Index
A
adjusting target-date funds, 233-236
age requirements for IRAs, 82
American Institute of Certified Public Accountants, 87
analyzing stocks, 114
company profit potential, 114-115
“Are You Saving Enough?” calculator, 16
investment percentages, 172-173
fund manager’s role, 175
investment percentages
classic 60/40 mixture, 177-183
rules of thumb, 193
automatic deposits in IRAs, 73
B
back-end loads, 205
Ballpark Estimate calculator, 16, 28
Bear Market Rank, 154
bear markets
history of, 105
recovering from, 106
Bernstein, Peter L., 196
blend funds, 153
blue chips, 143
bonds
expected returns, 101
investment percentages, 178
compound annual rates of return, 189
stock market crash of 2007-2009 example, 191-193
as mutual fund category, 126-128
intermediate-term bonds, 135-136
in mutual funds, 163
borrowing from 401(k), 59
Brennan, John, 96
Brinson, Gary, 169
brokers
conflict of interest, 203
loads and expense ratio, 205-207
C
calculating
inflation rate, 31
life expectancy, 25
retirement savings
evaluating your needs. See evaluating your needs
financial records needed, 26
IRAs, 31
planning for economic downturns, 37-40
quick and easy calculations, 33-36
Social Security benefits, 26, 28
calculators, 249
401(k) contribution amounts, 51
401(k) planning, 54
CalcXML.com, 88
Expected Family Contribution (EFC) Calculator, 87
loads and expense ratios, 205
Quick Savings Calculator, 56
SmartMoney.com, 77
tax effect on savings, 47
CalcXML.com, 88
capitalization, 142
cash
as mutual fund category, 126-128
suggestions for finding, 55-56
certified financial planners (CFPs), 245, 250
certified public accountants (CPAs), 251
CFAs (chartered financial analysts), 250
CFPs (certified financial planners), 245, 250
Charles Schwab, 72
chartered financial analysts (CFAs), 250
chartered financial consultants (ChFCs), 251
chartered life underwriters (CLUs), 251
ChFCs (chartered financial consultants), 251
CLUs (chartered life underwriters), 251
CNN Money Retirement Planner, 16
college funds, retirement savings plans versus, 86-87
company profit potential, analyzing stocks, 114-115
company stock
in retirement savings plans, 162-163
comparing mutual funds with comparable index funds, 226-230
compounding
fees and, 202
Compounding Calculator, 3
conflict of interest, 203, 247-249
contribution amount
for 401(k)
qualifying for employer matching, 56-57
for IRAs
Roth IRAs versus 401(k), 78-79
at tax time, 73
for retirement accounts, limits on, 52
costs of switching mutual funds, 139-140. See also fees
CPAs (certified public accountants), 251
credit cards, payments on, 56
credit counselors, 251
credit risk, 132
cycles
in growth versus value stocks, 167-168
in international stock funds, 155
choosing mutual funds, 125-126
D
dates on target-date funds, 232-233
DinkyTown.com, 35
discount brokers, 72
diversification, 127
in asset allocation, 170, 173-175. See also investment percentages
in intermediate-term bonds, 135-136
in international stock funds, 154
REITs, 159
dollar-cost averaging, 198
Dow Jones Industrial Average, 213-214
E
E-Trade, 72
early withdrawals from IRAs, 82-83
economic downturns, planning for, 37, 39-40
economy (U.S.), investing in, 103
emerging market funds, 155
employers
employer matching in 401(k), 45, 56-57, 78
financial advisers in workplace, 251-252
ETFs (exchange-traded funds), 221-224
evaluating mutual funds, 226-230
asking questions, 19
Social Security and working longer, 17-18
women’s life expectancy, 25-26
exchange-traded funds (ETFs), 221-224
Expected Family Contribution (EFC) Calculator, 87
expected returns
bonds, 101
expense ratios (mutual funds), 205-207
expenses during retirement, 6-7
F
fear of losses, preventing, 187-193
broker conflict of interest, 203
effect of differences in, 202-205
ETFs (exchange-traded funds), 222
importance of knowing, 201-202
for index funds, avoiding, 225-226
loads and expense ratios, 205-207
target-date funds, 239
FinAid.org, 87
financial advisers
choosing
conflicts of interest, 247-249
limiting advice from, 249
financial aid for college, 87
financial consultants (stock brokers), 251
financial planners
discount brokers, 72
evaluating your needs, 14-15, 19
full-service brokers, 71
planning for economic downturns, 39
financial records for retirement savings calculations, 26
IRAs, 31
Social Security benefits, 26-28
finding
fixed income mutual funds, 126
401(k)
balanced funds, 241
borrowing from, 59
calculating contribution amount, 50-52
changing contribution amount, 49-50
company stock, avoiding, 199-200
dollar-cost averaging, 198
employer matches, 78
financial advisers in workplace, 251-252
leaving your job, options for, 59
limits on contribution amounts, 52
