Are You Getting the Best Rates on Your CDs and Money Market Accounts?

Take Stock of Your Financial Life During National Save For Retirement Week

If nothing else, the tough economy has shown the importance of making smart money choices and saving for the future. In honor of National Save for Retirement Week, Oct. 18-24, take stock of your finances to gauge whether you're on track for living well when you retire.

Your Savings Rate: Could It Use a Lift?

If you're like most workers, you or your spouse have set aside money for retirement, but your savings rate is a bit meager. Although three-quarters of workers say they've saved some money for retirement, more than half--53%--have less than $25,000 in savings and investments, not counting their home and defined benefit plans, according to the Employee Benefits Research Institute's 2009 Retirement Confidence Survey.

Get Money Smart

First introduced three years ago by the National Association of Government Defined Contribution Administrators Inc., Congress unanimously designated the third week in October National Save For Retirement Week to increase financial literacy and raise awareness of retirement-savings vehicles. Whether you plan to retire in a few years or in a few decades, the time for retirement planning is now. Consider these questions to evaluate your financial position:

Annual Income: How Much Money Will You Need?

Calculating an annual income for retirement gets more important as you age. People in their 20s and 30s can focus simply on saving--experts recommend putting away 15 percent of gross income for retirement. But once you're in your 50s, you'll want a number. Most experts agree you'll need 70% to 90% of your preretirement income to maintain your standard of living. So that means if you make $100,000 a year before taxes now, you'll need at least $70,000 to keep your current lifestyle. (The less you earn the higher percentage you'll need in retirement.)

Your Savings: How Much Should You Have?

Contact the Social Security Administration and request a Personal Earnings and Benefit Estimate Statement to project how much Social Security income you'll get. Add in other sources of income, such as pensions. Now calculate how much of a nest egg you'll need to fill the gap between the income Social Security and pensions provide and how much you'll need to live each year for the rest of your life. A man retiring at 55 can expect to live 24 years, and a woman can expect to live another 28 years.

How Much More Do You Need to Save?

Add up how much you've saved for retirement in 401(k) s, IRAs and annuities. Use conservative estimates to project how much those investments will grow by the time you retire, and compare that figure to the size of the nest egg you'll need to live comfortably. This should give you a good idea of how much more you need to save.

Boost Savings with Best Savings Rates

Plan how to increase your savings rate if you're behind. If necessary, cut expenses, sell assets, or increase your income with a second job. Save as much of your income as you can. Choose investments wisely and get the best returns possible. For instance, research and get the highest interest rates on cash investments, such as money market, savings accounts and CDs. If you still don't think you have enough time, think about delaying retirement or working part time for a while after the time you had planned to quit working. You'll stay connected and purposeful but still have more time for leisure.


U.S. Department of Labor • Savings Fitness • http://www.dol.govhttp://www.dol.gov/ebsa/pdf/savingsfitness.pdf

National Association of Government Defined Contribution Administrators Inc. • National Save for Retirement Inc • http://www.nagdca.orghttp://www.nagdca.org/content.cfm/id/nagdcanote20090812

Employee Benefits Research Institute • Why Are Americans Delaying Retirement? • Oct 01, 2009 • http://www.ebri.orghttp://www.ebri.org/pdf/FFE138.01Oct09.Finl.pdf

U.S. Department of Labor • Top 10 Ways To Prepare For Retirement • http://www.dol.govhttp://www.dol.gov/ebsa/publications/10_ways_to_prepare.html

Mary Beth Franklin, Kiplinger's Personal Finance Magazine • The Basics: How Much Do You Need? • http://moneycentral.msn.comhttp://moneycentral.msn.com/content/Retirementandwills/Createaplan/P142702.asp

Follow These 10 Steps for Investing in Certificates of Deposit

The ABC's of CDs: 10 Tips for Smart CD Investing

Certificates of deposit have grown more complicated in recent years, so it pays to do your homework before investing.

First, a primer: A CD is a time bond--you agree to deposit money in a bank for a certain amount of time, and after the CD matures, you collect the original deposit plus the accrued interest. CDs are lower risk than stock market investments and they offer higher interest rates than regular savings accounts.

