How To Set Up Your First 401k

Retirement may seem decades away to younger taxpayers, but most financial experts actually say the best time to start saving for the future is in your early twenties. However, most taxpayers in their twenties are usually focused on school, their first serious jobs, or even starting a family. Fortunately, MSN Money recently published a helpful article on how to setup your first retirement plan, and I highly recommend anyone without a 401k or IRA check it out below.

Start early

Money you tuck away for retirement in your 20s has decades to compound. Make savings automatic, beginning with your first paycheck, and try to ramp up your contributions whenever you get a raise.

"Our goal for new employees just getting into the work force is we want to get them to save 10% of their gross wages as soon as possible," says Mark Berg, a certified financial planner and the president of Timothy Financial Counsel in Wheaton, Ill. Those who can't afford 10% right away can start smaller. "We try to target 4% to 5% initially and then as they get raises, we'll add a percent or two to the amount they are putting in," says Berg.

If your company has a waiting period before new employees are allowed to join the 401k plan, make note of that date and begin participating as soon as you are eligible.

Get a 401k match

An employer match is a powerful incentive to participate in a 401k. A company match of 50% of contributions up to 6% of pay for an employee earning $35,000 annually can boost that worker's retirement savings by $1,050 each year.

If your employer doesn't offer a 401k match, it's still worthwhile to invest in a 401k for the tax break. Young employees can contribute up to $16,500 to a 401k in 2010 and won't pay income taxes on the amount contributed until retirement.

Consider a Roth 401k

Some companies offer a choice between traditional and Roth 401k's. Traditional 401k deposits give you a tax break in the year you make the deposit, but income tax is due when the money is withdrawn. Roth 401k contributions are made with after-tax dollars, and withdrawals in retirement are tax-free.

The Roth option can be a good deal for young people who are currently in a low tax bracket. "People who potentially will retire in a higher tax bracket than they are in right now should use a Roth," says Clark Kendall, a certified financial planner and the founder of Kendall Capital Management in Rockville, Md.

21 Best Money Tips Ever

Earlier today a colleague sent me a link to this story with 21 money and finance tips from different financial experts from around the country. As I always say, sound financial advice is always worth listening to, so I have listed a few of my favorite tips below for all of my readers to consider. Be sure to check out the full list of 21 tips at MSN Money.com.

3. Teach independence

Joline Godfrey

CEO of Independent Means, which teaches financial literacy to families and children

Raise your children to make a job, not just take a job. If they don't know how to create a plan, they'll always be beholden to someone else.

4. Retire your debt before you retire

Jane Bryant Quinn

The dean of personal-finance columnists and author of "Making the Most of Your Money Now"

Best advice I can give: Many people are now going into retirement with debt. So how about this for an old-fashioned idea? Pay off your mortgage before you retire if you want financial safety and security. There is bankruptcy among people in their seventies and eighties who had a lot of debt that they couldn't carry when the paychecks stopped.

Best advice I ever got: In the mid-1970s I met Vanguard founder Jack Bogle, who was calling up reporters to get them to write about an index fund. I had lunch with him, and he showed me studies and materials, and I said, "This can't be true -- actively managed mutual funds have always dominated."

But I took his stuff with me and called him a few times about it, and suddenly a light went off. And of course since then an S&P 500 index fund, over time, has done better than managed funds.

2009 vs. 1999: Are you Better off?

Earlier this morning I came across an interesting article from MSN Money discussing how the financial situation of most middle class families has not improved over the past decade. When comparing the year 1999 – the peak of the dot-com boom – to the recession of 2008 and 2009 it is easy to understand why so many families feel their finances are worse off now than they were a decade ago.

"This hasn't been a sterling decade," says Isabel Sawhill of the Brookings Institution and the author of "Creating an Opportunity Society." She argues that the American dream of prosperity and advancement has turned into a myth. "The average American family hasn't been able to improve its financial situation."

Of course, it's impossible to compare 1999 with 2009 without noting that in 1999, the economy was still floating happily in a dot-com bubble, while this year we've been mired in the worst recession since the Great Depression.

But experts say these are just details. They argue that dozens of indicators -- after adjusting for 30% inflation since 1999 -- have been marching in the wrong direction for years, in ways big and small:

In 1999, 67% of workers had to pay part of their health care benefits cost, says the Bureau of Labor Statistics. In 2008, that had risen to 75%.

According to the Census Bureau, 10.3% of U.S. families lived under the poverty line in 2008, versus 9.3% in 1999.

Households in the bottom 10% made $12,181 or less in 2008, which was down 8.1% from 2000. But the threshold for household incomes in the top 5% was $180,000, down just 0.9% from 2000.

Continue reading at MSN Money.com…

Beyond Skills and Smarts: Thriving in the New Economy

Last week one of my favorite blogs, The Glass Hammer posted a very interesting article by Liz Cornish on how to thrive in today’s tough economy. You can check out a section of the entry below, or click here for the full text.

