GET YOUR SAVINGS IN GEAR

Help!!!!: I want to build my financial situation better than what it is now. I want to know more about stocks, bonds, mutual funds, etc. How much money is needed for these particular products?

Chris Brown: In terms of educating yourself about these products, I would suggest that you start reading some personal finance publications such as Kiplinger's to become more knowledgeable or do some research on the Internet. The best place for you to get started would probably be no-load mutual funds at companies such as Vanguard, Fidelity or T. Rowe Price. The minimums vary by company -- you'll have to research that -- many will lower the minimum if you agree to start an automatic deposit program with them. Good luck with this.

JGallman: I'm married and 54yrs old. I maxed out my 401K (with the catchup) for 2007. Our AGI should be around $120,000 for 2007. I have both a Roth and traditional IRA. Will I be able to contribute to my IRA for 2007 without penalty? Which would be better-Roth or tradional? Thanks!

Chris Brown: You appear to be under the limit for the Roth contribution for a married couple. I would suggest that you and your wife make contributions to the Roth IRA. If she works outside of the home, she should also max out her 401(k). Good luck!!

k drotzer: Do you think it wise to take out a mortgage at this time on a house with no mortgage and invest in something? We have 6 - 10 years til retirement. What do you suggest as an investment?

Chris Brown: I'm not a big fan of withdrawing equity from a home and putting it in the stock market. Although you could do well with this, there is a danger that if you don't know what you're doing, you'll trade equity in your home for a bigger mortgage. Make sure that your investment strategy matches your goals and objectives and is extremely diversified--especially with the current financial markets. Good luck!

Hal: How and what would you invest in, with the goal of highest rate of return over the coming ten years?

Chris Brown: I would make sure the portfolio is extremely diversified and includes a healthy dose of international equities (including emerging market stocks), commodities and REITs. The latter is currently beaten down, but prospects appear to be fairly bright in the future. Remember that we are in a global economy now, with many economies growing faster than the U.S.

george: I'm in the 33% Federal tax bracket. I have been investing in nondeductible IRAs for both myself and spouse and also in a brokerage account (non deferred). This is after maxing out other retirement options thru work. Is this smart or should everything be in the brokerage account?

Chris Brown: There are pros and cons of using a nondeductible IRA. The pros are that the earnings grow tax-deferred and the balance is earmarked in an account that probably won't be touched for anything else other than retirement savings. The cons are that the gains will come out taxed at your ordinary income rate rather than as capital gains (currently 15%, but not guaranteed to stay that low). To make a tax-smart decision, what you might do is keep investing in the nondeductible IRA, but put the tax-inefficient investments (bonds, REITs, high turnover mutual funds) in them and put the tax-efficient investments (individual securities, index funds) in the taxable accounts. Sorry that there is no clear answer. Seems like you are a good saver--congratulations!!!!

Dave: I have private loans through Sallie Mae and it doesn't seem that I will ever pay them off. Is there an easy way to pay them off quicker than 30 years?

Chris Brown: I would contact Sallie Mae and request several payoff schedules--and them pick the one you are most comfortable with. Unfortunately there are few shortcuts. I can empathize with you -- I borrowed money for an MBA program and it took 10 years to pay it off!!

Tony C: Many deductions and/or limits are based upon the magic acronym AGI or a percentage of AGI. I know the limit to contribute to a Roth is $160K, but how can I best calculate my household AGI so I understand if I can contribute? Or if I should prepay medical expenses to ensure that I can deduct some expenses? Thanks.

Chris Brown: Tony- This is a complicated tax question. I would advise that you contact your tax advisor so you can get the best advice on this one. MAGI is Modified Adjusted Gross Income, but there is no short answer to your question. Sorry I couldn't be of more help.

nadja lee: Hi, I currently work for a bank and have my series 7, 66 and insurance licenses. How do I become one of you guys? What do i need to study or work in to be more in the planning side?

Chris Brown: Great question. NAPFA is an association of Financial Advisors who operate under a "Fee-Only" Model. Basically the traditonal way of delivering products to the industry is by "selling" them and earning a commission. NAPFA members are paid only by their clients and do not earn income for commissions. Most members make their living by providing comprehensive planning services and managing assets for their clients. The licenses are nice, but what is really the "union card" in our industry is the CFP (Certified Financial Planning) Certification. You can go to www.cfp.net to learn more about the program. Most NAPFA Advisors consider the program a minimum standard for working in the industry.

Tom M.: My wife and I each have separate revocable living trusts (written and funded in 2001). Our assets are split between both trusts, including our home. Now that the Federal limit for estate taxes is nearing $3 million, would a single trust, with both of us as trustees, be better now that we are retired (53 and 51) and our estate is worth roughly $1.75 million? Assigning assets to only one trust may possibly be less of a hassle upon our deaths and distribution? Thanks.

Chris Brown: I don't know if it is worth the trouble to draft another trust. You can control the estate better in two trusts instead of one -- although it might be a little bit of a hassle to keep up with two trusts. FYI, there is no guarantee that the limit will stay as high as the current level -- Congress must act or the exemption equivalent goes back to $1 million in 2011. So I would keep the trust intact at least until some clear direction is provided by Congress in this area.

Gail M: I have a 403B invested in mutual funds. I am 60 and was told that I would not have surrender charges at this point (I've had this for 12 yrs). Do you feel I should keep the 403B or invest another way? I do monitor the funds and meet with the representative at least twice yearly.

Chris Brown: You won't have surrentder charges as long as the funds are not "B" shares-sometimes referred to as "back end loads". If the 403(b) is invested in annuities, the surrender charges will probably go away after 7 years--but check with your representative to determine what happens to any recent contributions you put into the fund. You will face tax consequences when you withdraw the funds--like 401(k)s, when you withdraw funds from your 403(b) account, it is taxed as ordinary income. You should continue to max out your 403(b) contribution--the limit in 2008 is $20,500 since you are over 50. Good luck--continue to meet with your representative.

Kay: Hello-What would you recommend as the best investment choices for the novice investor? How do I buy no-load mutual funds?

