How much will you save toward retirement next year?
Many workers are confronting that question as part of the annual enrollment period for employee benefits, but that isn't the only question that needs to be asked. The other one: Is your company's plan the best place to put your savings?
If your employer matches contributions, by all means contribute enough to earn the maximum match. And if you're too busy or not inclined to do research, stay right where you are. But if you are willing to put in a little time, take a close look at your plan before deciding to concentrate your savings in one spot.
The key questions to ask:
1. How have the funds in your plan performed compared to market averages over various time periods? Are they mostly winners or mostly substandard performers?
2. How much are you paying? There are two parts to the answer. You'll need to know what you are paying for annual or quarterly account fees and for annual expense charges for the funds in your plan. If you are in an annuity, your funds have insurance expenses on top of money management expenses.
3. Does your plan have an adequate variety of decent-performing funds to put together a diversified portfolio?
If you are satisfied with the answers to those questions, your best bet is to stay put and keep the convenience of making pretax contributions through payroll deduction. But if you find something lacking, consider outside alternatives.
You can save up to $3,000 a year ($3,500 if you are 50 or older) in an individual retirement account. A Roth IRA is often the best bet if you qualify. Beyond that, low tax rates on dividends and capital gains can make taxable accounts a better place to hold stock funds than a 401(k). Withdrawals from a 401(k) are taxed at ordinary income rates and your heirs don't benefit from a step-up in tax basis at your death.
To keep costs low, look at the discount brokerages that have mutual fund supermarkets and at the big mutual fund companies that sell funds directly to investors. Ask the same questions you asked about the funds in your 401(k) plan.
If you have other savings outside your 401(k), you can use them to open your new account. If not, direct money from each pay period into a credit union or other savings account until you have accumulated enough to meet the minimum account requirements at the fund company or brokerage of your choice.
Q. Four years ago, George W. Bush and Al Gore pledged to keep Social Security trust funds in a "lock box" and use them only for Social Security. Why isn't anybody talking about it in this campaign?
Because the president and Congress cut taxes and they need the money in the "lock box" to pay for other government spending. If we locked up the trust fund, we would have to raise taxes or cut government spending, which would be politically unpopular. That's why you don't hear Bush or John Kerry talking about it.
Starting about 2018, the money in the trust fund will be needed to pay Social Security benefits and we'll need to find a way to repay what has been spent.
Q. Where can I find information on "inside buying," or company officials buying their own stocks? Can it be found on the Internet? Is "inside buying" not the proper term for what I am seeking?
When you search the Internet, use the term "insider buying" or "insider trading," which is perfectly legal as long as the corporate insiders follow the rules. If you want to look up information on a particular company, go to www.nasdaq.com enter a ticker symbol and click on "info quotes." Under "company filings," look for Form 4, which is a report of insider transactions. Additional information is available under "holdings/insider." You also can find information on insider trades in the Wall Street Journal and on Web sites such as www.sectorupdates.com/insider.asp and www.investor.reuters.com You can read more about insider trading at www.sec.gov/answers/insider.htm
Information on insider trades is taken from forms filed with the Securities and Exchange Commission.
Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
