollar match, if the interest on debt is high enough, the decision may still be a close call.
Debt interest. The higher the interest rate on debt, the more likely one should stop saving for retirement until the debt is paid off. If the debt is on no-interest or low-interest credit cards, low-interest home-equity lines, or is a low-interest school loan, then continuing to save for retirement while paying down debt becomes a better option.
Be honest. Before putting a stop to retirement savings, be honest with yourself about debt. One of the worst outcomes is to stop saving for retirement to pay down debt, only to find yourself going into more debt. If you're not serious about getting out of debt, or you think there is a good chance you'll charge the cards back up once they are paid off, keep saving for retirement.
Time to pay off debt. For those with debt that will take many years to pay off, putting retirement savings on hold may be a bad idea. It's one thing to stop saving for retirement for a year or two. But we all know that the key to successful retirement savings is to start early.
It's not all or nothing. Keep in mind that you can compromise. Rather than saving nothing for retirement or contributing enough to get the full company match, you can meet in the middle. You can contribute some to retirement, even if it doesn't take full advantage of the company match, and put the rest toward debt.

In our case, the nonmortgage debt we have is at very low interest rates. The highest interest we currently pay, after taxes, is about 3%. On top of that, my employer matches 401(k) contributions dollar for dollar, and the matches vest immediately. So we'll keep saving for retirement while paying off debt.

How do you make this decision?

Related reading at The Dough Roller:

Save or repay debt: That is the question

How to find affordable health insurance online

3 gadgets that can cut your energy costs by 30%

Money mistakes that will have you eating dog food

Karen Datko — Tue, 19 May 2009 14:40:00 GMT

Having one or two bad money habits probably won't land you in the poor house, but a lifetime of making the 50 money mistakes on Jeff Nickles' list could mean dog food on your dinner plate. That's not exactly what we had in mind when we urged you to eat at home more often.

What? More lists? you say. Sorry, but we think these snappy reminders are worthwhile. No matter how much we emphasize the basics of personal finance, we always find people who say, "I didn't know that was a bad idea."

For instance, how many people still routinely buy extended warranties on products? "You can always find someone who was glad they bought the extended warranty, but for each of these there are a thousand people who gained no benefit from the extra cost," Jeff says. "This is exactly what the warranty provider banks on."

We picked out others from Jeff's post called "50 bad money habits that will leave you eating Alpo for dinner" at My Super-Charged Life that many people, including some we know, are guilty of.

Investing in things you don't understand or, we might add, choose not to understand. That pertains to all the people who are getting into cash gifting clubs and other pyramid schemes.

Buying a new car every two or three years. Why did that become the norm for so many people? Jeff says, "Buy a good vehicle that is two years old and keep it until it wears out." Another related bad money habit on Jeff's list is "buying too much of what depreciates."

Borrowing from your 401(k). This is your retirement savings, not your piggy bank. If you're still tempted, read "7 reasons why borrowing from your 401(k) is bad, bad, bad!" at Gather Little by Little.

Owning more pairs of shoes than there are days in a month. We'd think having only 15 pairs of shoes would be excessive.

Going to the casino every week. Trust us, you're going to lose money. "Casinos are in business to make money, not give it away," Jeff says.

Overbuying gifts. How are you improving your family's well-being if your Christmas overspending is putting your family in debt?

Pursuing debt consolidation. It may or may not reduce your monthly payments. Often you're better off just sucking it up and paying your bills.

Insider's guide to debt consolidation

‘Gifting club' pyramid schemes flourish on Web

Can't stay away from your 401(k) or IRA?

Are 401(k)s a bad idea?

Karen Datko — Thu, 07 May 2009 17:48:00 GMT

This guest post comes from Frank Curmudgeon at Bad Money Advice.

A reader named Trent pointed me to a story that "60 Minutes" did recently, "Retirement dreams disappear with 401(k)s." It's not their best work, and I'm not one who thinks much of their best work.

Helpfully, the CBS Web site gives a near transcript of it, so I can easily quote the way over-the-top copy read by the reporter, Steve Kroft.

It was a gray, chilly morning in midtown Manhattan and a line of unemployed, mostly white-collar workers stretched for blocks around the Radisson Hotel. More than 1,000 middle managers, stockbrokers, consultants, secretaries and receptionists had come hoping to find a job.

It was called a career fair, but there was no merriment -- only a whiff of desperation.

