Employer Sponsored Retirement Accounts – What Are Your Options?

In an effort to reduce my debt load, I have taken an additional job in order to increase my accelerator margin payments. The good news is, in the 4 months I’ve been doing this new routine we’ve paid off four credit cards as well as a vehicle loan. The great news is that this new job offers a SEP account. Well, what exactly is a SEP account, is it just a different term for a 401k? Let’s take a look and find out.

Employers will typically offer one of these plans: 401(k), 403 (b), TSA, SIMPLE, SEP, or Keogh.

401(k) is the most popular type of employer sponsored retirement plan. This is also the most complex and costly to maintain for the company. The employer can elect to make a matching contribution to the employees salary-deferral contribution . Within 401(k)’s you can take out loans, set up a vesting schedule, and profit-sharing plan. Maximum annual contributions are $15,500.

 

Diversifying Roth IRA Investments

In October, I wrote a previous post on how I planned to allocate my Roth IRA investments. Well today (1/25/08), after much strenuous research and the market dropping to records lows, I decided now was the time to act. Many of the investments I had been looking at dropped significantly on Wednesday (1/23/08). I felt pressure to buy but I had yet decided exactly on which funds I wanted to buy. Certainly, I didn’t want to act out of haste without properly reviewing the expense ratios and such of each of the investments I was considering.

 

The Power of Roth IRA’s and Compound Interest!!!

It wasn’t until a recent episode of Suze Orman did I fully grasp the potential of IRA’s and the power of compound interest. When you sit down and work out the math it’s really quite amazing how simple steps we can take while we’re young, say, saving $100 a month, can turn into millions by the time we retire.

The Basics:

With Roth IRA’s you can deposit up to $4,000 per tax year. (5k starting in 2008 ) You don’t have to put in that much, it could be $25 a month or $100 a month, whatever you can afford. You put it in with after-tax dollars and it grows tax-free. So that when you pull the money out when you’re 59 1/2 (or later) you don’t owe capital gains taxes on all the interest you’ve earned. Any other regular investments you do have to pay taxes say, if you have stocks/investments outside of a Roth IRA account.

 

Coach Stock Plummeting, No Relief in Sight

Part of the reason for my renewed interest in posting is that I received my Scottrade investment statements. I knew I should have been devoting an hour a week to company research, per Jim Cramer’s advice, but sadly, that also fell to the wayside while I was caught up in the joy of maintaining a home. Since my last post about my Coach (COH) stock investment, much has changed.

As I’ve shared before, I purchased COH at $43. I knew the stock market hadn’t been doing well since the sub-prime crisis however, my previous research about COH reassured me that Coach would be insulated from economic woes. Looks like we were all wrong. My latest statement indicated that COH has dropped 44% to $24!!! So I got back on the financial blogs, back on Google Finance and BloggingStocks.com

The articles I found were not pretty. Here’s some of the headlines flashing before my eyes:

October 23rd- Coach (COH) dives 10% on slack U.S. sales

 

How to Choose a Great Mutual Fund/ETF

Now as you know, I’ve begun investing my Roth IRA money. I bought my first set of stocks and would like to have the bulk of my portfolio in nice, save and secure mutual funds. My goal is to achieve a well diversified portfolio.

I’m looking to invest my portfolio like this:

80% Mutual Funds

10% International

5% Individual Stocks

As I’m planning to invest a huge chunk into mutual funds for the long run, I want to make sure to be very selective. But quite honestly, there’s hundreds of funds out there and I don’t know where to start.