Review your approved list
Your "approved list" is the stocks and bonds you're willing to invest in and the cash you plan to hold. Even within those basic categories you can invest in individual securities, mutual funds or exchange-traded funds, or ETFs.
If your portfolio doesn't have an international component, looking beyond domestic investments can make sense, and not just for stocks.
Expanding the list to include commodities, precious metals and real estate can give your portfolio diversification. Learning how to hedge portfolio risk with options and futures contracts is best left to a discussion between you and your investment professional.
Roth IRA conversions and more
The Internal Revenue Service removed the income limitations for Roth IRA conversions, starting in the 2010 tax year. Unfortunately, there are still income limitations on who can contribute to a Roth IRA. That forces taxpayers with incomes above the contribution limits who want to hold retirement assets in a Roth IRA to perform the intermediate step of contributing to a traditional IRA and then making a converting contribution to a Roth IRA.
If investment returns don't pan out, taxpayers have the ability to recharacterize their Roth IRA contribution as a contribution to a traditional IRA. The taxpayer has this option up until Oct. 15 of the tax year following the conversion year. Converting in January 2011 gives you the flexibility to recharacterize over 21 months. Investors should have a better read on the recovery and tax code changes over that time span.
Work with your tax professional to determine if converting your traditional IRAs to Roth IRAs makes sense.
Estimate your retirement nest egg needs
You need a sense of how big your investment portfolio should be at retirement. The Employee Benefit Research Institute's 2010 Retirement Confidence Survey concluded that only 46 percent of workers or their spouses have attempted to estimate their retirement nest egg needs.
If you construct a household spending plan (or budget), you can use the total annual expenses as a guide to what you might need in retirement.
Financial planner recommendations typically range from 75 percent to 100 percent of your annual expenses while working, but exclude money budgeted for retirement savings. You'll be taking distributions from these accounts, not funding them.
Bankrate's retirement calculators can help you right-size your nest egg by estimating your income needs in retirement, considering how much you have already put aside and deciding on your pre-retirement savings goals.
Capture the match in your retirement plan
If your company's 401(k) or 403(b) plan has your employer matching contributions, then you should contribute up to the limits of the company match. A typical 401(k) matching program has the employer contributing 50 cents for every dollar you contribute up to a limit of 3 percent of salary. You contribute 6 percent, the company contributes 3 percent, and you just made a 50 percent return on your money.
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