mutual funds, choosing. See mutual funds
procrastination, effect of, 57-59
solo 401(k), 88
target-date funds, lacking, 237
tax advantages, 53
front-end loads, 205
full-service brokers, 71
Fund Finder, 146
fund managers
role in asset allocation, 175
G
gambling, investments versus, 91-93, 107-108
Garrett, Sheryl, 14
glide path, 236
Great Depression, recovery after, 106
growth funds, value funds versus
investment percentages in retirement plans, 153, 182-183
H
hands-free portfolio, 223
Harrison, Al, 97
herd mentality in investment cycles, 99-100
high-yield bond funds, 135
history of bear markets, 105
I
income during retirement, Social Security, 6-7
income limits
on IRAs
Roth IRAs, 81
traditional IRAs, 80
index funds, 146, 182, 204, 209-213
Dow Jones Industrial Average, 213-214
ETFs (exchange-traded funds), 221-224
evaluating mutual funds by, 226-230
minimum contributions, 225
rebalancing, 218
Standard & Poor’s 500, 214
individual 401(k), 88
individual retirement accounts. See IRAs
industry sector cycles, 120
inflation protection with ETFs (exchange-traded funds), 223-224
inflation rate, calculating, 31
inheritances, 26
insurance, CLUs (chartered life underwriters), 251
interest rate risk, 133
intermediate-term bonds, 135-136
international stock funds
cycles, 120
in 401(k), 217
investment percentages, 180-181
balanced funds, 159
bond funds, 163
classic 60/40 mixture, 177-183
company stock, 163
growth versus value funds, 153
in large-cap U.S. stock funds, 146
in midcap U.S. stock funds, 150
REITs, 160
rules of thumb, 193
in small-cap U.S. stock funds, 148-149
IRAs (individual retirement accounts)
automatic deposits, 73
checking amount in, 31
compounding, advantages of, 64-66
investment percentages for mutual funds, 194-195
limits on contribution amounts, 52
maximum annual contributions, 69-70
mutual funds, choosing. See mutual funds
non-deductible IRAs, 85
for non-working spouses, 69-70
Roth IRAs
rules, 79
age requirements, 82
Roth IRA income limits, 81
traditional IRA tax deductions, 80
for small businesses
SIMPLE IRA, 89
types of, 74
IRS Publication 590, 79
IRS Publication 3998, 87
J-K
job loss, 401(k) options, 59
junk bonds, 135
Kennedy, Paula, 249
Kiplinger.com, 16
L
investment percentages, 179, 182-183
percentage in retirement funds, 146
leaving your job, 401(k) options, 59
life-cycle funds, 240-241. See also target-date funds
life expectancy
lifestyle expectations in retirement, 19-21
LivingTo100.com, 25
loads (mutual funds), 71, 205-207
loans from 401(k), 59
long-term care insurance, 23
Long-Term Care: Your Financial Planning Guide (Shelton), 24
M
“Manager of the Year” award, 166
married couples, IRA contributions, 69-70
matching in 401(k), 45, 56-57, 78
maximum IRA contributions, 69-70
medical expenses during retirement, 7
medical insurance, cost of, 21-22
Medicare, 7
Merrill Lynch, 71
midcap U.S. stock funds
investment percentages, 181
percentage in retirement funds, 150
risks, 150
what to choose, 150
Millionaire Calculator, 3
minimum contributions, buying index funds, 225
Monte Carlo simulations, 39
Montgomery, Henry, 244
Morgan Stanley Smith Barney, 71
comparing mutual funds, 227
“Manager of the Year,” 166
Mullainathan, Sendhil, 207
mutual funds. See also stocks
fund manager’s role, 175
investment percentages. See investment percentages
bonds, 163
choosing best mix, 72, 123-125
intermediate-term bonds, 135-136
common misconceptions, 111-112
costs of switching among, 139-140
cycles, 95
dollar-cost averaging, 198
evaluating by index funds, 226-230
fees
broker conflict of interest, 203
effect of differences in, 202-205
importance of knowing, 201-202
loads and expense ratios, 205-207
fund managers
Dow Jones Industrial Average, 213-214
ETFs (exchange-traded funds), 221-224
minimum contributions, 225
rebalancing, 218
Standard & Poor’s 500, 214
loads, 71
screeners, 72
specialty funds, 161
stocks
growth versus value funds, 151-154
growth versus value stocks, 167-168
large-cap U.S. stock funds, 143-147
midcap U.S. stock funds, 150
small-cap U.S. stock funds, 147-149
401(k) funds without, 237
in technology stock crash, 97-98
N
National Foundation for Consumer Credit, 251
no-load mutual funds, 206
non-deductible IRAs, 85
non-working spouses, IRA contributions, 69-70
nursing home care, cost of, 23-24
Nygren, Bill, 116
O
O’Neal, Edward, 203
online calculators, 3, 15-16, 249
401(k) contribution amounts, 51
401(k) planning, 54
CalcXML.com, 88
Expected Family Contribution (EFC) Calculator, 87
loads and expense ratios, 205
Quick Savings Calculator, 56
SmartMoney.com, 77
tax effect on savings, 47
operating expenses. See expense ratios
P
Parlay Your IRA into a Family Fortune (Slott), 77