Many of the people at the career fair have been out of work for months and burned through their liquid assets; their future, even bleaker than the present.

At the non-merry career fair Kroft interviews some late middle-age folks with bleak futures. (Something I can really sympathize with.) Kroft does get a few moments of moving video when an executive assistant with 30 years of experience pleads for somebody in the television audience to hire her. But that's not the fallout of the Wall Street implosion on which "60 Minutes" wants to report. This story is on 401(k)s.

Helpfully, these New Yorkers with bleak futures have brought their 401(k) statements with them to the career fair. And naturally, one of them has brought it unopened so CBS can share the drama of him opening it with America.

The poor guy is 60 years old, planned to retire at 62, and "nearly half of his life savings" has been lost. His 401(k) is off $140,000. Ouch. Was that all his savings? "60 Minutes" doesn't mention anything else. So he was three years from retirement and had only $280,000? In New York? I'm thinking (and hoping) there was more money in other accounts, but CBS is focused on 401(k)s and nothing will throw them off the scent.

For example, they pass up the story of how a guy in the final years before retirement could allocate his assets in a way that he could lose half his assets. It could be smugly assumed that he was foolishly aggressive in his choices, but I bet he didn't know any better. He didn't understand how aggressive he was being and how dangerous his situation was. How that could happen would have made a good story, but, alas, I digress.

This "60 Minutes" story is on how 401(k)s are a failure, and possibly a bad idea. According to them, 401(k)s "were never designed to be retirement plans in the first place." Or, to be more precise, it was just a part of a larger retirement plan, most of which was to be provided by government and paternal companies. "It was supposed to supplement the two traditional income streams for retirees -- Social Security and pensions."

This is hogwash. First, it was Social Security that was meant as a supplemental source of retirement income when it started. Second, corporate pensions were never as universal as nostalgia suggests. At their peak, which was a while ago now, less than half of American workers were covered by them. And third, although I don't know what was in the minds of lawmakers when the 401(k) law was enacted, in practice it is very explicitly thought of as a substitute for a pension plan and as far as I know this has always been the case in the corporate world.

People in the investment business call pensions defined benefit, or DB, plans and 401(k)s, IRAs and the like, defined contribution, or DC, plans. For decades now, there has been a movement away from DB to DC. It may have been under-reported by the media and under-debated as a policy issue, but it has been massive and almost universal.

Companies don't like running DB plans for two big reasons. First, they are hard and expensive to run. The company is forced into a sideline of being an insurance company and investment manager in addition to whatever it is that it does for a living. If the investments do poorly, or if retirees live longer than expected, then the company has to take more money out of the business to make up the shortfall.

But the other, and at least as significant, reason that companies don't like DB plans is that their employees don't like them very much either. Obviously, if given the choice between having a pension and not, everybody would choose to have one. But on a perceived-benefit-per-dollar basis, DB plans are a poor way to compensate your employees. From the workers' point of view, the pension benefit they accrue in a given year is often very abstract and uncertain. If they work some number of years, they will get some percentage of their (not yet known) final salary. If they leave the company after only a few years, which is statistically likely, they often get nothing.

In contrast, the benefits from a DC plan are immediately obvious to the worker. They get paid countable dollars that they can save in a tax-deferred vehicle. Often the company matches some of their contributions. Although those company matches sometimes have a vesting schedule, in general DC plans are completely portable, meaning that workers can take their savings with them when they leave the company.

The "60 Minutes" piece does all it can to portray the DB-to-DC conversion as another example of evil big business shortchanging the little guys. It may be that the little guy was indeed shortchanged by this, but what CBS is talking about is a huge demographic shift, not some small accounting trick. It would make as much sense to bemoan the decline in classified advertising in newspapers or the shrinking pay-phone industry.

And those little guys who are now worse off were willing accomplices in their own downfall. They were enthusiastic about having control of their own money, rather than trusting somebody else to take care of their retirement savings. But like a teenager desperate for a driver's license, craved freedom sometimes has tragic consequences. Many, out of ignorance, made foolish choices about how to invest their money. And many did not set aside enough money each year to begin with, choosing to convert what would have been their part of a DB plan not into a DC plan but into cool toys and fun vacations.

To me, what Americans did wrong managing their own retirement savings, and why, would have made a much better and more interesting story. Which is why I am not a television news producer.

