Mr. Money and I both have Roth IRAs with a brokerage account at the bank I currently work at.  Since they are in mutual funds, there is an annual fee for having the accounts.  Every year it’s been $15 since I’m an employee, and he’s my spouse.  Imagine my surprise when this year I received the bills and they were each $40! I almost had a heart attack.  I didn’t mind paying $15 a year, but $40 a year is way too much because the balances we have in those accounts doesn’t make up for it.  My account has around $400 (I put $500 in about 7 years ago and left it at that).  Mr. Money’s has more, which is good because he’s older.

When I went to talk to the broker about it, he told me that the fee had gone up and they would try to get it waived for me.  However, if I wanted to close the accounts, there is a $75 fee.  Nice.  So not only would I be out the annual fee if they can’t get it waived, I’m also out $75 each account.  Really?  I am exploring these options:

-Finding a new brokerage company that doesn’t charge annual fees or other stupid fees.  I’m fine with paying trading fees, since I don’t think there’s really any way around those at any company.  I just can’t stand the idea of paying $40 a year just for them to hold my account.

-Opening up a Roth IRA for each of us with ING.  With ING, they have an IRA savings account that has no minimum balance and no fees.  I really like that idea.  I’ve thought about starting one of those for each of us, and then contributing what we can each month.  When the balance builds up to say $10,000 (which will probably take quite awhile!), then I could always look into transferring it into a brokerage account.

-I’m thinking about just closing out my account totally and just using the money to buy baby things.  Of course, I’d have to claim this as income, which would be a pain, but I wouldn’t have to pay that much in taxes since the balance is so small.

I am waiting to see what happens with the annual fee.  If they can get it waived, then I’ll probably just leave the accounts as they are.  However, I’m worried that once I terminate my employment that they will realize that and remove the waiver and I’ll be right back in the same situation.  I think it would be easiest to just close out the accounts and move them to ING because of the no minimums and no fees, but I’m worried about lost opportunity in the mutual funds.  Of course, if my account has been in mutual funds for 7 years, and I’m $100 less than what I put in, it’s really not doing that well any way!

Planning for retirement can be such a headache.  I’m glad we’re getting it done now, but I’m hoping there’s an easy solution so I don’t have to do too much work after we get it squared away!

Do you have an IRA?  What is your favorite place for a fee free IRA?

Last Friday I logged into my employer’s human resources website to take a quick peek at my 401k balance.  I was just curious how much money I had in there.  I made a mental note of the balance, logged out, and went about my day.  Then this week happened and the economy and stock market decided to take a nose dive.  For the heck of it, I decided to log into the website again and check my balance.  It had gone down over $2,000 (which is a pretty nice percentage of the money that I have in it).  Whatever.

Why am I not concerned?  First of all, I’ve got many years until I am going to retire.  I’m not going to touch that money for at least 30 years, so why get all worked up about it now?  Secondly, the stock market is going to go up and down- it’s just how it goes.  If I was one of those people who panicked and sold all my stocks I’d be losing a lot more than $2,000.  I’d lose the opportunity to make that money back.

When the stock market does crazy things like it has over the past few weeks, people start freaking out and doing crazy things with their money.  They think they should sell before they lose even more money.  Look at it this way: now is the time to buy!  Stocks are on sale right now, and if you get a good deal, you have an opportunity to make a lot more money over time.

The other day I had a client come into my office that wanted to place a $75,000 wire transfer.  As part of our bank’s policy, I asked him what the transfer was for.  He informed me that he was buying gold.  I couldn’t believe he was going to buy $75,000 worth of gold, but who am I to tell him not to?

I’m glad that I realized that the money I “lost” isn’t something I should worry about.  There’s no way to get it back, and all I can do is move forward and keep being frugal and saving money.  What else can I do?

Are you concerned about the economy/stock market?  Do you worry about your money?

My employer offers a 401k for retirement savings.  I contribute 6% of my salary, and they contribute 4% of my salary and give me dollar for dollar matching.  I’ve contributed 6% for years, and it’s a number we’ve been comfortable with.  However, I got to thinking the other day how Mr. Money’s employer doesn’t offer any type of retirement savings (they haven’t ever) and how we probably need to get cracking on saving for retirement with him.  We each have a Roth IRA that are in mutual funds, and my account has around $500 in it while his has maybe $2500 in it.  That is all we have saved for retirement minus my 401k, which I know has a decent balance, but not as much as I’d like for both of us, especially with Mr. Money being 34 years old.

This is what I’m thinking: I will take a set amount of his paycheck aside each month and transfer it to an ING account where it can stay until we’ve got enough to contribute to the Roth IRA.  The reason I don’t want to contribute each month directly to the IRA is because every time we make a contribution they charge us.  So it makes sense to go ahead and save up and just make one quarterly or biyearly contribution.