Chris Brown: I think the best investment choices for novice investors are no-load mutual funds, which have a pre-set investment allocation among stocks and bonds. These fall into several categories: 1) balanced mutual funds, 2) equity income mutual funds or 3) "target date" mutual funds. The latter category is a relatively new category, which readjusts the allocation to be more conservative the closer you get to your goal. For example, if you buy a 2030 fund, it may be relatively aggressive now, but become more conservative the closer you get to 2030. Balanced and equity income mutual funds have a good mix of both stocks and bonds in them. In terms of buying them, I would recommend that you look at the funds of T. Rowe Price, Fidelity and Vanguard -- either directly or through a discount broker such as Charles Schwab or TD Ameritrade. All have a good selection (although T. Rowe Price is probably my favorite fund company for depth and breadth of products). Good luck.

jose: I'm 27 years old. So far I have approximately deposited $3,000 into my 401K. Beginning this year I will begin depositing $350 a month and I will continue to increase the amount whenever I get a raise. Am I on the right track for retirement? What else should I be doing? (I don't have any other investments like stocks, bonds, etc.)

Chris Brown: I think you are doing an excellent job in getting started. If you can make sure you are contributing at least as much to your 401(k) plan to get the full match from you employer. If you can exceed that, you might think of starting a Roth IRA, where you can put money away for retirement and have it grow tax-free. The limits in 2008 are $15,500 for your 401(k) and $5,000 for your Roth IRA (there are some income limits for the Roth IRA in 2008, so please consult your tax advisor). You've made a good start. Make sure your portfolio allocation in the 401(k) is diversified.

Rachel Sheedy: For the 4 p.m. hour, Chris Brown of Ivy League Financial Advisors is answering questions. If you want to speak to a planner personally, call 888-919-2345. The phone line is open to 6 p.m. EST.

Mike S.: I am 22 years old. My 401k has two options for my contributions. One is for pre-tax and one is for after-tax. There is no Roth contributions allowed. Is there a difference between the after-tax and Roth contribution types and should I consider contributing to this account after-tax?

Holly Thomas: Dear Mike, Congratulations on starting your retirement savings at such a young age. Over your working lifetime, most studies show there will be a huge difference between contributing after-tax and before-tax. The studies are based on the assumption that you are better off paying taxes later than earlier. Their conclusion is normally that you should maximize your before-tax contributions. I am not an accountant and so am not familiar with all of the differences between contributing after-tax and contributing to a Roth. You should consult a tax advisor for this. Best of luck in your career. Sincerely, Holly

Al: My partner and I have approximately $300,000 in combined 401k accounts and $50,000 in Roth IRA accounts. My partner turns 50 this year, so we are taking advantage of his catch-up contributions. His company recently added a Roth 401k option. Do you think it would be wise to divert some of his 401k contributions to a Roth 401k for tax diversification or are we fine with our Roth contributions? Because of my salary, I am subject to the phase-out restrictions for a Roth IRA.

Holly Thomas: Dear Al, Congratulations on taking full advantage of all of the tax deferral options available to you and your partner by maximizing your joint contributions. I cannot give specific tax advice. I can tell you, in general, the Roth 401K option is an excellent tax strategy if one qualifies for it. Also, I don't know what state you live in, but especially because you are not married, don't forget how important it is for you both to get your estate planning done, if you haven't already. Good luck. Sincerely, Holly

Harry: Can you explain the rules regarding converting traditional IRAS to Roth IRAs? I realize it would be best to pay the tax bill with monies from outside retirment funds.

Holly Thomas: Harry, a Roth IRA conversion can be an excellent strategy, however, there are lots of rules about converting traditional to ROTH IRAs. Check out Kiplinger's story Everything You Need to Know About IRAs for some information on conversions. But you would be best served to consult with a tax advisor on your individual situation.

Cheryl D.: When you roll your money from a 401k to an IRA, (and want to keep the same funds) are your shares sold at the current price causing you to have to buy at higher prices? Can you transfer dollars and shares both? I've never been quite sure how this works? Would you explain?

Holly Thomas: You generally do not have to sell your current funds in your 401K when you roll over to an IRA, unless they are "proprietary" to the 401K company. You can transfer both dollars and shares.

Rachel Sheedy: For the 3 p.m. hour, NAPFA member Holly Thomas of Independent Insights is taking questions.

kathy: My husband and I are retired at 62 & 67, house paid for with only $200,000 savings in IRA/CDs currently at 5%. Interest rates are going down, so would immediate annuities (like Vanguard's Growth and Income) be a good and risk-free option for monthly income (in addition to Social Security). Thanks for your advice!

Eve Kaplan: Hi Kathy, The only risk-free immediate annuity will be a guaranteed annuity -- not something invested in "growth" (meaning stocks, presumably). You may be at risk of running out of money if you have 200K in savings (and the IRAs will be taxable income when withdrawn). An annuity can guarantee income for life but I would not put more than 1/3 of your savings into an annuity -- and I don't believe a 65K annuity will do much to generate monthly income for you. The best thing I can recommend is that you consider a part-time job to slow the risk of running out of money!

John: I always hear on TV that you cannot just let your 401K just sit, but must be attended to. If I have the investments spread out, what more needs to be done?

Eve Kaplan: Hi John, Who has determined that your investments are spread out (and that they adequately compliment your non-401k investments so you have sufficient funding for all your goals)? I would suggest you seek professional advice to make sure you have the correct investments to fund what you need -- and that someone looks at the big picture and makes sure your 401k analysis is integrated into your entire holdings, savings rate, etc.

Nate: Savings 385,000. Pensions + Social Secu. 44400 month. Age 62 and 60. Bank savings 10000. House note 583. Q. Would like to leave some amount -- what could be the annual take on savings without running out of money?

Eve Kaplan: Hi Nate, It's a little hard for me to understand your note, but you appear to have 385K in savings and 10K in bank savings. I don't know what your home equity is (your note is unclear) and I assume your pensions and social security pay you 4.4K/mth? (not 44.4K/mth?). In any event, if you have 395K total savings (385K + 10K), you can draw down e.g. 15.8K/year (4% of this total) without dipping into the principal (meaning you won't run out of money).

uk: quick question. if i left another job and left my 401k there is it to late to convert it to an ira? also, should i? it's in my opinion some good options i orignally invested in although i have had some losses due to the market now. and can i just roll over some of it to an ira instead of all of it? and roll the remainder over next year?