Sound simple? Sure, but today CDs come in more varieties than ever before. Here are 10 tips for CD investing:

1. Define how CDs fit into your financial plan. What are your goals? CDs can be an important part of a portfolio, but keep in mind the risk that inflation may outpace CD interest earnings.

2. Understand CD interest rates. What is the rate, and is it fixed or variable? How often does the bank pay interest--periodically or at maturity? If the interest rate is variable, when and how does the rate change? Some CD variable rates step up or step down to pre-determined levels at set times. Other CD variable rates rise or fall periodically according to performance of a financial index, such as the prime rate.

3. Double check the CD maturity date. Read the fine print to make sure you understand when the CD matures, and time your CD investments to your advantage. Don't go for a two-year CD if you think you might need the cash in the next 12 months.

4. Investigate CD special features. Some CDs, for instance, offer a death benefit, so your heirs can redeem the CD without paying a penalty.

5. Learn the risks of callable CDs. Some long-term CDs are "callable," which means the bank (but not you) can terminate--or call--the CD after a certain amount of time if interest rates fall. When the CD is called, you get the original deposit and any accrued interest. Callable CDs, which often promise higher yields than other CDs, may be a good idea for some investors, but the North American Securities Administrators Association warns people to be wary. Make sure you understand a callable CD's maturity date. For instance, "one-year non-call" means the bank can't call the CD in the first year; it doesn't refer to the maturity date, which may be many years from now.

6. Keep CDs within federal deposit insurance limits. FDIC insures deposits of up to $250,000 per person at each institution. That limit will revert to $100,000 Jan. 1, 2014, unless Congress intervenes.

7. Know your CD broker. You can buy CDs directly from a bank or through a broker, who can negotiate a higher interest rate in return for bringing deposits to a financial institution. Check out the broker's background and work only with reputable professionals. Find out how the broker keeps records to assure your CDs are covered by federal deposit insurance.

8. Beware of "too good to be true" CDs. Thoroughly investigate any CD offer that promises out-of-this-world yields. If it seems too good to be true, it probably is. For evidence, look no further than the case of Texas financier R. Allen Stanford, now on trial for bilking billions from investors by hawking phony CDs.

9. Understand CD early withdrawal rules. Some CDs don't allow early withdrawal, while others charge a penalty. In some cases you can avoid early withdrawal penalties with brokered CDs. A broker may sell your CD when you're ready to withdraw, and you pay no penalty to the bank. However, you still might lose money if interest rates have risen and the broker has to sell your CD at a discount.

10. Shop for the best CD rates. Check rates online here for a variety of CDs -- from one-month CDs to seven-year CDs.

CD investments aren't "no brainers," but they can be safe and simple when you understand how they work.


Joan Goldwasser • What You Need to Know About CDs • Jun 01, 2009 • http://www.kiplinger.comhttp://www.kiplinger.com/magazine/archives/2009/06/what-you-need-to-know-about-cds.html

Federal government • FDIC Insurance Coverage • May 22, 2009 • http://www.fdic.gov/news/news/financial/2009/fil09022.htmlhttp://www.fdic.gov

Kara Scannel • SEC Accuses Texas Financier of Massive $8 Billion Fraud • Feb 18, 2009 • http://online.wsj.com/article/SB123489015427300943.htmlhttp://online.wsj.com

North American Securities Administrators Association • NASAA Issues Top Five List of Investments to be Wary About • 0000-00-00 • http://www.nasaa.orghttp://www.nasaa.org/NASAA_Newsroom/News_Release_Archive/1742.cfm

Federal Government • Bank Find search tool • 0000-00-00 • http://www2.fdic.gov/idasp/main_bankfind.asphttp://www2.fdic.gov

Federal government • Certificates of Deposit: Tips for Savers • Oct 04, 2008 • http://www.fdic.govhttp://www.fdic.gov/deposit/deposits/certificate/index.html

Walter Updegrave • CDs That Sound Too Good To Be True • Apr 03, 2009 • http://money.cnn.com/2009/04/02/pf/expert/high_yeilding_CDs.moneymag/index.htm?postversion=2009040305http://money.cnn.com

Retirement Investments: Should You Convert?