I’m going to have to figure out a dollar amount that works with our budget and go from there.  I guess I’ve always worried we won’t have enough money, but that stands for life in general, so as long as I do SOMETHING about retirement and we continue to save money, I should feel good about it.

I’ll continue to contribute to my 401k at work and may even up the percentage a little bit to try to bump that balance up.  I know I’ve talked about it before but never took action.  I think part of my problem is that I worry too much about everything in general and compare our finances to other people sometimes and those are both big mistakes.  I think if I stop doing that, I’ll be in a lot better shape!

I freak out a lot but I also have to realize that we still are pretty young and really just getting started. With Mr. Money a little older than me, it’s easy to think we should have more money saved at this age, we shouldn’t owe so much on our mortgage, he should have a better retirement account, etc.  The truth is we’ve done pretty well.  We paid off our consumer debt and student loans over the past few years with hard work and determination.  We work hard to live on his income, so we can have me stay at home with our baby when the time comes.

Retirement is a long way away, and we’ll do our best and take it from there.  That’s all we can do.

Do you worry about retirement?

Almost six years ago I opened a Roth IRA in a brokerage account.  I started the account with just $500, and I did it as more of a favor to the financial adviser that worked for the bank.  Needless to say, I haven’t made any contributions to it since I actively contribute to my 401k offered through my employer.  Every year there is a $15 annual fee, and each year the Roth IRA automatically sells some of my mutual funds to pay for that annual fee.  In addition to losing money with the annual fee for the brokerage account, the value has gone down due to the stock market fluctuations.

I’ve been contemplating closing out my Roth IRA.  It doesn’t make sense to have an account that costs me money each year that I’m not going to make contributions to.  I talked with my financial adviser and she agrees that we should just close it out.  It doesn’t make sense financially.  I’ll keep contributing to my 401k, and we’ll leave Mr. Money’s Roth IRA as it is (it’s also a brokerage account, but he’s got more money in it).  She did tell me that there is a penalty for closing out the Roth IRA early, but it’s really not a big deal.

Roth IRA Early Withdrawal Penalties

Since I am not over 59.5 years old, I will incur a penalty of 10% for closing out my Roth IRA early.  I believe that my Roth IRA account balance is around $300.  When I do my taxes, I’ll have to claim that and that’s when I will incur the 10% penalty.  $30 isn’t going to make or break me (in fact, if I left the Roth IRA as it is, that’s two years of annual fees!).  My thinking is that I would rather pay the 10% penalty and not worry about the annual fee or losing even more money.  The truth of it is, I probably shouldn’t have opened the Roth IRA in the first place!

Saving for Retirement

I’ll continue to save for retirement through my employer’s 401k plan.  I contribute 6% of my annual pay each pay period, and that seems like it’s a pretty good amount for us at the moment.  We also throw a chunk of money into a regular savings account each month, and that money could be reallocated in the future towards retirement if we so desire.  I like the flexibility of having the money in the savings account versus having it in a retirement account.  Who knows if we’ll decide we never want to retire and we want to use the money without penalty?

After talking with my financial adviser, it seems like it’s the right thing to do an early withdrawal on my Roth IRA.  Even though I’ll incur that 10% penalty, I’m still better off than leaving that small amount of money in the brokerage account to be eaten away by losses and fees.  It just doesn’t make any sense to me.

Do you think I am doing the right thing with a Roth IRA early withdrawal?

I logged in to check my 401k performance the other day and realized that about 35% of my 401k portfolio was in company stock.  I personally don’t allocate my contributions to company stock, so it was all from the company match.  While I am thankful for the 401k match, I also don’t like having that much of my 401k tied up in company stock.  I don’t know much about investing, but I do know that it’s not good to have your eggs in one basket, especially in your company stock.

I am reminded of a couple years ago when the bank I work for was not doing so well.  At one point our stock was $45 a share.  Before we were bought out, our stock was down around $2.  Many people, including the branch manager and licensed investment adviser, had their entire 401k in company stock.  To say they lost money would be an understatement.  Unfortunately, I know this happened to many others as well, and not just those who worked at the bank.

I sold all the stock and put it into a money market fund until I decide what I want to do with it.  At least it will be earning interest (although not much) while I make a decision.  I left my future contributions how they were, and I’ll have to go back in 3-6 months and reevaluate.  If I have too much stock then, I’ll sell again. I’m thankful that the company still does a 401k match.

What’s funny is the investment adviser at my branch told me that I shouldn’t do it.  I’d make more money if I left it in the stock.  I didn’t feel comfortable doing so, so I did what I thought was best.