Eve Kaplan: Hi UK, It's never too late to rollover a 401K to an IRA. You have more investment options with an IRA than your 401k plan (and costs may be lower -- you won't be paying the underlying management fee for the 401k plan overall anymore). However, I'm not aware that you can take part of a 401k and roll it over to an IRA (I've never seen it done and I believe it can't be done).

Larry Toll: I am anticipating retirement from a traditional defined-benefit plan that offers both lump sum and annuity options. How can I judge the security of the pension plan's long-term ability to survive?

Eve Kaplan: Hi Larry, You can look up the credit rating of your employer (e.g Fitch) to get some idea. If your company is very solid (e.g. AAA, AA, A or BB), that could be a positive indication. However, the credit quality of a company can deteriorate over time. Typically the annuity option is better (because you have income for life and the onus of investing lies with the company). However, if your company went belly up you easily could only receive e.g. 60 cents on the dollar. Receiving a lump sum has its hazards, however -- if you don't invest wisely you could end up coming up short. I generally recommend clients go the annuity route unless your company is on shaky financial ground.

william craun: My state job offers a partial lump sum on retirement. Let's say I can retire with $3,000.00 month. If I take a partial lump sum, they will give me $110,000 cash and reduce the monthly benefit to $2,400 a month. Is this a good thing? And, can I roll it over into an IRA and do anything I want with it as long as I don't take it out and not be taxed? Can I add to this account with extra earned income from another job or should i set up another IRA?

Eve Kaplan: Hi William, I'll try to answer your questions: On the first one, you need to have a planner do a simple analysis for you to determine which is better for you. Typically, however, it's better to take a monthly benefit because you're covered for life and you don't have the investment risk. I assume, since it's a state job, that your pension is well-protected and guaranteed (as well as any pension can be considered guaranteed these days). On the second question, if you take a lump sum, you can roll it over to an IRA but you're postponing - not eliminating - taxes. You'd have to take a required minimum distribution not later than wehn you turn 70 1/2. On the third question, I'm not quite sure what you're asking here, but assuming you set up a rollover IRA with your lump sum payment, additional earned income from another job might require a different type of IRA (e.g. a SEP IRA if you're self-employed in your other job).

Christa: I'm wondering if I should continue at or continue increasing my contribution rate to my employer's 401K or if I should start an IRA. I'm 42 and feel like the returns on my 401K aren't keeping pace with peer funds. We only have two, higher quality funds out of several choices in our 401K plan. My company matches the first 6% of contributions with their stock, and I currently set aside 10% of my salary for my 401K. I don't have any outstanding debt -- other than my home.

Eve Kaplan: Hi Christa, If you have better alternatives in an IRA, I would fund the 401k up to the match level and then anything additional to an IRA. Just be aware that the 401k funding is automatic (once you've selected it) but you have to make the choice to fund an IRA. Sometimes it works better to have an automatic savings scheme instead of relying upon yourself to save additionally (but I don't know how motivated you are -- perhaps it's not an issue). Be aware that there are income limitations on funding an IRA if you participate in a 401k plan. If your income exceeds these levels, your IRA funding will NOT be tax-deductible. 1. Covered by an employer-sponsored plan and filing as: Single $52,000-$62,000, $53,000-$63,000; Married filing jointly $83,000-$103,000, $85,000-$105,000; Married filing separately $0-$10,000, $0-$10,000.

Gary: I have 2 401k(s) sitting with my previous employers. Should I roll them over? One of them is heavily in VPMCX, which is a very good but closed fund. Of course, it's taken a big hit from the market downturn. Should I just take a hit to roll it out? I feel history (year 2000) is about to repeat itself. I am close to 40 yrs of age.

Eve Kaplan: Hi Gary, Your 401ks from previous employers can be rolled over to an IRA. VPMCX (large cap growth) is an excellent fund and closed due to over-subscription. I would NOT sell it at this time, when I personally feel much of the bad news already is reflected into the share price. If your 401k provider allows you to retain VPMCX, I would roll it over to an IRA. If your 401k provider does NOT allow you to rollover your holding, I would take no action at this time and stay with your VPMCX holding.

Ray: I'm 75, wife is 59 still working. We have a bit over $1.1 million in investments, 82% in a balanced fund 401k, 5% in international mutual fund, 5% in bond funds, 4% in cash, and 5% in other mutuals (micro-cap, real estate, utilities). Mortgage free home $1.5 million, no debt, credit rating 802. Any investment advice going forward in this wild market?

Eve Kaplan: Hi Ray, My advice to anyone in this market -- regardless -- is not to bolt for the exit door and sell "low." You have a decent amount saved in investments but a large percentage is in a balanced fund (not sure what the percentage of fixed income is). You wife is 59 and I assume my clients will live to 95 -- that's 36 years of living expense funding needed (and you would be part of the picture for e.g. another 20 years). I'm straying a bit from your investment question but I'd make sure you have a good allocation to fund up to 36 further years. You certainly could benefit from making sure all your investment and estate planning ducks are lined up in a row since it's very likely your wife will outlive you for an extended period of time.

zack: Does it pay off to refinance HELOC to a fixed loan? I have $45000 at 7% currently interest only($300). I can afford higher payments.

Eve Kaplan: Hi Zack, Now that interest rates have come down further, it makes sense to refinance if you're currently paying 7% on an interest only loan. You do need to investigate what e.g. a 6% loan will cost if you're paying interest AND principal. Typically many people who have interest only loans couldn't afford the interest + principal alternative, so make sure you can. Also, it costs something to refinance and you typically need some months to cover the cost of doing so to make it worth your while (esp since your loan is relatively small).

David Coleman: Are there any tax issues if one takes a lump sum and rolls it over to an IRA?

Eve Kaplan: Hi David, There are no tax consequences as long as you don't retain the funds beyond several weeks. To avoid any tax consequences, make sure to roll over your lump sum (I assume this is a 401k) into a rollover IRA "institution to institution."

Ron Renfer: Hi, I have all my "income" fund money invested in Vanguard Total Bond Market. With the talk of inflation I was wondering if I should put a certain % of this into the Vanguard Inflation-Protected Securities?