It’s been a tough and frustrating year for financial professionals. Watching other smart, motivated people lose their jobs is sobering. Increased regulation is forcing many institutions that were playing by the rules to endure shrinking margins and panicked customers. It’s like being grounded because your sibling broke curfew. As the economy shifts and uncertainty prevails, what should women in finance do to ensure their own future?

First, congratulate yourself. You’re a motivated woman in the right industry. Sure, there will be changes and disruption, but finance is here to stay. As Patty Vantuhl of Bank of America noted, “There will always be a financial world. Names and players will change. But people will always need a way to store, access, invest, leverage and keep track of their money.” If you were in the newspaper publishing business, this would be a very different article.

So you’re in the right place, right career. Now what? What will it take to thrive in the new economy?

Newsweek Claims the “Recession is Over” – but Many, Including Obama, Disagree

In their latest issue, Newsweek magazine claims, “the recession is over, now what we need is a new kind of recovery.” However, dozens of experts have spoken out disagreeing with the publication and even President Obama expressed that he disagreed with the publication’s claims.

“I don't know whether you've seen the cover of the latest Newsweek magazine on the rack at the grocery store, but the cover says, 'The Recession is Over.'"

"I bet you found that news a little startling. I know I did. Now, it's true that we've stopped the free-fall. The market is up and the financial system is no longer on the verge of collapse. We're losing jobs at nearly half the rate we were when I took office six months ago.

"So, we may be seeing the beginning of the end of the recession. But that's little comfort if you're one of the folks who have lost their job, and haven't found another. Unemployment in North Carolina is over ten percent today. A lot of small businesses like Sara's are still struggling with falling revenues and rising costs. Health care premiums, for example, are rising twice as fast as wages, and much more for small businesses -- something I'll address in a minute.

"So, we know the tough times aren't over."

You can read Newsweek’s full story here, but after looking over the text it looks like their assertion that the recession is over was mostly an attention grabber. The main point of the story is that the worst part of the recession might be over technically, but that the country still has a long way to go.

“When economists proclaim a recession over, they're celebrating a technicality: they mean economic output has stopped contracting. And while that is good news, you might wait a while before adding Judy Garland's rendition of Happy Days Are Here Again to your iPod. GDP growth alone can't feed a family, or pay a mortgage. Cursed with a high national debt load and blessed with a dynamic, growing workforce, the U.S. economy needs annual growth of at least 1.5% just to feel like we're standing still.”

Evidence Piling Up That Worst Of Recession Is Over

More and more experts are beginning to weigh in on their opinion that the recession has already hit its peak. You can find a segment of an Associated Press article discussing the topic below, or find the full story here.

Evidence is piling up that the worst part of the recession has ended. But that doesn't mean the pain is over.

A better-than-expected unemployment report Friday -- job losses declined to the lowest level in six months -- capped a week of encouraging news, including firmer home sales, a revival in consumer spending and fresh optimism about the biggest U.S. banks.

The economy remains vulnerable to further shocks, and 13.7 million people are unemployed. The jobless rate rose to 8.9 percent in the new report and still seems headed for a stinging 10 percent.

Yet confidence is building that the recession, the longest since the Great Depression, will end this summer or fall, setting the stage for a slow recovery.

Pointing to recent improvements, President Barack Obama said Friday "the gears of our economic engine do seem to be slowly turning once again."

By some measures, the darkest months have passed. The plunges in economic activity and rising waves of layoffs, seen from the end of 2008 through the start of this year, seem to have subsided.

"The winds are still howling, but I think we can see the sunlight on the distant horizon," said Mark Zandi, chief economist at Moody's Economy.com. "Clearly, the job losses are moderating."

Wall Street investors could see the sunlight, too. The Dow Jones industrials gained nearly 165 points and finished 4.4 percent higher for the week. It was the eighth gain for the index in nine weeks.

The economy probably is still shrinking in the current quarter but only at about half the pace -- around 3 percent -- that it had in the prior six months, the worst in 50 years. Businesses are expected to be cutting back far less on things like home building, commercial construction, equipment and software. And factories could then boost production to replenish razor-thin stockpiles of goods.

Many believe the economy could start growing again by summer or, more likely, by the final quarter of this year, as the impact of tax cuts and increased government spending on big public works projects contained in Obama's $787 billion stimulus package takes hold.

Job losses are expected to continue through the rest of the year, but are likely to be smaller in number.

Losses averaged 700,000 a month in the first quarter but dropped to 539,000 in April, according to Friday's Labor Department report. They should average around 500,000 in the current quarter and taper off to 250,000 a month in the final quarter of the year, according to some projections.

That's probably cold comfort to Tara Barrone, 28, of McLean, Va., who was checking out job prospects at the Secret Service at a career fair Friday.

"Government jobs are popular because of the sense of stability," she said. "I know I'm looking for a sense of security and permanency after being laid off twice in the last year." The lines at the Secret Service booth were much longer than at other recruiters.

Federal Reserve Chairman Ben Bernanke earlier this week gave his most optimistic prediction yet about the end of the recession. He said he expects the economy to start growing again this year -- though the comeback could be weak and more jobs will disappear even after a recovery takes hold.