Does your company match your 401k contributions?  Do you receive stock if so?

photo credit: Ponzi_Unit

This post is from wifeish, who believes “More money = better wine.” Check out her blog at Wifeish Money.

Let’s talk about the stock market. Don’t worry! I have GOOD news! First bit of good news? Investing in the stock market can be very simple. In fact, for the average Jane or Joe there are only a few types of funds your money should be parked in.

Where to start? If your company offers a 401k contribution program sign up! You can choose an amount to be deducted from every paycheck which is then placed into an investment fund. How much to put in? If your employer offers a match, put in the minimum amount to get that free money. My company matches my contributions up to four percent. Since we are trying to build up our emergency cash fund, we only contribute that four percent. Once we have a big fat piggy bank full of emergency money we will probably up that amount. Did I mention that your 401k money is taken out before taxes? Bonus!

Ready for more good news? Stocks are on sale! Now is a great time to start investing in the stock market. Right now you can buy a share of an S&P 500 ETF for about 115 dollars. In 2007 that same piece of the same fund went for about 150 dollars per share. Now remember, this is for the long haul, people. Who knows what price that fund is going to be at in two years? Could be higher… but it could be lower. So the money you put into this fund is money you will not need to touch for a minimum of twenty years. LONG TERM. You should not use your 401k or Roth IRA as an emergency savings account.

For the average person, investing should be simple. Start early. Go slow. Gradually build your portfolio with a variety of funds. The rule of thumb is be a turtle, not a rabbit.

One way to think of the stock market is like a mall. The mall has a lot of stuff you need, a lot of stuff you want and a bunch of stuff you would never ever in a million years need to buy. So what do you need from the stock market? You need mutual funds. Mutual funds are stocks from lots and lots of different companies all pooled together. Mutual funds come in all kinds of flavors from “blue chip” which are made of companies with a long history of stable growth (think: McDonalds, Wal-mart, Apple, etc.) There are energy funds which are made up mostly of oil and utilities stocks and there are real estate funds which invest in…duh…real estate from lots of different companies. There are too many different kinds of mutual funds to name. However, there is really only ONE type that is crucial to the beginning investor.

I believe that every new investor should begin with a mutual fund that mirrors the index. These funds are referred to as index funds. For some reason I just love the S&P 500, which is the index upon which our entire stock market is valued. The S&P 500 contains stocks from hundreds of American companies. It is suuper diversified, meaning if one company from the fund went under, it wouldn’t ruin the whole portfolio. Diversity is good, really good.

I am not here to tell you what to do with your portfolio down to every last fund. I am here to to give you a few tips to help you get started.

Don’t put all of your eggs in one basket, choose general and diversified funds. When going shopping you look in more than one store for the best deal, right? Same thing with mutual funds. Each one has something different to offer, and the more funds you invest in, the more your money is spread around in case one company or set of companies doesn’t do so well. I have 75% of my 401k dollars going to one type of mutual fund and 25% going to a different type. I only use two funds, but they are both low risk and very diverse.

Know where your money is going! I cannot stress that enough. Not every mutual fund carries the same level of risk. The S&P 500 fund is low risk over the long term as are the blue chip funds. Energy and real estate funds, however, carry more risk. Also, know how diverse your funds are. Some contain a lot more companies than others. Fidelity is the company in which my 401k is housed. Fidelity gives me a list of mutual funds and asks me how much money I want to put into each one. I picked two after doing research on what types of funds they were and how to gauge how well they are doing. Know the long term history of your funds. I also know what factors go into their performance. For example, my energy fund contains a lot of stock in oil companies. What the price of oil shoots up, my fund makes money.

Don’t ever, ever buy stocks. Remember how I said the stock market is like a mall? Stocks are like the 500 dollar Ferragamo pumps you will only wear once. Money out the window! Unless you have that money to throw away, don’t do it. Trading stocks is the same as going to Vegas and hitting the poker tables as far as you and I are concerned.

Don’t be afraid! You have the power to invest for your future wisely!

What’s your favorite avenue of investing money?

This is a guest post from Evan, who writes over at My Journey to Millions. Be sure to pop over to his site and subscribe to his feed!

The Temple of Apollo at Delphi has a phrase carved into it.  Its translation? Know Thyself.  The Greeks knew it over 2,000 years ago!  While I don’t think there is one way to achieve financial independence and wealth (regardless of what those terms mean to you), I do believe there is one common denominator of those that actually meet their goals.  It is all about knowing yourself and either protecting yourself from…yourself, or, alternatively, encouraging those good qualities you may have.

The world is what it is, and there are very few people that will be able to change the world, so most people have to adapt.

How does this Apply to Personal Finance?