Eve Kaplan: Hi Ron, You can put some of your bond money into the Vanguard Inflation-Protected Securities you mentioned, but I typically would not put more than 1/3 of your bond money into that area. When inflation is raging, inflation-protected bonds (TIPS) do well but if inflation is quieted, they will underperform other bonds. Since we're headed into a recession (or may already be in one) and the Fed is cutting rates, the timing may not be optimal to go into TIPS.

Pat: Is 28% cash and 12% bonds a good balance in today's market for a person 4 years away from full retirement?

Eve Kaplan: Hi Pat, It's hard to give a less than superficial answer here since I don't know how old you are and what your financial goals are. Typically my clients retire e.g. at age 65 and I assume they'll live to 95. That's a 30-year retirement period. You want to make sure you have enough in stocks. You appear to have 60%, which seems ballpark correct (given that I know nothing else about you). You have much more cash and fewer bonds than in a typical model portfolio -- bonds have had a run but I would suggest that municipal bonds are selling at very advantageous levels right now (even if you're in a low tax bracket) and the risk is minimal. I would put some of your cash to work with muni bonds and get a 6-7% effective yield after tax consideration -- that will beat what you have in cash.

Jason: What type of account does my traditional 401k become at retirement?

Eve Kaplan: Hi Jason, You either can leave your 401k "as is" in your account or you can roll it over to an IRA (called a rollover IRA). The advantage of the latter is that you have access to a wide number of mutual funds, etc (versus the smaller sampling you have in your 401k).

Rachel Sheedy: It's 2 p.m. and our Jump-Start Day is more than halfway over. Eve Kaplan is fielding questions this hour. Remember, too, that you can call 888-919-2345 until 6 p.m. to speak to a NAPFA planner personally.

Jason: Can I transfer my IRA to a different company? For example, from Fidelity to Vanguard. Is there any limit to how many times?

Eric: Jason, you definitely can move your IRA from one company to another. There are two ways, one is a 60-day rollover, where the IRA custodian sends the money to you (check made payable to Jason), and you deposit it at the other custodian. Be careful with this method. If you fail to get the full amount to the next custodian in time, you will be taxed for the full amount, plus any penalties. Also, you are limited to doing this once per year. The other method is a "trustee to trustee transfer" where you submit the paperwork with the receiving institution (Vanguard in your example), and they go and get the money from Fidelity.This is much cleaner, and eliminates the risk of inadvertently facing a huge tax bill. I don't believe you are limited in the number of times you can do this, but you should verify that. Also, you shouldn't do it too frequently. I can't see any benefit to doing so.

jim: I have 15K in passbook bank accounts, would you advise moving the money to an online bank, such as ING Direct?

Eric: Jim, that's hard to answer without knowing more about you. Is this your emergency fund? If so, I would probably advise that you keep it where it is. How much are you earning on the passbook account (haven't heard that term in a long time)? Keep in mind that ING wasted no time lowering their savings rate after Tuesday's rate cut by the Fed. Their savings rate is currently 3.65%. If you are more comfortable with a bricks and mortar bank rather than online, I would keep it where it is.

Gary Herman: I have a mixture of standard IRAs, rollovers, a SEP-IRA, Roth IRAs, 403Bs, and brookerage accounts and am considering moving as many as I can into target funds. However, I know I can't put them all in one fund because of the tax considerations when I start taking distributions. What is the logical way to make this transition to target funds?

Eric: Gary, your age and your risk tolerance are important here. However, without that, I will give you my answer that is not necessarily the most simple, but how I would approach it. Look at the accounts not as SEPs and 403b, etc., but as how they are taxed. They are taxable (brokerage), tax-deferred (IRA, Rollover, SEP, 403b), and tax free (Roth). Only the tax-deferred accounts have mandatory withdrawals, and those w/ds are fully taxed at your ordinary rate. The brokerage is currently taxable, but long-term cap gains and qualified dividends are taxed at a lower rate. And, if most target funds have low turnover, meaning that if you don't sell for a long time, you will effectively defer much of the taxation. The Roth is the best from a tax perspective. No mandatory w/d, tax free when you do take it out. I know the point of target funds is to pick a date, and apply it to everything, but that's not how I would do it. I would determine an overall allocation that makes sense for you, and put the most growthy allocation in the Roth, next most growthy in the brokerage, and the least growthy (most fixed income) in the tax deferred accounts. As I said, not the simplest way, but the most tax efficient way in the long term.

Lyle: Im 53 and have just suffered a complete loss of assets including having to sell my IRAs and take the tax hit due to a series of bad health issues. I'm self-employed and have no savings left. I owe about $210,000 on a house worth $450,000. Should I sell the house and rent while investing my equity proceeds, or just try to make the payments and save a little income for retirement plans?

Eric: Lyle, I'm really sorry to hear about your health. Of course, that's the priority here. So, I would begin by asking if there is anything related to your house that is important to you medically, psychologically or socially. If you have a strong support system of family and friends close to the house, that may trump the financial considerations. The next question is how your business is doing. Have you maintained a steady income through the health problems? If not, would you be able to find employment at a similar income level (with medical benefits)? I would not sell the house to put money in investments. However, if you need the equity in the house to make ends meet, it is a consideration.

Mike: I have two funds in my Roth: AGTHX - Growth Fund of America A and FMATX. The majority of my assets(~85%) are in FMATX. Should I stick with this type of allocation?

Followup from Jane: Depending on your risk tolerance - I might try to equalize them over time - perhaps with new contributions.

Laurie: I just read an entry by someone else with a somewhat similar question. If both of us earn less than $160,00 combined, it's okay to contribute $5000 each to a Roth IRA, right?

Followup from Jane: Do either of you participate in any other retirement plans? $5,000 is the limit for 2008 if neither of you are contributing to any other retirement plans and you could deduct regular IRA contributions regardless of your income. If you want to do a Roth and you make less than $150,000 combined AGI, you can each make full Roth contributions. If you make over $160,000, that excludes you from Roth eligibility.

John: I currently track my investments, allocations, and budget via various Excel spreadsheets. Can you please recommend any software programs that are useful for managing and planning finances? Consumer or professional program recommendations are appreciated. Thanks!

Eric: Many of our clients use the popular software that is out there, such as Quicken or MS Money, and have no problems with it. There are web-based sites, like mint.com or wesabe.com, and others, but I am not very familiar with those. Professionally, we use Money Guide Pro for our financial planning. It's web-based, but very comprehensive. I'm not sure if they have an option available for non-professional use.

