RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

You may be surprised to hear that many companies are considering doing away with matching contributions to their employee's 401(k) plans. Some big companies, including Ford Motors, Bethlehem Steel, and Charles Schwab, have already tried suspending or reducing their 401(k) matching contributions as a cost-cutting measure in the last recession. Though most of them reinstated the perk after 2002, the current crumbling economy has put 401(k) contributions back on the table and on the chopping block. Current research points to the idea that matching contributions are not necessary in order to lure employees into retirement planning, and that the funds earmarked for 401(k) matches can best be spent elsewhere in the form of salary raises for all employees, or beefing up health insurance benefits.

However, just because your company is not matching your contribution, there's no reason not to plan ahead for retirement. In fact, if you were contributing enough into your account to qualify for a matching contribution from your employer, chances are you can afford to open up an individual retirement plan or Roth IRA and arrange to transfer the same amount into it every month, weekly, or biweekly. Roth IRAs have contribution limits depending on how much you make: if your modified adjusted gross income for tax year 2008 is $101,000 or less for singles, or $159,000 or less for married couples, you can make a full contribution of $5000 per year. However, this works out to a little less than $100 a week, or up to $416 a month.

Most experts advise you to keep a mix of retirement contribution accounts to maximize your tax savings. 401(k)s and tax deductible IRAs will give you a deduction on your income now, while Roth IRAs and taxable brokerage accounts allow you to carry a tax break into your retirement instead. It's generally considered advisable to put as much money in the tax-deductible IRA or 401(k) as you can, since you'll want to maximize your tax savings during the time you make the most income.

Those who are getting a late start on building their nest egg, or have a tough time putting aside any part of their current income, have the most to gain from 401(k) matches from their employers. If that's you, you might want to make sure you have a job that provides this important benefit. But if you don't have a 401(k) match, it's time to start prioritizing your retirement planning on your own. Talk to a broker or investigate your options to find the best retirement plan for your needs.

Do you have a 401(k)? Chances are your 401(k) is part of a program offered by your employer. If you are about to change employers, or if you've recently lost your job - an unfortunate fact of life these days, it seems - then you are probably wondering what to do with your 401(k) fund. If your employer allows you to participate in their 401(k) plan, and many employers will, you could always leave it where it is. You could also rollover your 401(k) into an Individual Retirement Account, or IRA as they are more typically referred to. When you roll over your 401(k) into an IRA, you will enjoy greater flexibility and have more diverse investment options.

Let's say you've been working at your company for the past 6 years, and have been participating their 401(k) plan the whole time. You have now built up a chunk of change. You've accepted another job, however, and are wondering what to do. You may decide to keep your money in your current 401(k) plan, or move it over to the 401(k) plan offered by your new employer. Or you might roll it over into an IRA. That may be the most appealing option for you since when you have your money in and IRA, you have more kinds of investments you can make. For example, with an IRA you can invest in individual stocks, bonds, or mutual funds that you just happen to like. You will probably have to evaluate your choices yourself, but at least you'll have the freedom to do so.

To learn more about rolling 401(k)s into IRAs for more diverse investment options, 401(k)s, IRAs, or any other long-term investment question, be sure to consult with a financial advisor. He or she can walk you through the pros and cons of all your potential investment instruments.

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