For example there are 2 camps when it comes to using cash only vs. using cards.  I know I can’t carry cash on me, if there is cash on me it is gone, and I am not one of those people that spend more when using a credit card. Failing to understanding where you land could be a crazy money vacuum.

I know I need automation in my life, and what is more automated than a 401(k)?  Even if there is no match sometimes a 401(k)s are better than IRAs based on many factors, but the biggest one for me is that the paycheck comes in net of that contribution.  Further, I have to go talk to my HR person to tell them that I need to stop my retirement savings.

The HR discussion that I want to avoid, is an example of a Personal Finance roadblock that I know I need.  Specifically, one of the biggest benefits of using ING for me, at least, is the fact that to get to the money I have to sign online and make moves.  For big purchases, I get a cool down period for the money to hit my main account.

Do you know yourself when it comes to running your money life?

Ever since the bank I work for was bought out by another bank, there have been changes occurring. I knew that there would be, as change is inevitable. Some of the changes have been small, and some have been huge. I’ve taken it all in stride, and rolled with the punches. There’s not much more I can do besides that.

This morning we had a meeting on some of the changes to our benefits plan.  The first thing we went over was health insurance plans.  The old bank offered a high deductible health plan, and now the new bank is going to follow suit.  We’ll still have other options like PPOs and HMOs, so I’m not freaking out about that too much.  I can pick health insurance pretty easily now.

The next topic we touched on was retirement accounts and pension plans.  As it is currently, my company matches $1.15 per every dollar I put into my 401k, up to 6%.  I also have a pension plan I was grandfathered into that they put money into each month.  Very nice!  The new bank is going to be matching dollar per dollar up to 4%. Ouch.  That totally bites.  But, they are going to offer everyone a pension plan.  So, essentially I am going to be losing out.  Not only are they matching less money, but they’re matching 2% less than the old bank! Bummer.

Seeing as this is our only retirement account we actively contribute to, I think I’m just going to keep contributing at 6% and leave it alone.  I am truly disappointed that it’s occurring, but I am also happy they will be matching something.  I don’t know if their reasoning is due to the merger or the economy, but whatever the reason, I’m not pleased.

Has your employer changed your retirement plan due to the economy? 

Before you freak out, it’s not me that stopped saving for retirement. Sheesh! I’m not that crazy. But my friend is. The other day we went to lunch, got started talking about retirement and how she’s not saving anything.  She’s my age (25) so I was pretty curious.  Our conversation went a little bit like this:

Mrs. Money: “I am glad I am saving for retirement because my company matches up to 6%.  I feel that’s pretty good for me right now.”

Crazy Friend: “I’m not saving at all, and I don’t ever plan on it.”

MM: “You don’t ever want to retire?!? Are you crazy?”

CF: “Nah, I just think there are too many variables.  You know, the world will probably have ended by that time anyway, so what’s the point of saving if you aren’t even going to be around to enjoy it?”

MM: {blank stare}… “Are you kidding?”

CF: “No, I really think that.  With global warming and everything, our planet will probably explode or we’ll all be drowned or something. I’m living life now!”

While we’re all entitled to our own opinions, I’m going to go on record with believing this is one crazy girl. You never know what’s going to happen in the future, that’s why you plan for things.  Yes, the world could end, but she could also end up living until she’s 100 and out on the streets.  The real reason behind an emergency fund, planning for retirement, and saving for our children is because we don’t know what life will throw at us.  There’s that delicate balance between living life as if you’re going to die tomorrow and living as if you’re going to live until you’re 100.  But the thing is, you never know. I’m the kind of person that worries and plans and wants to make sure there is some money saved if there is an emergency.  To be honest, I’m worried for this friend!

What advice would you give Crazy Friend?

I am worried about retirement. Truth be told, I am only 25 years old, and I’ve got a long way to go.  The fact of the matter is: with the way things are going now and watching people go back to work after being retired and watching others postpone their retirement, I don’t want to be one of them.  I want to be old and gray and enjoying life on the road or comfortably at home, just like this little old lady in the picture at the top of this post.  I don’t want to be 70 and still working or looking for a new job.

I checked my 410k today and it has lost 40% so far. There isn’t a thing I can do about it. I hate that.  I guess I’m just not a good investor.  I realize I’ve got at least 30 years to make it up, but I hate logging in and seeing that I’ve lost that much.  I don’t think I’m going to look at it until November 15th, when I’ll sell the company stock that is matched by my employer.

I think that I’m going to set up an automatic transfer into an ING account set up specifically for retirement. I’ll earn a guaranteed 3% and have the peace of mind, which I think is priceless. When things turn around, or when I get the guts to do so, I’ll make a decision to contribute that to our ROTH IRA or do something else with it.  I know that I’m probably worrying too much, but I’d rather be safe than sorry.

Are you worried about your retirement?