Gene: A lot of financial advisors say to not take Social Security early if you don't need the income. Well, I don't need the income as I have three pensions I'm currently living off. I have a little over 1.5 million in IRAs that I have not touched. However when I have to take the required minimum distribution at age 70 and I then am also getting full Social Security won't being in a much higher tax bracket take most of the gains I would see by waiting? I am currently 62.

Eric: Gene, you have touched on a very important point here. IRAs are great accumulation vehicles, but they are terrible distribution vehicles and possibly even worse to die with. Under current tax law, your IRA distributions will likely cause your Social Security to be taxed to the highest possible level (85%). We can run the math on when you will break even by taking SS early or later, and from what I have read it works out that you are better off taking later if you live past your late 80s. However, because of spousal rules, it is important to know if you are married, how much older/younger your spouse is, and whether your spouse qualifies for higher or lower SS than you. Here's the wildcard. We don't know what the Gov't is going to do with SS in the future. Are they just going to raise the age, reduce benefits, increase taxability? Barring special situations related to a spouse, I say take the money when they are ready to give it to you.

Julia: My company no longer matches our 401K - what are the benefits of continuing to contribute?

Eric: Julia, it depends on how much you are saving overall. The tax benefits are tax deductiblity and tax-deferred growth. However, if you qualify for Roth IRA contributions, that is where you should save first. However, there's a secondary benefit to the 401k, and it's automatic payroll deductions. Most people learn to live on what their paycheck says. The 401k puts it away before you even see it.

Rachel Sheedy: Eric Toya of Leonard Wealth Management is taking questions for the 1 p.m. hour.

Mia: My husband (who is 34) is a student and we'd like to start retirement savings for him. My gross income for 2007 was close to $200K, what are our options? Is there a max amount we can save toward retirement for him annually? I use my company's 401K and max it each year but also do not contribute anything to an individual IRA account, should I and if I do, how much is the max I can do? Can we have multiple accounts? Thank you.

Jane: It would be nice to do a Roth but if you file jointly your income is too high - it phases out at $160,000. I thought he could do a nondeductible spousal IRA even if he does not earn any income - $4,000 for 2007 - you can contribute up til the time you file - and $5,000 for 2008 but the phase-out rules are more complicated than I anticipated so now I am not certain. You can certainly have multiple accounts. Do you have someone who prepares your tax returns? He or she would be the final judge.

Jay: In reference to an earlier question, since you say I should pay off this personal loan first, do you believe I should empty my savings into paying it off? I believe I could get a mortgage with zero down or save for a couple of months for at least a 5% down payment, correct?

Jane: That is a tough question - without knowing more I would recommend waiting on the real estate purchase - but I would meet with a banker - or two - to see what the amount you could be pre-approved for with your current financial picture.

Tom: Would money leftover from a refinance be taxable? Where can I deposit those funds (100k) into what sort of tax deferred account where I can control which mutual funds (say kip25) to invest in? I would need access to withdrawl my initial investment w/o penalty? Thank you for the day's help. Questions are all great.

Jane: Dear Tom - If you wanted to put the money in a tax deferred account, you would be subject to withdrawal penalties unless you are over age 59 1/2. The money should not be taxable to you but I would check with your tax prepaprer to be certain. Why not deposit some of the money to your retirement plan and invest the remaining cash in a liquid portfolio so you can have easy access to withdraw the money.

Mike: Follow up on Jane's reply: I have ~$30,000 in American Funds.

Jane: American is a great fund family - which funds do you own?

Laurie: I recently put $5000 in a Roth IRA this year. I work part-time and sometimes I make less than $5000 a year. My husband works full-time and we file joint returns. Did I make mistake by putting more than what I earn? I also put $5000 for my husband too.

Jane: For 2008, the Roth limit is $5,000 - If you and your husband file jointly, you cannot make more than $160,000 and still be eligible for a Roth. And you cannot contribute more than you earn - up to but not more....

Jay: I'm 25 and have $4,500 in a deferred comp account and contribute $70 a check (26 checks/yr) and $4,500 in a Roth IRA and contribute $100 a month. I have $7,800 in savings and I was wondering should I save that money to purchase a house or put $5,000 into my Roth IRA and use the rest as my emergency fund? CDs are so low right now I would just keep it cash and with the housing market going down would you say it's a good time for me to purchase a home? Or what would be the best option for me? Oh yea, I make about $2,000 a month and have a personal loan of $8,000 at 7.46% and a student loan that’s $9,500 at 4.25%. Thanks!

Jane: I would consider paying off your personal loan first - and then meet with a banker to determine how much of a mortgage you could qualify for - make sure it is a fixed rate thirty year mortgage - so you could better decide on the amount of real estate you could purchase and comfortably handle the monthly payments.

Monique: I recently inherited about $130,000 in Savings Bonds, E and EE series. They no longer are earning interest and I'd like to cash them out and re-invest them. What's my best strategy to minimize my taxes? Also, will I still be eligible to contribute to a Roth IRA if I cash them out at once? I earn around $50,000/year. Thanks!

Jane: Unfortunately, I do not know a lot about savings bonds and the tax implications - do you have an accountant to whom you could speak?

elizabeth: I am going to inherit $100K (TOD accounts) in the next two months and another $100K over the next year. I am 49, have 2 kids in high school going to college in the next couple of years. We have $2500 in a college savings account, only $5K in a 401K because of financial troubles over the last few years. How do I make this money grow? I'm so afraid it will disappear into the bills and we'll still be in the same unfortunate situation we find ourselves in now.

Jane: Do you expect to qualify for financial aid for your children's education? If so, I might try and make catch-up contributions to your 401(k) plans.

Mike: I'm 24 and have accumulated enough money in my Roth IRA that my advisor now says I should put it in to an account where they balance the funds for me for a 1.5% annual fee. I've asked about putting it into other mutual funds rather than going down the 1.5% annual fee route but continues to recommend that program. In addition, all my contributions from last year are still sitting in a money market account. What is your thoughts on these types of programs and what would be your recommendation on what I should look to do with my account. Also, what should a young adult look for in an advisor.

Jane: Mike - how much is in your Roth and how and where is it invested?

