While most people agree that the best bang for your buck comes from index funds, sometimes you want to roll the dice a little and see if that hot shot mutual fund manager can get you a little better return than the market. Even though index funds are the best value, putting all your funds into one is just as bad as putting all your funds into one stock - you want some diversification on both a stock-bond level as well as a geographic level (and other levels).

Anyway, as is the case every year, Money Magazine put together a list of 70 actively managed mutual funds that they feel provide the best value for the investor on a variety of factors. They break the group up based on market capitalization for stocks, as well as groupings for bonds, international, and a specialty category (for things like real estate funds).

Don’t blindly invest in anything and definitely don’t invest in something just because you saw it in a list - just use this information as another factor in your decision on the funds you want to invest in.

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The ninth retirement resolution was to set a retirement savings goal.

Only 42 percent of workers have actually calculated how much they need to save for a comfortable retirement, according to EBRI. And 41 percent of those who did the calculation created their own estimate or guessed. It’s a good idea to sit down with a financial adviser and calculate exactly how much you will need to cover your expected retirement expenses or use an online calculator or retirement worksheet.

It’s always important to have a plan before you do anything and your retirement is no different. If you don’t know where you need to be and how much you’ll need to retire, it’s very difficult to be comfortable with how much you’re saving. Are you saving too little or even too much? Life is about balancing the enjoyment of your labor both now and into the future so you don’t want to put too much away into your nest egg, it’s almost as bad as not putting enough.

Now, it’s staggering that only 42% sat down and calculated how much they’ll need and that of those, 41% only guessed. Now, if you’re young and just entering the working world, it’s perfectly alright for you not to be focused on retirement outside of the basics. However, if you’re less than twenty years from retirement, it’s crucial that you sit down, do the math, and give yourself some confidence that your retirement plan is on track.

Source: US News and World Report

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The eight retirement resolution was to plan for the financial transition into retirement.

It’s important to develop a plan to transition your retirement savings into a stream of retirement income. “It’s the way you take it out that will determine how much you and your family keep and how much goes to the government,” says Slott. “If you take it out the wrong way, it all goes back to the government.” A financial adviser can help you determine the most tax-advantaged way to withdraw money from retirement accounts. You’ll also want to double-check the beneficiary forms on all your retirement accounts. “The beneficiary form is the key document that’s going to determine who gets all this money you’ve saved,” says Slott. “Most people think that somebody else took care of this, and then they are surprised to find out that they didn’t.”

Retiring is difficult and it’s important that you establish a plan for your finances before you make the move to retire so that when you do start tapping your savings, you don’t make the mistake of drawing it down too quickly or too slowly.

Another important tip they recommend is to double check the named beneficiary on your accounts the event of your departure, checking the named beneficiary is something I discussed before in the past.

Source: US News and World Report

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The seventh retirement resolution was to remember to save first, spend second.

“Pay yourself first, and find ways to invest automatically,” says Heather Dzielak, senior vice president of retirement income security ventures for Lincoln Financial Group. “Get in the discipline of setting aside money for your retirement.” Many companies will let you automatically deposit a portion of your paycheck into savings or investment accounts, so you can save it before you even get a chance to spend it. Martin Weiss, president of Weiss Research Inc., recommends prioritizing retirement even above your holiday spending. “I know it sounds a little bit selfish, but the holiday spending and undersaving is the big hit to the nest egg,” he says. “If we could save for a nest egg the same amount that we spend for gift giving during the holidays, that one change alone could have a very dramatic impact on the quality of our life during retirement.”

There isn’t that much more that can be said on the subject, saving is the key to a successful retirement. What’s interesting is what Martin Weiss said about how holiday spending is one of the biggest hits to the nest egg, so remember to contribute to your Roth IRA, 401(k)s, etc. before you go spend-crazy.

Source: US News and World Report

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The fifth retirement resolution was to pay down that home mortgage.

Pay down your mortgage. “Try to figure out ways to reduce your mortgage rather than add to it,” says Pond. “You don’t want to be paying off your mortgage when you’re 80.” He also recommends downsizing to a smaller home when you retire or even while you are still working. “Many people who live in urban areas can reduce their living expenses by up to 40 percent,” he says, “simply by moving to lower-cost and often more climate-friendly locales.”

Hmmmm, while this is a good idea in principle, you have to evaluate whether your next dollar should go towards your mortgage or to something else. Certainly, owning your home is an extremely laudable achievement and something you’ll want to have done by the time you’ve retired (that’s just another fixed payment that you don’t have to make) but depending on where you are in your life, your dollars might be better served going elsewhere.

While debt is always bad, a mortgage usually has a much smaller interest rate when compared the typical 20% rates of credit cards. Mortgages also have the benefit of having the interest being deductible, something that credit card debt doesn’t have.

Source: US News and World Report

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The fourth retirement resolution was to get rid of credit card debt.

“Pay off your credit card debt because your investments will not be rewarding you at the same rate as your credit card debt,” says Ted Allrich, the author of Comfort Zone Investing. Credit cards carry interest rates that can top 20 percent, as well as late fees and penalties. That is much higher than the return you can expect on most investments.

Credit card debt is the black hole in the financial industry (for consumers anyway!), once you open one up, it seems like it sucks up all of your money. When you’re battling 20% interest rates, it’s difficult to establish any semblance of a strong financial foundation, so you must get rid of the credit card debt you’re holding onto right now. If your credit is strong enough, consider taking out a 0% balance transfer to give yourself a breath of fresh air as you continue the fight. If you are looking for a card, consider one from this list of no fee 0% balance transfer credit cards.

Source: US News and World Report

US News and World Report had a little piece where they discussed some good New Year’s resolutions related to retirement and I thought that I’d put each of them through their paces. The third retirement resolution was to examine your investment portfolio.

