Planning for Retirement

 

age of your income. Moreover, contribution limits may also be affected by your involvement in other retirement plans such as SEPs. Your personnel department would definitely be able to clarify the specifics for you."

"I'm sure most of your investment advice for IRAs and Keoghs holds true here, too, Roy: Don't withdraw early and therefore face penalties, and all that stuff. But from your brief description, it sounds as though my company may control some of the investment decisions. True?"

"To some extent, yes, though companies normally give employees a number of choices. You'll usually be able to choose from among a CD-type savings plan, a variety of mutual funds, and often a plan that invests in the stock of your company. I'd be somewhat leery of that last choice. Remember, when you're investing in the stock market, diversification is essential to your success. It's tough to sleep at night with all your eggs in one basket."

Tom looked perplexed. "You mentioned choosing from a variety of mutual funds. Did you mean from a limited variety selected by our company, or any fund we want?"

"Unfortunately, the former. Well, 'unfortunately' may not be the right word, because it's in your company's best interests to choose a reputable group by applying the same selection criteria that you would. Nevertheless, you may want to investigate their choices, and if you're un-comfortable with them, go the CD-type savings plan route.

"401(k)s are, for the most part, excellent deals, and are becoming more and more popular. The matching provision can really help! They're the financial equivalent of the 'no-brainer,'" Roy summarized.

"Well, I do know quite a few people who participate in the 401(k) plan," Tom admitted. "Some of them brag about