Emily: My former employer has moved my retirement account to another company. I am now having problems tracking down the new account information. My employer said talk to the new company and the new company said talk to the employer. Is there anyone with enforcement power that can help me with this?

Jane: If you have exhausted your inquiries through the benefits office of your employors, I would go to the secretary of state or the securities commissioner where you live.

Rachel Sheedy: It's noon, and Jane King of Fairfield Financial Advisors is fielding questions. Just a reminder, you can also call 888-919-2345 until 6 p.m. today to speak with a NAPFA planner personally.

Doris Loeser: What is the recommended balance of stocks, bonds and international funds for someone retiring in 5 to 7 years?

Mark Berg, CFP: Doris, Good, but difficult question. It is so dependent on your tolerance for risk, goals and overall time horizon. Some important points are that you probably have a 20-30 life expectancy beyond retirement, so I typically recommend having some level of stock/international exposure, even for my conservative clients. But even the 5-7 years gives you a good time frame to weather the typical market cycle while you continue to earn and possibly contribute. The bottom line is I would probably recommend for someone in their 50s at least 40% in US/international stock funds. But I would recommend you seek some professional counsel from a fee only advisor. There are some who will give you counsel by the hour, others that will manage it for you if you like. Try www.napfa.org for someone near you. Good luck!

John E: I am 21 years old. Where can I find out which investment company is right for me? Goal is to be semi-retired or retired by 45-50.

Mark Berg, CFP: John, A great place to start is Vanguard. Why? They keep the costs very low, especially with their index funds. Roth IRAs are a great place to start, since your contributions grow tax-free and you can withdraw tax-free upon retirement. Note though that with few exceptions you won't be able to pull out of a retirement account without a 10% penalty tax until you are over 59 1/2. So be sure to have $$ outside of retirement vehicles if you want to retire that early. Good luck!

Mike: My wife and I both have IRAs funded with nondeductible contributions and are interested in converting these to Roth IRAs. Should we convert now, or wait until 2010 when there are no tax consequences, assuming we are below the income limits?

Mark Berg, CFP: Mike, It depends on your current income. If your AGI is below $100K, then you could convert now. If over, you will be forced to wait until 2010. Note that the growth on the contributions will be taxable, so be ready to pay that. If you are in a lower bracket now than you will be in 2010, convert. Also note that if you have other IRAs (not qualified plans like 401(k)s), those must be factored into the equation. I recommend speaking to a fee-only advisor with expertise in this area or a CPA before pulling the trigger. Good luck!

Gary: My current portfolio is 60% stocks, 30% bonds and 10% cash. I'm 58, would like to retire this year and move to a more conservative asset allocation of 50% stocks and 50% bonds. Given the current market, is this a good time to buy bond funds with the cash? If so, what type(s) of Vanguard bond funds do you recommend? If not, what do you suggest I do to move to this more conservative position?

Mark Berg, CFP: Gary, You will find that due to the low interest environment, you won't get much yield in purchasing individual bonds. Also, bond funds have risks too, primarily interest rate risk (if rates rise, bond values go down). Vanguard is solid because you are starting off at a low expense base, but know up-front that you can lose money in bonds. I would recommend seeking professional advice on this one, especially given your proximity to retirement. A great source is NAPFA.org. You may not be as far off on your allocation for your age as you think (depends on your investment profile). Good luck!

susie: From what I have been reading in the responses, it looks like a fee-based financial planner would be a good path for me to take. I have explored the ones listed on the NAPFA Web site and there are some in my area. Now how do I decide which one to call. What questions can I ask to find the right fit for me and how can you tell if you are getting "good" advice???

Mark Berg, CFP: Susie, NAPFA holds their advisors to a high standard. That is a great starting point. I would recommend calling 2-3 and have an initial discussion. Be prepared with the questions and issues you are seeking to get answered. In some cases, you both may find it is not a fit. In other cases, there may potentially be a good fit. Part of the question will be whether you are only looking for a financial plan or if you are also looking to have assets managed. Narrow it to 2 or 3, and meet them in person. This will require some work on your part to get your information together, but I believe you will find the effort worthwhile. This way you will get a good sense as to whether they are a good fit. Finally, each will give you a quote, so you can finally determine whether the cost is worth the benefit. Good luck!

KKE: Trying again! My husband is 55 and I'm 49. He works in skilled trades and I'm in education, together we make about $130,000/yr. We have no outstanding debts (house paid off, no credit debt), and no kids. Neither will have much of a pension. He wants to retire in 3 years, me in 4. We have savings and investments topping $600,000 now. What do you think?

Mark Berg, CFP: KKE, Sounds like you have prepared well for retirement. A few things I would recommend you look into: 1) Retiree health care. Both of you will be well short of Medicare, and this can put a significant dent in your budget. 2) Where the $600K is makes a difference as well. If it is in IRAs, especially if it is in your name, there are some limitations and penalties to access this money. 3)Your lifestyle is as much a factor in retirement viability than how much you have saved. I recommend you seek a fee-only, hourly planner to give you an objective review of your picture to see if it is viable. Good luck!

Heather: What should I be concerned about when buying company stock from the company I work for. There is only one owner and four employees. I'm concerned that he can control the stock price by paying himself more?

Mark Berg, CFP: Heather, Good question. There are many factors that can impact a stock price. Does he have a stated formula to determine the value?Is there an independent valuator? If it is a multiple of gross revenue, then it doesn't matter what he takes as a higher salary. The higher salary can affect dividends. If you like the company and are a valued employee, I think it is prudent for you and the owner for you to buy into ownership. For you, there needs to be a level of trust to do this. Also, I would not recommend that you ignore your own retirement savings plan to focus on this buy in. Make sure you are balanced in your approach. Good luck!

Jim Z.: I have a question whether we should sell our rental property now. We have a townhouse (bought four years ago) rented out with negtive cash flow (short of 9K per year). Since our income exceeded 150K, we cannot claim the passive loss. Should we sell it and buy a larger house or keep it for the long term? Our income can cover the mortgage payment of our primary residence and the rental property even without the rent income.

Mark Berg, CFP: Jim, Difficult question. Assuming you have a 30 year mortgage, and given the real estate market slump, it will take years to recoup the cost of this investment, not to mention the $9K negative cash flow. I would recommend cutting your losses. But between the two options you mention, I would keep what you have rather than buy a larger home.

