Can too much information about your 401k be a bad thing? As we enter in the next decade, already eight days old, most of us have broken, or fudged just a little, on the New Year's resolutions we promised ourselves. In many cases, these commitments to change your lifestyle, reverse the bad habits, or embrace some new ones are often loftier than life allows. While change is good and change is constant, it is also incredibly difficult.
Read more here.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.
Thursday, January 7, 2010
Tuesday, January 5, 2010
The Risk of New Annuity Products
Annuities come in all sorts of flavors. Single premium annuities are an all-in type that is purchased in a lump sum. Flexible annuities spread the payments over a period of time. 
Sometimes these are deferred until a later date whereby the investor can withdraw money all at once or in scheduled payments. Investments grow in a tax-deferred environment. Fixed annuities offer the investor the lowest risk (in part because the insurance company invests in bond funds) which insures your principal is never lost. Immediate annuities are also lump sum investments that begin distributions immediately.
But there is a new variable annuity product coming to market that will attempt to lure Baby Boomers into its trap. Question is whether you understand what this trap offers to your retirement and whether it is worth paying the high cost.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer
Sometimes these are deferred until a later date whereby the investor can withdraw money all at once or in scheduled payments. Investments grow in a tax-deferred environment. Fixed annuities offer the investor the lowest risk (in part because the insurance company invests in bond funds) which insures your principal is never lost. Immediate annuities are also lump sum investments that begin distributions immediately.But there is a new variable annuity product coming to market that will attempt to lure Baby Boomers into its trap. Question is whether you understand what this trap offers to your retirement and whether it is worth paying the high cost.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer
Sunday, January 3, 2010
Breaking Bad Investment Habits in the New Year
We all have them, some worse than others. The older we get the more dangerous these habits become. Boomers need to be extremely cautious with every investment decision.
Most of us look at the turn of a calendar year with the hope that the investment mistakes we made in the previous year will not be made in the new one. This is noble and in many cases futile. These attempts are usually too difficult to handle, which is why, in many cases you haven't done anything before this point.
But with little effort, you can change how you invest. For the vast majority of us, investing requires far too much time. It requires continued education (which I fully recommend), frequent monitoring (which can involve little more than opening your statement just to make sure your investments are going where you intended) and a clear-cut understanding of where you are on the timeline (beginning to invest or at it for awhile).
Altering bad investment habits is not that difficult. Five Tips for 2010...
Paul Petillo is the Managing Editor of Target2025.com is also a fellow Boomer.
Most of us look at the turn of a calendar year with the hope that the investment mistakes we made in the previous year will not be made in the new one. This is noble and in many cases futile. These attempts are usually too difficult to handle, which is why, in many cases you haven't done anything before this point.
But with little effort, you can change how you invest. For the vast majority of us, investing requires far too much time. It requires continued education (which I fully recommend), frequent monitoring (which can involve little more than opening your statement just to make sure your investments are going where you intended) and a clear-cut understanding of where you are on the timeline (beginning to invest or at it for awhile).
Altering bad investment habits is not that difficult. Five Tips for 2010...
Paul Petillo is the Managing Editor of Target2025.com is also a fellow Boomer.
Thursday, December 31, 2009
What will 2010 Bring?
2010 will be the year of stabilization. A year where, if you have a job, you will probably still be working at the beginning of 2011 and if you are not, you may find employment; one where if you are prudent (and by that I mean not-so-conservative but cautious), you will find the equity markets still performing better (but not better than expected); one where we have learned lessons that should not be soon forgotten.
Read the full article from Paul Petillo, Managing Editor of Target 2025.com and a fellow Boomerhere.
Read the full article from Paul Petillo, Managing Editor of Target 2025.com and a fellow Boomerhere.
Thursday, December 17, 2009
The IRA Option
Some of us may be entering a new job that does not have a 401k or has one that you do not feel is as good as the one you just left. And your employer won't let you keep your money where it was. What to do?
Rolling your 401k into an IRA is another matter. This is for the investor who has some concept of what lies before them. If I were to guess, this type of investor has had an active roll in how their former employer's 401k was allocated. They paid close attention to diversity, perhaps even following conventional wisdom of limiting risk as they aged.
For this retirement investor, the IRA rollover is viable option. It allows closer control of how this money is invested with a variety of considerations weighed with each decision. Not only will this investor spread their allocation over a number of funds, they will do so with an eye on fees and expenses, a consideration of performance of the fund under both good and adverse conditions, and clearheaded understanding of the risks involved.
IRAs cannot be borrowed against and restrict a penalty-free withdrawal of money before 59 1/2 years old. But the choices are the primary attraction. This investor knows, and you should as well, the risks of building a successful IRA portfolio also increase. The biggest concern is investments that crossover.
What 401k plans are supposed to do is provide the investor with a fiduciary responsibility to provide the right tools for their employees. You, as an IRA investor are on your own.
You must monitor the funds you invested in for a change in investment strategy, style drift (when a fund manager invests on the edges of what s/he was hired to do; such as when they invest in large-caps when mid-caps are the focus), and an increase in turnover (a cost for trading repeatedly that the shareholder pays for directly, often done in an attempt to boost returns in the short-term, like at the quarter's end). You bear the burden of this responsibility to your future.
