Investing in Retirement Plans

So you're thinking about investing in retirement plans - that's a good thing. But maybe you're not exactly sure where you should put your money - that's not a good thing. It's easy to get confused about funding a retirement plan, especially when it comes to tax-advantaged plans versus employer plans.

Retirement Planning Guide

We've developed this retirement planning guide to help you figure out what might be the best option in your particular situation. Using a series of questions that appear below, we'll try to help you figure out what types of retirement plans to consider and when faced with multiple options, we'll also try to help you figure out which fund is likely to yield you the highest return.

Retirement Questionnaire

Additional Resources

The way this retirement guide works is pretty simple. We're going to ask you a series of questions, and depending on your answers we will make an investment suggestion. Remember, the goal here is to save money for your retirement years, so you'll want to take advantage of 401k plans, 403b plans, Roth IRAs and traditional IRAs whenever possible. This guide should help you make a decision when faced with all these options.

When your thinking about your answers to some of these questions, you'll want to think about things such as your possible tax rate in retirement, whether or not your eligible to make IRA contributions, and how easy or convenient it is to contribute to certain plans - especially payroll deduction plans offered through your employer.

Retirement Planning Questions

Question 1 - Does your current employer sponsor a retirement plan such as a 401k or 403b plan?

No - Go to Question 4
Yes - Go to Question 2

Question 2 - Does your employer match your contributions to a retirement plan such as a 401k or 403b plan?

No - Go to Question 4
Yes - Go to Question 3

Question 3 - Are you contributing enough money to your employer plan to obtain the maximum match for which you're eligible?

No - Employer matching is hard to beat when it comes to when it comes to retirement investment options. An employer match is like an instant return on your investment and you should consider funding your 401k or 403b plan up to the maximum employer matching contribution before funding any other type of retirement plan.
Yes - Go to Question 4

Question 4 - Are you currently contributing to a Roth IRA or traditional IRA retirement account?

No - Consider funding a Roth IRA or Traditional IRA account - up to the maximum of $4,000 or $5,000 if you're 50 or older in 2007 ($5,000 and $6,000 respectively in 2008 and 2009). Roth IRAs allow you to contribute after tax dollars in exchange for tax free income at retirement. Traditional IRAs offer you the chance to obtain a tax deduction today in exchange for taxable income at retirement.
Yes - Go to Question 5

Question 5 - Are you making the maximum contribution to a Roth IRA account or a traditional IRA?

No - Consider maximizing your contribution to a Roth IRA or Traditional IRA. In 2007, the maximum contribution to an IRA is $4,000 and if you're 50 and over you can contribute up to $5,000 ($5,000 and $6,000 respectively in 2008 and 2009). In 2010, the limit moves up based on an index of inflation. Roth IRAs allow you to contribute after tax dollars in exchange for tax free income at retirement. Traditional IRAs offer you the chance to obtain a tax deduction today in exchange for taxable income at retirement.
Yes - Go to Question 6

Question 6 - Do you have a spouse that currently earns little, if any income?

No - Go to Question 7
Yes - Consider investing in a Spousal IRA with either after tax money (Roth IRA) or using a tax deductible retirement account (Traditional IRA). See the IRA contribution limits that apply, which were already mentioned in Question 5.

Question 7 - Are you looking for other tax deferred retirement options to fund your retirement years?

No - Stop
Yes - One final option you may want to consider as part of your retirement plan is funding a non-deductible traditional IRA.

Funding Retirement Plans

This guide should have helped you to understand exactly how to progress down the path of retirement planning and investing. But the single most important thing we want you to remember is this simple rule. Investing for retirement is just as important as any other investment you might make - whether it's in a college degree or a new home. Don't shortchange your future by ignoring your retirement options today.

Retirement Calculators

While the above retirement planning guide can help you figure out which type of retirement account you might want to start funding, it really doesn't help answer the question: How much money should I be saving for retirement?

To help you answer that question, we've put together a series of retirement calculators - ranging from 401k savings calculators to Roth versus Traditional IRA decisions and even a calculator that can help you figure out how much retirement income you'll need.

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