Rachel Sheedy: For the 11 a.m. hour, Mark Berg of Timothy Financial Counsel will be taking questions.

Roman: Recently I received news that we can roll over traditional IRAs (I have one that transferred from an old employer 401K plan), if you make under 100K. What are the pros and cons to consider?

Annette Simon: I'm not sure what you're referring to. You can always roll over balances from former employers into a traditional IRA, and should probably do so. 401(k)s tend to have limited investment choices and often those choices are all relatively poor -- high cost, low performing funds. You can open an IRA account at a discount brokerage like T.D. Ameritrade or Schwab and rollover the balance in your old plan. This will give you access to thousands of funds to invest in. Or if your balance is relatively low (under $150,000) you could open an IRA account at Vanguard, which has a number of excellent low-cost mutual funds, some that give you broadly diversified investments in a single fund.

Liza: I am 40 yrs old and make approx 160k a year. I contribute the max to my 401k each year 10%. My company matches 2% if I contribute 6%. Should I just be contributing up to the match and putting the rest in an IRA? I am not eligible for a Roth IRA and do not have a regular IRA.

Annette Simon: Liza, There is no particular advantage to reducing your 401(k) contribution in favor of a traditional IRA. However, while saving 10% of your income has been the advice many people have follwed for years, we've found that it may not be enough to allow you to retire in the traditional sense in your 60s. We recommended saving more than that, and putting the additional savings in no-load, low-cost taxable investments (diversified mutual funds -- Vanguard has wonderful products). Keep in mind that the money you are saving in your 401(k) will be taxed as ordinary income when you draw it out at retirement. What looks like $1 million will really only be $700,000 or less depending upon the tax laws when you begin pulling the money out. What you save in a taxable account will be after-tax dollars -- and the increase in value will be taxed as capital gain (currently 15%) -- so more of it will be available to you when you retire. The trick is balancing deductions today and available funds in the future. Good luck!

Tom: With current market conditions, should I be more conservative in my asset allocations? I am 41 yrs old and have approx 70% in stocks and 30% in bonds and fixed.

Annette Simon: I can't give you a really valid answer to that question without having a lot more information about you and your financial situation -- for example, how much money do you have saved? How much is in taxable and tax-deferred accounts? Are you building your accounts or are you drawing upon them? If you are not currently doing so, when do you anticipate that you will begin to draw upon them? How much risk can you personally tolerate? A 70/30 equity/fixed income allocation might be fine for you, but it depends upon a lot of variables. You should consult with a NAPFA advisor in your area.

Jeane: My company is offering a Roth 401K. Currenty, I contribute the maximum amount, $15,500. I have over $350,000 in 401K, Traditional IRA and Roth IRA combined with $75,000 in a brokerage acct. I am 44 years old. Should I contribute more to traditional or Roth 401K?

Annette Simon: I am a big fan of the Roth IRA. You will contribute after-tax dollars now, but all of your earnings are income-tax free for the rest of your life and your beneficiaries' lives. This is the greatest gift Uncle Sam has given us in recent memory. If you have a pool of after-tax cash available, you might even consider converting some of your traditional IRA funds to a Roth. Current tax rates are quite low historically, so paying some tax now to avoid it later is not a bad idea. Check with your tax advisor to be sure this makes sense for your specific situation.

L. H. Kevil: I remember a column by Humberto Cruz about 0% capital gains coming up soon. Can you give me some details about that? Thanks.

Annette Simon: Starting this year taxpayers in the lowest tax bracket will owe no tax on long-term capital gains. The rate returns to 5% after 2010.

Robert: I have pretty bad credit because of some downfalls I had previously. What would be your advice to raise my credit?

Annette Simon: You should contact your local Consumer Credit Counseling Service -- the non-profit group, not any of the for-profit businesses that offer to fix your credit. CCCS will help you negotiate reduced interest rates with your creditors, establish a budget and fix your credit rating.

JSH: My wife and I are retired. We are both over 50. I have no earned income. However, my wife will work part-time and earn $12,000 per year gross and $10,000 net. Can we contribute $6000 each to our existing Roth IRAs? Thank you.

Annette Simon: You can contribute up to $6,000 each in 2008-- as long as one of you has earned income of at least $12,000.

Thomas Tom: Is a family trust the most effective means of preserving assets and minimizing taxes (inheritance) for future generations of a family?

Annette Simon: A trust can be a good way to accomplish this, but whether a trust is right for your family, and what kind of trust would be appropriate depends upon many variables. This is something you should explore with a financial advisor (www.napfa.org) and a qualified estate-planning lawyer.

David Coleman: Can one still take a penalty free withdrawal fom an IRA for educational expenses? If so, what are the tax consequences and how do you report the withdrawal?

Annette Simon: You can take a withdrawl for educational expenses. The withdrawal will be taxed as ordinary income but will not be subject to the 10% penalty. You should check the IRS website or with your tax professional for the specifics on how to report the withdrawal.

Rachel Sheedy: We're experiencing technical difficulties, but we should be back up and running. Annette Simon of the Garnet Group is answering questions in the 10 a.m. hour.

Grant Gormley: Is it wise to have one spouse take Social Security at 62 and the other at 66? That way the surviving spouse gets a high benefit? Assume both spouses' SS are about equal.

Jack White: Taking your Social Security payment at age 62 will result in you receiving approximately 20% less than if you waited until your normal retirement date. However you will be receiving that amount for at least 3 years maybe for depending on when you were born. So the consideration is how long will it take for the additional 20% to equal the early distributions, usually around age 75 or 77. However the largest consideration is whether or not you intend to continue working after 62. If you are and planning on earning anything over 12,0000 taking early distributions is not a good option because of the payback rules. It would be good to discuss this with your financial advisor.

