Don’t Mess With Your Nest Egg.

On this day before those of us in the U.S. celebrate our freedom, there’s a great threat out there to the foundation of our financial freedom - our nest eggs.

You see, a lot of us are digging into our nest eggs to help us through these bad times. And that’s not good.

This is the subject of a great article I read today by Robert Powell on MarketWatch.com.

Rob warns us against 3 common mistakes a lot of us make with the money that’s supposed to set us free and at least support us through retirement, if not also being left as a legacy to our heirs.

These mistakes include:

Retirement Accounts
Don’t stop contributing to your 401(k) and don’t cash-in any or all of it.

Life Settlements
Don’t cash-in your life insurance for a “life settlement”.

Reverse Mortgages
Don’t try to cash-out on your house with a reverse mortgage.

For each mistake, Rob looks at both sides of the issue and gives it to you straight. So, check it out. It could be the best thing you can do for your freedom this July 4th weekend.

Don’t Make These Mistakes with Your 401(k).

If you’re one of the few, smart workers (only about 33%) who invest in a 401(k) plan, good for you. But there are some basic things that you should avoid if you want to give yourself a shot at better returns. This is the topic of a great article I read today on TheStreet.com by Lauren Tara LaCapra.

The piece goes on to state some of the common mistakes that a lot of 401(k) investors make, such as picking the wrong funds, not keeping an eye on their accounts and not rolling over their plans when they change jobs.

It then gives some intelligent advice on how to get the most from your 401(k). Here are 5 things to do.

1. Contribute more
If you’re not putting in enough to get the most from your employer’s matching funds, then you’re walking away from a lot of money. And if you don’t make “catch-up” contributions, then you’re really leaving money on the table. Remember, for 2008, the maximum contribution is $15,500 if you’re under 50 and $20,500 if you’re 50 or over.

2. Strategize and then track performance
Make a PLAN. And then follow it to a T. If your plan offers life-cycle funds, check them out to see if they fit your needs. They could be a good alternative to you just guessing what to invest in. Read more

Asset Allocation to the Max for Your Retirement Portfolio

For me, my retirement portfolio is the most important one I have because it’s what I’m going to have to live on later on in life. So, I keep a pretty close eye on it and have it set-up in what I think is a good way.

But then I read an article by Roger Nusbaum on TheStreet.com today that suggested a much different retirement portfolio than I have. This one had a really detailed Asset Allocation.

In fact, Nusbaum’s piece was about an article in Barron’s this past weekend that featured a suggested portfolio by Mohamed El-Erain from Pimco, a major investment management service. Usually, I don’t write about an article based on another article, but this information was so interesting I just needed to share it with you.

It’s extremely detailed, much more than I’ve ever seen. And El-Erain really gets into specific investments in each asset class. So, what kind of allocation does he suggest? Here it is:
• Domestic Equities: 15%
• Foreign Developed Equities: 15%
• Emerging-Market Equities: 12%
• Private Equity
• Domestic Bonds: 5%
• Foreign Bonds: 9%
• Real Estate: 6%
• Commodities: 11%
• Inflation Protected Bonds: 5%
• Infrastructure: 5%
• Special Opportunities: 8%

Yeah, I know, it doesn’t add up to 100%. It’s just 91%. There’s no % next to Private Equity. But thru subtraction, I’m going to guess that it’s 9%.

The one thing about this portfolio is that only about 30% of it would be in domestic stocks. That’s a lot different from what I’m used to seeing. But I’m willing to consider and continue researching the suggestions El-Erain makes in his asset allocation. What do you think about this? Let us know.

How to save $1 Million if you’re 25, 35, 45 or 55.

If you’re 25 years-old, how much do you have to save per month to have $1 Million when you retire? What about if you’re 35? Or 45? Or 55?

Well, if you’d like to know the answers to the above questions, check out this cool piece on Kiplingers.com.

The calulations assume that you’ll put these monthly savings in a retirement account that gets at least an 8% return. That’s a pretty fair assumption.

But the big question is: How much do you have to save per month?

Well, the answer is $671.

But I won’t tell you what age that starts at. For that, you’ll have to check out the article.

Saving $451 a month can make you a Millionaire?

There’s an interesting article on today’s Kiplingers.com that talks about how little you need to save and invest every month to reach $1 Million.

According to the piece, you just need to save $451 a month. And it actually shows you have to save money on a bunch of things - like your income taxes and your food bill. Even your health care!

It assumes that you’ll put the money into a retirement account that averages a return of at least 8% a year over the next 35 years.

It makes sense. But I guess I’ll have to cut out my Dunkin’ Donuts coffee. That’s 2 bucks a day for a total of $60 a month.

What do you save per month for retirement? Or do you save anything per month? Let us know.

Thinking of dipping into your 401(k)? Think again.

I just read a great article by Lauren Tara LaCapra on today’s TheStreet.com the consequences of withdrawing money from your 401(k) when you’re in your 20’s or 30’s.

I just wish she wrote it – and I read it – 25 years ago instead of today.

You see, dipping into my 401(k) during my 20’s and 30’s wiped out my nest egg - TWICE.

Just like the young people Lauren writes about who view their 401(k)s as kind of a regular saving account, I was short-sighted about my finances and my retirement plan. I lost all of those years of tax-deferred compounded interest. UGH!! It kills me that I was so stupid.

If you’re thinking of taking out money out of your 401(k), and you’re younger than 59 1/2, please read Lauren’s article. It could save you more than just a few bucks. It could save your retirement.

Hey, Remember the IRA?

How many American families who were eligible to make direct IRA contributions in 2006 (the most recent data available) actually did so?
__ 100%
__ 85%
__ 50%
__ 25%
__ None of the above

The answer, according to a great article by J. Alex Tarquinio on today’s NYTimes.com, is…14%!

Can you believe that? Only 14% of eligible American families contributed directly to their IRAs. I think that’s insane. And don’t tell me the reason is because they’re contributing to their 401(k)s at work.

Because, according to the article, 57% of Americans 25 to 64 have NO RETIREMENT PLAN AT WORK.

So, what’s going on here? Do they think that Social Security will be their retirement plan? Will SS even be around when they retire?

Sure, deciding which IRA is right for you could be a little confusing, but it’s really not a good excuse for not putting at least something into your IRA. And not having the money after paying all of your bills can also be a reason. But if you can find a few dollars to buy a latte or a pack of cigarettes even once a week, you can afford to put something into your IRA.

So, what do you think is the reason why so few of us take advantage of IRAs? Give us your take.