Am I Getting The Most From My 401(k)?

Today's economic conditions seem to create more questions than answers.

Yet the fact remains - we need to continue to save (and invest) in order to retire with dignity.
Dave Kansas makes a good point in a recent article "What Do I Do Now?" (Wall Street Journal - April 10, 2009) http://www.marketwatch.com/News/Story/do-do-now/story.aspx?guid=%7BE341FAB9-B0EC-4310-8E19-E03CE63FB7E4%7D when he quotes the author, Rudyard Kipling. "Keep your head about you as everyone is losing theirs."

That is what many good advisors tell you, although it is easy to say....and hard to do.

Another problem is that company retirement plans have become increasingly complex. Features such as online investing and elections, and mulitiple fund choices were designed for convenience, but actually may cause people to become "accidental " investors, which leads to confusion and inconsistent results.

This can present a problem for businesses who have a Fiduciary Responsibility to their employees to provide the highest quality investments and proper education on how to invest, why to invest, and how much to invest - at a reasonable cost.

Alliance Bernstein did a study recently http://www.deanvoelker.com/files/ab401kreview.pdf.
They found that both plan sponsors and participants want to "keep it simple".
(Hmmm....imagine that!)

Plan sponsors must review their plans on a regular basis. They need to make sure they are working with a professional who can meet with employees regularly and "keep it simple."
A strategy must be put in place to make sure you are saving enough.
http://www.helpmy401k.us/investment-tools.htm Please use the 401(k) calculator to see if you are on track for your goals.

Employees should also ask their plan sponsor about how funds are selected. There needs to be enough selection to be diversified, but not so much that it is overwhelming.

"Keep your head about you while everyone else is losing theirs." (Kipling)
"Be fearful when others are greedy, and greedy when others are fearful." (Buffett)

Please contact me at www.deanvoelker.com for more information.

What Else Do You Know About Munis?

Over the past few days, I have been promoting the value of municipal bonds. Right now, they offer a better bargain for your long term savings than CDs.

One of the things I dislike about CDs is that they are really just a holding place for your money.
Money falls into 2 main categories -
*Liquid Money - Money that can be used now or held in an emergency fund (about $10,000
or 3 -6 months of expenses).
*Invested Money - Money that is invested that you don't have an immediate need for.

Looking at those two groups, CDs are kind of a "tweener" - your money seems tied up, so you
can't get to it. Also, the rates are so low currently that it really isn't invested either. Talk about being caught between a "rock" and a "hard place"!

CD yields are so poor, that you may even consider the idea of early withdrawal to take advantage of better (and tax FREE) yields with munis. The penalty usually is forfeiting some interest (WHAT interest??), as much as 6 months.

If you had $10000 in a CD, paying 2% ($200/year, taxable), you would lose $100 to the bank. If you re-invested it in a 5% muni bond, you would earn $500 on the same amount, and not pay federal taxes (perhaps even no state or local taxes) on the interest.

You do the math.

Here are a couple of other articles which support the idea of using muni bonds.

MARKET WATCH - "Muni Yields Aren't Puny"
http://www.marketwatch.com/news/story/bargains-abound-tax-free-muni-bonds/story.aspx?guid=%7B2A55A5F2-2F94-4181-A51A-7FFA12E1A9D2%7D

KIPLINGERS - "Steals In Tax-Free Bonds"
http://www.kiplinger.com/magazine/archives/2008/05/kinnel.html

Warren Buffett likes munis too, and you could do a lot worse than listening to Mr. Buffett!

For more information on municipal bonds, or any other savings ideas, please contact me at
www.deanvoelker.com .