Jean: My retirement future looks good, except for the health-insurance aspect. I know that as I grow older, the list of "preexisting conditions" that I may face could price health insurance out of my retirement budget, at least before Medicare. Since I plan to retire at 62, will not have a pension and will not have retiree health benefits from an employer, what do you recommend for health-insurance planning? (Currently age 51)

Jack D White: I would recommend having your insurance advisor discuss the benefits of an HSA (Health Savings Account). These accounts offer tax deferred accumulation of a sufficient amount of capital to pay a large deductible that you may take w/you when you leave your current employer at retirement. In short, it allows you to substantially reduce the cost of health insurance as you are in essence self-insuring for the first part of your medical costs, but are covered for the larger catastrophic issues that tend to impact your finances so severely. These are relatively complex instruments and you should seek counsel as to whether they are appropriate in your particular circumstances. In addition, I would recommend you research the increased benefit of maintaining a healthy lifestyle to protect against the traditional "old age ailments."

cindee smythe: I am 57, husband is 51. We are self-employed and business earns $51,000 a year. Business pays our low-cost health insurance as well as car insurance, repairs and related travel expense. Business pays us minimum salary and we each earn $8,000 annually, which keeps us on the Social Security radar screen. We have $62k invested in retirement mutual funds (European, emerging markets & growth) and $65K in CDs (4.75%)and $5k money market/emergency fund. Another $50k will be coming our way 3 years from now on a repayment from a family loan (signed in blood!). We have no debt, 2 cars are paid in full (2006) and we own 2 homes with no mortgages. We paid cash for one $175k, worth $425k in today's housing market. The other we paid $340k cash, worth $375k etc. One's in the mountains. The other is at the beach. Our business income helps pay all expenses. We never touch savings. How are we doing?

Jack D White: It sounds like you've been very diligent in your financial management. From an overall perspective, it sounds like you're doing very well. However, I would highly recommend that you spend some time figuring out exactly what you want to do with the accumulation of assets once the business is no longer attractive for you. A big issue for self-employed is getting the value out of your life's work. The options for that are many. You should seek counsel from qualified financial, tax and legal advisors regarding the many decisions that you need to make to insure that you receive maximum value from your business.

Sandy: I currently have no savings. I am a 47 year old single female. I bought a new home 4 years ago and owe $101K on a first mortgage and 11K on a second mortgage. It appraised last month for $125K. I owe approximately $13K in credit card debt and would like to sell my home (myself) and pay off most of my debt.The remaining debt would be paid off in 6 months or less. I would like to rent for a while and get myself in a better financial situation. I want to save for my future and learn to invest. I understand about home equity and the benefits of homeownership but I believe in some situations that renting is not always a bad idea. I would appreciate any advice you can give me.

Jack D White: If you are comfortable selling your home yourself, and the estimation of its value is correct, you would receive sufficient money to retire your debt. Renting is not necessarily a bad option, particularly in light of the potentially high maintenance cost and taxes you will have to pay in addtion to purchasing. The big question is the rent more or less than the mortgage payment? Whether or not it's a good idea to pay rent is more of a philosophical question regarding your desire to own your own home. If you're diligent with your savings program, and have a conservative portfolio of bonds & equities, the return potential for that investment could be greater than the return potential of a home. I'd recommend using a financial planner to outline your goals and objectives in light of your current and future earning capacity to determine the best course for you regarding these issues.

Andrea: Regarding Alternative Minimum Tax...is there any way to plan for avoiding this? And, what are the deductions that get taken away under the AMT? Specifically, I'm wondering how chartible contributions might be affected. Can I still make donations without worrying if they will be taken away? Thanks.

Jack D. White: I'm not a tax expert. My understanding is that charitable contributions are exempt from AMT. I'd recommend you consult with your tax advisor about this issue.

Scott Keelan: I am a Midshipman at the US Naval Academy and will receive a $35,000 loan at a very low interest rate (~1.0%). At my age, 19, and with a generous pension upon retirement, what advice do you have in order to maximize my financial potential?

Jack D White: The $35K loan would be classified as 'good debt' and the low interest rate argues for paying it back only in accordance with the payment schedule. The best thing you can do to maximize your financial potential is to set specific goals that you want to accomplish; remember, good goals are specific, measurable, and trackable. They should be something that you really desire to accomplish and contain a detailed plan for accomplishing them. Beyond that, it's up to you. Do you desisre to acomplish the goals enough that you're willing to set aside the necessary funds on a regular basis in a well diversified portfolio & stay focused on the objective? It's called...differed gratification. In other words, wanting something in the future bad enough to postpone the immediate pleasure. If you do that, you will maximize your future financial potential. BTW thanks for serving our country.

Muhammad: I looking for long-term investments in stocks and mutual funds for my kids. Thanks

Jack D White: The best investments are determined by establishing specific goals for your children and you, then follow a well-designed investment plan. Investing in a well-diversified portfolio that includes an allocation to stocks and bonds is typically a good long-term investment strategy.

Linda: I am retired and have a 401(k) plan that I'm considering rolling over to an IRA. What are the pros and cons of keeping the 401(k) vs. moving to the IRA?

Jack D White: This is a very complex question and the options are many. I'd suggest consulting with a financial and tax advisor for your particular circumstance.

Linda: I have both a 401(k) and a 403(b) account from two different jobs. Now that I'm retired, what are the pros and cons of keeping the accounts as they are or rolling them over to one or more IRAs? I am comfortable with the current investment options in each of the accounts.

Jack White: Rolling both the 403(b) and the 401(k) into an IRA gives you more investment options in the event that you become dissatisfied with the current options, which often happens. Many individuals find it more convenient as well to have all of your retirement assets in one account as it makes it easier to manage. You have more options when you are doing estate planning with individual IRAs. Finally, there are a number of tax considerations that you may need to consider, but you should consult with your tax advisor on those issues. In short the biggest advantage to individual rollover accounts is that you have more options when it comes to planning your financial future. The disadvantage to rolling into an IRA is that your state may not protect the assets from your creditors. I'd highly suggest that you review your particular situation with a financial advisor because the options are very complex and extend way beyond just the investment choices. You can locate a fee-only planner in your area by visiting the National Association of Personal Advisors web-site www.napafa.org.

Rachel Sheedy: Welcome to the second Jump-Start Your Retirement Plan Live Discussion. I'm Rachel Sheedy, associate editor for Kiplinger's Retirement Report and the retirement content editor for Kiplinger.com. I'll be moderating today's discussion, which will touch on all stages of retirement. Every hour until 6 p.m. today, we'll have a different NAPFA planner answering questions you've submitted. Note that you can also talk to a NAPFA planner until 6 p.m. today by calling 888-919-2345. But let's get started with our live discussion. First up to the plate to take questions is NAPFA member Jack White, of Fidelis Financial Planning.