The 2010 Roth IRA Opportunity

Previously off-limits to high earners, the Roth IRA will be available to anyone as a retirements savings vehicle starting in 2010. It's not too soon to start thinking it over because there is no single right answer for everybody. The solution will depend on your circumstances, and there are several factors to consider.

Roth IRA Best Way for Some to Grow Investments

Created by federal law in 1997, the Roth IRA has offered appealing advantages to investors, mostly young people who were years away from their peak earning potential. The Roth IRA offers more flexibility than a 401(k), allowing investments in just about anything--stocks, mutual funds, money-market accounts, certificates of deposit, even real estate. Check our listings here for money market account rates. The best 7-year CD rates can be found right here on our site.

Unlike traditional IRAs, contributions are made after taxes, but distributions and earnings are tax free. The Roth IRA also allows penalty-free withdrawals of contributions. After five years, up to $10,000 can be withdrawn for the purchase of a first home. Money in the account can also be used to pay for children's college education.

New Rules: Higher Earning Investors Can Put Their Money Market, CDs, and Other Savings in Roth IRAs

In 2009, individuals with modified gross adjusted incomes (MAGI) under $105,000 and married couples filing jointly with MAGI under $166,000 can contribute up to $5,000 to a Roth IRA. Taxpayers 50 and older can contribute an additional $1,000.The contributions phase out for individuals earning between $105,000 and $120,000 and for maried couples filing jointly with MAGI between $166,000 and $176,000. Taxpayers earning above the top limits are shut out from the Roth IRA. And anyone earning above $100,000 can't covert a traditional IRA to a Roth. New laws next year, however,remove income limits on Roth IRAs and Roth IRA conversions.

So Should You Convert Your Traditional IRA Savings to a Roth Next Year? Consider the Following:

• Keep in mind you'll owe taxes on the money you convert because contributions to a Roth IRA are made after taxes, and the contributions to your traditional IRA were made before taxes.

• If you want to convert, make sure you can pay the tax bill for the conversion with money other than from your IRA. Using your IRA to pay the tax would defeat any advantages of the conversion.

• If you convert next year, you can spread the tax bill for the conversion over two years--2011 and 2012. But if you convert after 2010, you'll have to pay the taxes all in one year.

• Consider a Roth IRA if you want more flexibility in the amount distributed after retirement. Unlike traditional IRAs, the Roth IRA has no minimum distribution level starting at age 70 1/2. That means you don't have to take out more than you need, and you can leave more money in your account for your beneficiaries to collect tax-free after your death. As a key benefit for estate planning this alone might outweigh other considerations.

• You can withdraw earnings tax free from a Roth IRA if you're 59 1/2 and you've had the account at least five years. Before 59 1/2, you'll pay a penalty for withdrawing earnings, although you can withdraw contributions without penalty.

What Financial Planners Say About Your Savings

Compare your tax bracket now to what you think it might be after retirement. Financial planners use this rule of thumb: Consider the Roth IRA if you have many years to go before retirement and you think you'll be in a higher tax bracket when you're eligible for distributions. Think about sticking with a traditional IRA, which offers the upfront tax deductions, if you think you'll be in a lower tax bracket when you're getting distributions.


- Randy Spiegelman, CPA, CFP • 2010 Roth Conversion: Look Before You Leap • Jul 22, 2009 • http://www.schwab.comhttp://www.schwab.com/public/schwab/research_strategies/market_insight/retirement_strategies/planning/2010_roth_conversion_look_before_you_leap.html • Charles Schwab's Web site

- Denise Applebee,CISP, CRC, CRPS, CRSP, APA • Roth IRA: Back to Basics • 0000-00-00 • http://www.investopedia.comhttp://www.investopedia.com/articles/retirement/04/091504.asp • A Forbes digital company

- Erin Burt • Why You Need a Roth IRA • Mar 19, 2009 • http://www.kiplinger.comhttp://www.kiplinger.com/columns/starting/archive/2006/st0309.htm?kipad_id=49

- Federal Government • IRA Online Resource Guide • Mar 04, 2009 • http://www.irs.govhttp://www.irs.gov/retirement/article/0,,id=137307,00.html

Federal government • Publication 590 Individual Retirement Arrangements • Jan 30, 2009 • http://www.irs.govhttp://www.irs.gov/pub/irs-pdf/p590.pdf


Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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