Related reading at Bad Money Advice:

Our personal-finance problem

Fuzzy retirement math

First post in a series: Dave Ramsey

How to pick your first mutual fund

Karen Datko — Fri, 27 Mar 2009 13:37:00 GMT

This post comes from partner blog The Dough Roller.

Picking your first mutual fund is kind of like a first date -- scary at first, but later you wonder what all the fuss was about. And with the recent market volatility, investing in the stock market can be downright horrifying.

A couple years ago, a close relative spent some time with my family and me. We'll call her Susie (not her real name). Susie was 31, had one daughter (cute as can be), and had no retirement savings (not so cute). Her employer not only offered a 401(k), but also matched 100% of all contributions up to 6% of Susie's pay.

We got to talking about why she'd never starting saving for retirement, and her answer was illuminating -- she was intimidated.

Sure, there were times when money was tight, but one of the biggest hurdles for her was not knowing what to invest in. We spent about 30 minutes looking over her investment options, and I'm happy to report that she enrolled in her company's Fidelity 401(k) plan and began contributing 7% of her gross pay.

If you or somebody you know is in a situation similar to Susie's, this article is for you.

What's the biggest investing mistake you can make? As intimidating as picking your first mutual fund may be, the absolute biggest mistake you can make is not picking your first mutual fund. It's easy to put off retirement savings for another week, or another month, or another year while you think about your investing options. Susie's 401(k) had about 12 fund options, including stock and bond funds and a few lifestyle or fund-of-fund options (basically, a mutual fund that invests in other mutual funds rather than individual stocks). Picking any of those mutual funds would have been a better choice than not investing at all.

The point is, don't let fear or intimidation keep you from picking that first fund.

What should you look for in your first mutual fund? Assuming you have many, many years to retirement (which I hope, since this is your first mutual fund), at least two things will be important to consider in picking your first fund:

Diversification. A mutual fund that invests in a wide array of companies is a great choice for a first fund. Some mutual funds are limited to a specific industry, sector or geographic region. While these can be great funds as part of a larger asset-allocation plan (See my "Beginner's Guide to Asset Allocation" series), they would not be my choice for a first fund.
Cost. Cost is always important. For an S&P 500 index fund, look for costs to be less than 10 basis points (0.1%). For actively managed funds, I look for costs to be less than 100 basis points.

Two options

With these considerations in mind, here are two good choices I'd seriously consider today if I were starting out as a new investor:

An S&P 500 index fund is a great place to start. This was Susie's choice. Her plan offered a Fidelity S&P 500 index fund that costs just five basis points per year (0.05%). Remember that 100 basis points is equal to 1%. In other words, for every $100 Susie invests in this fund, the fund will charge her account 5 cents per year. And the fund provides instant diversification, as it invests in the 500 largest U.S. public companies. One thing to note is that the amount invested in each of the 500 companies is based on the market capitalization of the company, which I've written about before. What that means is that more will be invested in the larger companies in the fund than will be invested in the smaller companies.
Single-fund solutions. An index fund is not the only option. Another choice Susie had was to invest in a fund that owns other mutual funds. Fidelity calls them Freedom Funds while Vanguard has a similar set of funds it calls Target Retirement Funds. These funds provide a mix of domestic and foreign stock funds and bond funds all rolled into one. The mix is based on how many years you have left until retirement. The upside is simplicity: One fund and you're done. The downside is lack of control. You're basically limited to a few options. Again, not a bad choice, just not what Susie wanted.

Other options

There are other options, of course. Susie could have chosen the Fidelity Magellan Fund (FMAGX). The fund was closed to new investors at the time, although the option was available to her through her company's 401(k). Magellan is an actively managed large cap fund that may have seen its best days years ago under the management of Peter Lynch. My first mutual fund was Legg Mason Value Trust (LMVTX), another actively managed stock fund run by Bill Miller. Picking an actively managed fund, I believe, requires a lot more research than choosing an index fund or single-fund solution. So I think Susie made a great choice for her first fund.

If you are a beginner, I highly recommend the book, "The Bogleheads' Guide to Investing." I bought Susie a copy, which she promised to read. Along with the Fidelity S&P 500 index fund, she was off to a great start. If you're just beginning or know somebody who is, let us know how you picked your first fund.

Related reading at The Dough Roller:

ALERT: Refinance your mortgage now!

