Banks are closing, and unemployment's up. We have record foreclosures and sky-high gas prices. Everywhere we turn, there's gloom and doom -- on the newspapers, the nightly news, radio … every media outlet is full of these stories.
You probably know that many companies are freezing or even eliminating their pension plans. Workers could once expect to collect a pension in retirement -- a "defined benefit" -- but today, many folks are being offered only "defined contribution" plans, such as 401(k)s, in which the amount that they (and sometimes their employer) contribute to the plan is set, but the eventual value of the account is uncertain.
Stocks? For retirement? Sounds a bit strange, doesn't it? We're always hearing about how stocks are supposedly too risky to depend upon for our golden years. But you need stocks -- not only leading up to retirement, but throughout your life.
A Sicilian man recently lost his primary source of income and access to his home. At 61 years old, this was a tough break. Sadly, he needed police intervention to get his life back to normal.
To me, it seems an odd question -- they're two tools for the same job, best used together -- but it's a question that comes up fairly often. Usually, it's part of a larger discussion -- as someone said to me recently, "I don't like the investment options in my 401(k) plan. I feel like I should just do an IRA instead, but isn't a 401(k) better?"
Do you remember buying your house? Looking for just the right one, negotiating a price, sitting in the lawyer's office signing your name in dozens of places ... all so at the end of it, you had a home -- an investment not just in your present, but in your future.
You've probably got a 401(k) or other workplace savings plan, and hopefully you've been contributing enough to collect your employer's match. And unless your plan has a "directed brokerage" option that lets you invest your savings in stocks, you probably have your money in mutual funds or in something that generally acts like a mutual fund, maybe with a name like "managed pool" or "separate account."