PaycheckCity.com calculator, 51, 54
payments on credit cards, 56
Pension Benefit Guaranty Corporation, 29
pensions
planning for economic downturns, 37, 39-40
The Portable MBA of Investment (Bernstein), 196
preferred lists, 248
procrastination, effect on 401(k), 57-59
profit potential, analyzing stocks, 114-115
profit-sharing plans, checking amount in, 31
Q-R
Quick Savings Calculator, 56
rate of return, calculating, 31, 33
real estate investment trusts (REITs), 159-160
rebalancing
index fund investments, 218
investment percentages, 198-199
recovering from bear markets, 106
referrals for financial advisers, 245
REITs (real estate investment trusts), 159-160
retirement calculations. See evaluating your needs
retirement-date funds. See target-date funds
Retirement Income calculator, 40
retirement savings plans
company stock in, 162-163, 199-200
compounding, advantages of, 64-66
dollar-cost averaging, 198
401(k)
borrowing from, 59
calculating contribution amount, 50, 52
changing contribution amount, 49-50
leaving your job, options for, 59
procrastination, effect of, 57-59
tax advantages, 53
investment percentages
balanced funds, 159
bond funds, 163
classic 60/40 mixture, 177-183
company stock, 163
growth versus value funds, 153
in large-cap U.S. stock funds, 146
in midcap U.S. stock funds, 150
REITs, 160
rules of thumb, 193
in small-cap U.S. stock funds, 148-149
IRAs. See IRAs
limits on contribution amounts, 52
mutual funds. See mutual funds
savings accounts versus, 43-44
avoiding taxes with 401(k), 45-47
employer matching in 401(k), 45
for small businesses, 87
SIMPLE IRA, 89
solo 401(k), 88
returns
bonds, 101
rewards of holding stocks, 103-104, 108-109
Riepe, Mark, 197
risks
in bond funds, 163
in growth versus value funds, 151-152
in international stock funds, 154-156
in large-cap U.S. stock funds, 144-145
of leaving stock market, 103-104
in midcap U.S. stock funds, 150
in small-cap U.S. stock funds, 147-148
in specialty funds, 161
Roth IRAs. See also IRAs
income limits, 81
traditional IRAs versus, 74
RothIRA.com, 79
rules for IRAs, 79
age requirements, 82
Roth IRAincome limits, 81
traditional IRA tax deductions, 80
S
salary, percentage replaced during retirement, 20-21
sales charge. See loads
savings accounts, investments versus, 43-44
avoiding taxes with 401(k), 45-47
employer matching in 401(k), 45
Schoar, Antoinette, 207
Scottrade, 72
screeners, mutual funds, 72
sector mutual funds, 161
self-employment, retirement savings plans, 87
SIMPLE IRA, 89
solo 401(k), 88
Shelton, Phyllis, 24
SIMPLE IRA, 89
Slott, Ed, 77
small businesses, retirement savings plans, 87
SIMPLE IRA, 89
solo 401(k), 88
small-cap U.S. stock funds, 141
investment percentages, 179-180
percentage in retirement funds, 148-149
what to choose, 149
SmartMoney.com, 77
Social Security
solo 401(k), 88
specialty mutual funds, 161
Standard & Poor’s 500, 144, 214
stock brokers, 251
stock market. See also mutual funds; stocks
choosing individual stocks, 107-108
defined, 213
stocks. See also mutual funds; stock market
analyzing, 114
company profit potential, 114-115
capitalization, 142
company stock
in retirement savings plans, 162-163
growth versus value funds
investment percentages in retirement plans, 153
Dow Jones Industrial Average, 213-214
ETFs (exchange-traded funds), 221-224
evaluating mutual funds by, 226-230
minimum contributions, 225
rebalancing, 218
Standard & Poor’s 500, 214
international funds
investment percentages, 179-183
compound annual rates of return, 189
stock market crash of 2007-2009 example, 191-193
large-cap U.S. stock funds, 143-144
percentage in retirement funds, 146
midcap U.S. stock funds
percentage in retirement funds, 150
risks, 150
what to choose, 150
mixture in mutual funds, 118-119
as mutual fund category, 126-128
small-cap U.S. stock funds
percentage in retirement funds, 148-149
what to choose, 149
student loans, 86
successful fund managers, 165-168
summary plan description, 28
symbols for mutual funds, 146
T
T. Rowe Price calculator, 40
Tarbox, Laura, 247
401(k) funds without, 237
life-cycle funds versus, 240-241
taxes
avoiding with 401(k), 45-47, 53
CPAs (certified public accountants), 251
age requirements, 82
taxable IRAs, 85
TD Ameritrade, 72
technology stock crash, 95-99, 107
tickers (for mutual funds), 146
time requirements for stock market investments, 108-109
total stock market index, 214-215
traditional IRAs. See also IRAs
income limits for tax deductions, 80
Roth IRAs versus, 74
2007-2009 stock market crash, 189-193
U-V
U.S. economy, investing in, 103
value funds
growth funds versus
investment percentages, 153, 182-183
Vanguard, 233
W-X-Y-Z
Wien, Byron, 212
women, life expectancy of, 25-26
working longer