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Target retirement funds

Get free advice to jump-start your retirement plans

Karen Datko — Wed, 07 Jan 2009 22:25:00 GMT

On two days this month, you can get free answers to your retirement questions from people who normally charge $150 to $300 an hour.

This wonderful opportunity -- called Jump-Start Your Retirement Plan Days -- is sponsored by Kiplinger's Personal Finance magazine and the National Association of Personal Financial Advisors -- an organization of fee-only advisers.

If you're nearing the end of your career or just starting out, you're probably worried about your dwindling retirement accounts, so this advice couldn't come at a better time. Here are the details:

Help is available between 9 a.m. and 6 p.m. EST on Jan. 13 and Jan. 30.
Call (888) 919-2345 (that's a toll-free number) or log on to www.kiplinger.com/links/jumpstart/.

If you want professional financial advice from someone who is interested in your welfare and isn't trying to sell you anything, a fee-only adviser is the way to go. These people really know their stuff.

Last year during Jump-Start Days, about 4,100 people took advantage of this free service.

"These are frightening times for investors," Kiplinger's Personal Finance editor Janet Bodnar said in a press release. "But it's important to take a long-term view and to make decisions based on facts, not just emotions. These Jump-Start Days are a great way for consumers to evaluate whether their retirement goals are on track."

Related reading:

Can you trust your financial adviser?

Make your money last in retirement; 5 keys

Plan for your retirement

How much will your retirement cost?

Surviving (and thriving) in my sixth decade

Donna Freedman — Fri, 05 Dec 2008 17:19:00 GMT

Today is my 51st birthday and it's already looking a lot better than my 50th because this year my building isn't flooded.

At 51, some people are looking forward to retirement. Personally, I expect to have to work for a long time, for several reasons. Having spent 13 years of my adult life either part time or freelance means my Social Security isn't huge. A fair amount of my retirement is based on a 401(k) from my newspapering days, and we all know what's happened to 401(k)s recently.

I can't count on getting a decently paid job when I finish school next December. No graduate can. But unlike many 22-year-olds, I won't have huge student loan debt. My needs are fairly simple, so despite rising food prices and the necessity of funding my own health insurance, I could likely still survive on $12,000 a year -- not lavishly, mind you, but I'd be fed, housed and insured.

But I have another advantage, too. Upon graduation I won't have the paralyzing anxiety that comes from not knowing what I want to do with my life. Nor will I have the burning need to beat everyone else out for the Dream Job.

If I can't find a good position and freelancing doesn't pay the bills, I'll look for part-time work at the various businesses within walking distance of my North Seattle address.

It's not that I don't want to find a great position somewhere. It's that I'm at a stage of life where it matters less to me. Certainly I'd like to be comfortable and secure. But I'm finally comfortable enough in my own skin, and secure enough in my own identity, to know that a job does not define me.

Making smarter choices
Please note: I am not advocating that you just drift through life, hoping things will work out. On the contrary, I think you should take charge a lot earlier than I did. I was almost 50 years old before I opened a Roth IRA. Make smart use of your money from an early age and you won't be playing catch-up.

But I also hope you'll be not just mindful with your funds, but generous as well. I would have more money right now if I hadn't given a cash wedding present to my daughter and her husband, if I weren't donating to charities, if I weren't giving dollars to people on the street, if I weren't regularly sending money to a couple of relatives who are struggling.

Wouldn't it be smarter to give away less? Sure. But would that make me happy? Nope. Putting on one's own oxygen mask first is definitely smarter. But to me, giving is a priority.

I may be sorry one day if I don't reach all my financial goals. Yet I can't be sorry about helping others. I doubt I'll lie on my deathbed saying, "Darn it, I wish I hadn't shared!"

Wanted: A little equilibrium
In my 51st year I'll be seeking overall balance. Right now my life is pretty lumpy. A health condition is causing fatigue and what I can only describe as "brain fog," which makes the school/work mix a lot more challenging. My grade point average is 3.83, but it's been a real struggle. And there's no support system; if shopping, cooking, cleaning and laundry are to be done, they'll be done by me.

This would be a stage of life at which one might start going out to dinner a lot. But I usually don't, because my time is too limited and because, yes, I can use that money elsewhere -- either for the Roth IRA or the Roots young adult shelter.