The New Year is the perfect time to look over your various retirement accounts and make sure you are getting a good return on your investments. “Over the long term, diversified stocks and bonds should return you 7 percent,” says Jonathan Pond, the author of You Can Do It! The Boomer’s Guide to a Great Retirement. “The average investor makes about 4 percent because they are perfectly happy to hold on to underperforming investments or they don’t select good mutual funds or good investments.” Pond recommends a diversified portfolio, selecting good investments, and continuously monitoring those investments to make sure that you average at least a 7 percent return.

I definitely agree with this one, you should examine your investment portfolio once a year, preferably right before the end of the year so you can take advantage of the wash rule (where your profitable investments can balance out your losses from a tax perspective) but checking right now is better than not checking at all. Remember to reevaluate all of your investments given the current economic situation and that you should consider re-balancing if your asset allocations are too far out of whack given large gains or losses.

Source: US News and World Report

All of your annual contribution amounts have been reset and now is an excellent time to take stock of last year’s achievements and make the necessary adjustments to your retirement planning. Adjust those 401(k) contributions, start or continue to put away month into IRAs, and consider re-balancing that portfolio!

If you enjoy a nice helping of humor along with the usual dry subject of personal finance, Motley Fool is the website for you. I was poking around their content rich site the other day when I decided to pop my head into their retirement section and found an article written by Robert Brokamp (TMF Bro) titled: 5 Retirement Must-Knows - Everything you need to know about retirement planning on a single Web page. Well, given such an auspicious title, I just had to take a look. What were these five must-knows and were they really must knows?

You can’t look to your parent’s retirement as a guide for your own. What this means is that when you retire in twenty to forty years (even then, someone retiring in twenty will have a different retirement than someone retiring in forty) years, you’ll have to face challenges that your parents may not be facing right now. You will probably live more actively and live longer, enjoy more things, and generally need more income to sustain you in your later non-active income years. So while you’ll need more, you have more weapons at your disposal in the retirement battle because thirty years ago IRAs and 401Ks were unheard of. Everyone thought they’d retire on pensions and social security… which leads into the second must know.

You’re on your own. Retirement can be seen as a three-legged stool, propped up on Social Security, defined benefit plans, and your own savings. Social security is underfunded, people aren’t staying long enough at jobs to build up a large enough benefit in pensions and other defined benefit plans, which leaves savings as the only real dependable retirement option left for many folks.

Starting saving now. It’s never too early or too late to begin saving for retirement. The earlier, of course, the better; but starting late means you started, which is better than not having started, right? The article has a slick looking picture that you should check out that shows growth curves based on when you started, your investment return, and how much is saved.

Stocks are better than bonds. We all understand that stocks are better than bonds, but how much better are they?

According to Jeremy Siegel’s Stocks for the Long Run, for every rolling five-year investing period from 1802 to 2002 (i.e., 1802-1807, 1803-1808, etc.), stocks outperformed bonds 80% of the time. Stocks beat bonds for 90% of the rolling 10-year periods, and essentially 100% of the rolling 30-year periods. For holding periods of 17 years or more, stocks have always beaten inflation, a claim bonds can’t make.

Does this mean that you should put 100% into stocks? No! Put a mix that makes sense for you. What makes sense for you? Read up on asset allocation but the gist is the younger you are, the more you should put in stocks because you can weather the downturns because you have the benefit of time. If you’re close to retirement, you don’t want to have to weather downturns.

Defer taxes if you can. There are a lot of defined contribution plans, now that the defined benefit plans are going away, that allow you to defer your income (and taxes!) into your retirement years so you had better take advantage of them. Why is this smart? Your contributions aren’t taxed until you withdraw them and your earnings aren’t taxed until you withdraw them either, so you have a bigger investment bucket to grow into your later years. Use them!

Source: Motley Fool

The “Retirement and Planning Center” at Yahoo Finance has a great article from USA Today that outlines a retirement strategy for every age group - 20 to 29, 30 to 39, 40 to 49, and 50 to 59. As expected, the younger you are the more aggressive (emphasis on growth) they recommend you be and the older the more conservative (emphasis on income) they recommend you be. Within each age group they also give advice as to what you should do with respect to your retirement options, like your 401(k) and Roth IRA, and other major financial decisions, like saving for a house or for college for your kids.

20 to 29
Investing breakdown: 50% in an S&P 500 index fund, 25% in a small cap fund, 25% in an international fund. Start your 401(k) and contribute up to the company match, start a Roth IRA, start an emergency fund, and create a living will.

30 to 39
Investing breakdown: 50% in an S&P 500 index fund, 20% in an international fund, 15% in a small cap fund, and 15% in a mid-cap growth fund. Don’t sacrifice retirement savings to save for college for your kids, keep contributing to your 401(k), and don’t confuse whole life insurance with a retirement plan. It’s good to have but it’s not a retirement plan. Write a will.

40 to 49
Investing breakdown: 40% in an S&P 500 index fund, 15% in an international fund, 15% in a small cap fund, 15% in a mid-cap growth fund, and 15% in a bond fund. Max out that 401(k), be sure your emergency fund is 2-3x your monthly expenses, be sure your mortgage ends when you stop working, fund your Roth IRA or other tax efficient alternatives, and update that living will.

50 to 59
Investing breakdown: 30% in an S&P 500 index fund, 30% in a bond fund, 10% in a small cap fund, 15% in a mid-cap growth fund, 10% in a mid-cap blend stock, and 10% in an international fund. Review your life insurance plan, increase savings, and utilize catch-up provisions for your retirement accounts. When you hit 55, review your Social Security benefits and any pension plans you may be a part of. Finally, update that will again.

via Yahoo! Finance.