The terms of disbursement are spelled out when you leave the job in the 402(f) notice. This explains your options for handling a 401k disbursement. Even if you want to stay, your old employer really doesn't want the continued burden.
Bottom Line: Once you receive that 402(f), begin to research your options. And even if you think that money will come in handy, never take the cash.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.
Rolling your 401k into an IRA is another matter. This is for the investor who has some concept of what lies before them. If I were to guess, this type of investor has had an active roll in how their former employer's 401k was allocated. They paid close attention to diversity, perhaps even following conventional wisdom of limiting risk as they aged.
For this retirement investor, the IRA rollover is viable option. It allows closer control of how this money is invested with a variety of considerations weighed with each decision. Not only will this investor spread their allocation over a number of funds, they will do so with an eye on fees and expenses, a consideration of performance of the fund under both good and adverse conditions, and clearheaded understanding of the risks involved.
IRAs cannot be borrowed against and restrict a penalty-free withdrawal of money before 59 1/2 years old. But the choices are the primary attraction. This investor knows, and you should as well, the risks of building a successful IRA portfolio also increase. The biggest concern is investments that crossover.
What 401k plans are supposed to do is provide the investor with a fiduciary responsibility to provide the right tools for their employees. You, as an IRA investor are on your own.
You must monitor the funds you invested in for a change in investment strategy, style drift (when a fund manager invests on the edges of what s/he was hired to do; such as when they invest in large-caps when mid-caps are the focus), and an increase in turnover (a cost for trading repeatedly that the shareholder pays for directly, often done in an attempt to boost returns in the short-term, like at the quarter's end). You bear the burden of this responsibility to your future.
The terms of disbursement are spelled out when you leave the job in the 402(f) notice. This explains your options for handling a 401k disbursement. Even if you want to stay, your old employer really doesn't want the continued burden.
Bottom Line: Once you receive that 402(f), begin to research your options. And even if you think that money will come in handy, never take the cash.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.
Tuesday, December 15, 2009
Leaving a 401k behind?
Job separation can come for any number of reasons. But a late in life job change comes with additional considerations. What to do with that 401k you left behind?
Keeping the money in a 401k has its advantages. For older workers, the ability to begin disbursement at age 55 is an attractive plus. Although it is generally ill-advised under almost every circumstance, keeping the money in the 401k retains your ability to borrow from the plan. Some of us will consider keeping this option open. It's an option albeit, not a good one.
Generally, the fees are better in a 401k. Institutions may get a much better deal from the plan sponsor and consideration of this is important in the rollover decision. A much larger plan may come with more options or simply less expensive ones. Fees are an important aspect of total return and a worthwhile item to focus on when making any decision to move.
But you may not have an option if the balance is less than $5,000. This means you are faced with the choice of taking the cash in the account (along with the 20% the account must hold for income taxes and the 10% penalty). The scariest statistic, two-thirds of you take the money and pay those hefty penalties.
The terms of disbursement are spelled out when you leave the job in the 402(f) notice. This explains your options for handling a 401k disbursement. Even if you want to stay, your old employer really doesn't want the continued burden.
Bottom Line: Once you receive that 402(f), begin to research your options. And even if you think that money will come in handy, never take the cash.
Next: rolling to an IRA.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer
Keeping the money in a 401k has its advantages. For older workers, the ability to begin disbursement at age 55 is an attractive plus. Although it is generally ill-advised under almost every circumstance, keeping the money in the 401k retains your ability to borrow from the plan. Some of us will consider keeping this option open. It's an option albeit, not a good one.
Generally, the fees are better in a 401k. Institutions may get a much better deal from the plan sponsor and consideration of this is important in the rollover decision. A much larger plan may come with more options or simply less expensive ones. Fees are an important aspect of total return and a worthwhile item to focus on when making any decision to move.
But you may not have an option if the balance is less than $5,000. This means you are faced with the choice of taking the cash in the account (along with the 20% the account must hold for income taxes and the 10% penalty). The scariest statistic, two-thirds of you take the money and pay those hefty penalties.
The terms of disbursement are spelled out when you leave the job in the 402(f) notice. This explains your options for handling a 401k disbursement. Even if you want to stay, your old employer really doesn't want the continued burden.
Bottom Line: Once you receive that 402(f), begin to research your options. And even if you think that money will come in handy, never take the cash.
Next: rolling to an IRA.
Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer
Thursday, December 10, 2009
A Look at the Best 401K plans
In a previous post, we introduced a rating system for your 401(k) offered by Brightscope. Now, they are offering a look at the best 401(k) plans.
Does your plan work as hard as you do?
The Top 30 401(k) plans as rated by Brightscope.
Paul Petillo is the Managing Editor of Target2025.com
Does your plan work as hard as you do?
The Top 30 401(k) plans as rated by Brightscope.
Paul Petillo is the Managing Editor of Target2025.com
Subscribe to:
Posts (Atom)