A former co-worker once told me about the "20-40-60" rule. At age 20 you think, "Everyone's looking at me -- what do they think of me?" At age 40 you think, "Everyone's looking at me, but who cares what they think?" And at age 60 you realize, "Nobody was ever looking at me! Why did I spend so much time caring what other people thought?"

Apparently I'm a little ahead of schedule. One of the most delightful surprises about reaching 50 was the realization that all the things I fretted over as a younger woman really don't matter. I guess that's why so many women turn rogue in midlife: We realize that most of what kept us in line all those years was the fear of what everyone else thought and some mythical axe that would fall if we raised our voices.

It's getting harder and harder for me to care what other people think. I will no longer let my life be determined by other people's ideas of how I should be living it.

'... 7 bankers begging, 6 hedge funds failing ...'

Karen Datko — Fri, 28 Nov 2008 22:15:00 GMT

Christmas songs are already playing -- nonstop, in fact -- where "rutgerskevin" works, and that's gotten him in a holiday frame of mind, tinged by the economy.

Thus was born his clever version of "The 12 Days of Christmas" at The Red Stapler Chronicles. Sing along: "On the first day of Christmas, this economy gave to me a shrunken 401(k)."

And by the fourth day, well, he's pretty much nailed it:

On the first day of Christmas, this economy gave to me ... a shrunken 401(k)

On the second day of Christmas, this economy gave to me ... 2 bailout packages and a shrunken 401(k)

On the third day of Christmas, this economy gave to me ... 3 survived layoffs, 2 bailout packages and a shrunken 401(k)

On the fourth day of Christmas, this economy gave to me ... 4 calls from creditors, survived layoffs, 2 bailout packages and a shrunken 401(k)

You get the drift. Go to the post for the complete lyrics. Among the "gifts" are bank failures, nightly Spam dinners, bailout packages and calls from creditors.

Puts you right in the spirit, eh? Especially considering the real thing costs $86,609 this year, up 10.9% from 2007, according to annual data released Monday (that we read every single year, no matter how silly. Tradition is tradition).

PNC Wealth Management checks jewelry stores, dance companies, pet stores and other sources to compile the list. But the faltering economy has also brought down the cost of some items. Demand for gold rings is down, and so are prices, about 11%. The three French hens (down $15 to $30) and six geese a-laying (down $120 to $240) reflect declines in food prices.

But the increased minimum wage means eight maids a-milking will cost 12% more, and the better-paid 10 lords a-leaping, 11 pipers piping and 12 drummers drumming are all up about 3%, reflecting the general average wage increase.

And hey, if a poor man's "12 Days of Christmas" doesn't do it for you, maybe another person waxing poetic on the joys of a thrifty holiday will. Marla Joe Fisher found 10 reasons for thanks, starting with the giddy thrill of avoiding Toys 'R Us.

Is your 401(k) match on the chopping block?

Karen Datko — Fri, 21 Nov 2008 02:21:00 GMT

It's bad enough that your retirement funds are shrinking at a disturbing rate. Now some employers have stopped matching employee contributions to 401(k)s, and Nickel at Five Cent Nickel suspects more companies in struggling industries will follow their lead.

General Motors, Ford, Frontier Airlines and several other large companies have suspended 401(k) matches, and The Wall Street Journal reports that a growing number of small business are also put matching on hold.

Nickel writes: "Imagine how you'd respond if you received a memo saying that you've been targeted for a salary reduction. A cut in retirement benefits should be interpreted in exactly the same way."

The Associated Press explains it this way: "For millions of workers, the matching contribution is a critical part of retirement plans. The real impact isn't from the loss of the match but rather the lost opportunity to benefit from the compounding of interest on that money over time." (Companies generally match 50% of an employee's contribution up to 6% of the employee's annual salary.)

It's difficult to know how widespread this will become. In 2001-2003, numerous companies suspended contributions but reinstated them when the economy improved. U.S. News & World Report says a recent survey showed that 2% of companies have reduced their matches this year, and another 4% plan to make that move in the next 12 months.

Pamela Hess, director of retirement research at Hewitt Associates, told BusinessWeek, "It depends how long this goes on. In another year, you could have another 3% to 5%, or you could have 10%."

Should you increase your contribution if your employer puts the 401(k) match on hold? That depends on the state of your emergency fund. If it's small or you don't have one, Frank Boucher of Boucher Financial Planning Services suggested in an interview with CNN, you should probably contribute to retirement accounts at your normal rate and save extra money as a cushion in case you get laid off.