Tobie Stanger

You work all your life and dream of the day when you can ease back a bit and enjoy the fruits of your hard labor. But unless you plan for your retirement, that dream could turn into a financial nightmare.

During a TODAY Money web chat on Wednesday, Tobie Stanger, a senior editor at Consumer Reports Money Adviser answered a variety of questions about retirement. She said it’s never too early to start planning your retirement.

Tobie Stanger: Understanding what you spend now in your working life can help you determine what you'll need once you hit retirement.

Of course, things will change, but this is an important first step. And every financial planner worth his or her salt will ask you for this information. It also gives you a chance to look at what you're spending now. From there, you can plan changes so you'll be able to save more toward retirement.

Jon: How do I know how risky I should be on my 401k investments?

Tobie Stanger: It depends a lot on how old you are, and how long you expect to be retired. The rule of thumb is that the percentage of bonds you own should be about equal to your age.

Alice: Are annuities a good way to invest?

We're not crazy about variable annuities, which often come with steep fees and are very difficult to compare for shopping purposes. But a fixed immediate annuity may be a reasonable purchase.

There's a web site called immediateannuities.com that provides comparisons. Consumer Reports Money Adviser has an upcoming article in June on this very subject.

Omar: What are your thoughts on investing solely in index funds (S&P 500, small cap and foreign index) for an aggressive portfolio?

Tobie Stanger: Consumer Reports is very bullish on index funds. They are low-cost ways to track the market. Exchange-traded funds (ETFs) are somewhat like index funds, but can be even more low-cost. Check out Schwab and Fidelity for some good ETF choices and Vanguard for index mutual funds.

Stanger suggested using the retirement calculator on the T. Rowe Price website to help figure out how much you need to save to reach your goal. She said it's the most complete one Consumer Reports has judged.

Read the rest of the Q & A below:

David Bach

The stock market turmoil of the past few years has spooked many of you looking to invest and save for retirement.

But it’s time to get unspooked, advised David Bach, personal finance expert and author of numerous money management books, during a live web chat Wednesday where he took readers questions about retirement planning.

He had a spirited exchange with one reader who saw little value in stock market investing at this point, and had little confidence in financial planners or the U.S. economy.

Jeff wrote:

What if the stock market just goes side ways for the next twenty to thirty years and compound interest ends? Have fun saving for retirement then. All of these models financial planners have blow up. And the reality of it is most American will be totally screwed. Then what?

Bach said:

The reality is, Jeff, that the plans haven't totally blown up. In fact, according studies, people that have stayed the course since the stock market crashed after the recession are now UP, and have seen their 401(k) accounts go from the mid $40,000 levels to the mid $70,000 levels. The Dow Jones Industrial Average is up over 100 percent in the last four years from the bottom. We've just lived through one of the fastest stock market corrections in our lifetime. The bond market continues its historic bull market, and has produced annual returns of double-digit proportions. Municipal bonds last year were up over 15 percent. So, good financial planning and consistent savings have helped Americans survive and prosper through this recession. If you believe the stock market is going to stay flat for thirty years, then you should be focusing all of your savings on paying down your debt (specifically your mortgage).

And Jeff countered:

Over the last ten years the market has been side ways. Yes, pick the low point to the current run up to distort reality. Look at Japan. That could well be the future of the U.S. Good luck saving enough for retirement with out compounding.

To that, Bach added:

People save weekly and monthly and quarterly and annually. You my friend are the one distorting the facts. People didn't pile into the stock market ten years ago and then never add to their retirement accounts. And bonds have done extremely well. So has gold, silver and on and on. People are making money investing. If you don't believe it to be true, then don't invest. You can simply spend everything you make, live paycheck to paycheck and then get on live chats like this one and just complain the world is always going to be a terrible place. Sounds like a tough way to live however. I would rather bet on myself to win and bet on America.

Bach’s frank money advice touched upon everything from when to start taking disbursements from retirement plans, to whether you should raid your retirement fund to pay for your kid’s education.

Here’s a transcript of the web chat:

You can follow Bach, author of “The Automatic Millionaire" and "Debt Free For Life: The Finish Rich Plan for Financial Freedom,"  on his Twitter account, or check out his website.

Farnoosh Torabi

Some people think about saving for retirement in their twenties, others start contemplating rocking chair resources after they hit the big 40.

With a recent report that Social Security funds are dwindling, folks of all ages are wondering if they'll have enough to retire comfortably. 

What ever age or type of saver you are, the key is coming up with an action plan, advised personal finance expert Farnoosh Torabi, who was on hand Wednesday to answer readers' retirement money questions during our weekly live web chat.

A poll of readers who participated in the chat found only 11 percent are sure they'll have enough funds to enjoy those golden years; while 33 percent said they definitely won't have enough money, and 56 percent weren't sure.

How much should you be socking away? asked one 40-plus reader.

“Had you been consistently saving since your twenties, I'd say 10 percent would be enough,” maintained Torabi, author of “Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life”, and host of "Financially Fit" on Yahoo. “But if you've just begun saving in your forties, you should be as aggressive as you can be by putting about 15 percent towards your employer's 401(k), or more, and opening up an IRA or two to supplement the 401(k).”

For the 20-something wondering how she should start and worried about paying hefty commissions, Torabi had this advice:

“I would 100 percent recommend doing two things: Invest in your company's 401(k). Contribute 10 percent or at least enough to benefit from the full match your company may provide. Second, open a Roth IRA. You can open one up at any brokerage - Fidelity, Vanguard, Charles Schwab. The cheapest way to open one is probably going to a local credit union or your existing bank and opening a retirement account there. I have one with ING Direct, as well. No brokerage fees!”

Here are some more highlights from the Q&A with Torabi:

Bobby asked:

“Hi, I'm 68 years old with no retirement or pension funds, just $20,000 I've saved up over the years in the bank. I just got fired from my job as a factory worker because my entire left side got paralyzed after a stroke and I have no education at all besides a high school diploma, so what should I do with my money to maintain myself? Should I invest it in stocks or gamble it away in Vegas, because they're both just as risky aren't they?”

Torabi’s advice:

“Vegas is beautiful this time of year, but I would encourage you to continue to save that $20,000 and -- are you collecting disability? Check out this site to learn how to get compensated: http://www.ssa.gov/disability/.”

LaTonya asked:

“I am not sure if I am putting enough away for retirement. My husband and I both have jobs with pensions and health benefits at retirement (30 years). In addition to our pension contributions we have a Roth IRA that we contribute the max to each year. Is it safe to depend on our pension and not contribute more to private retirement accounts?”

Torabi’s advice:

“I never like to put all my eggs in one basket! And while you still have a pension (and that's so amazing!) I would try to diversify my savings -- you never know what could happen to those pensions or whether they'll be enough. It's always best to have a separate IRA to, again, diversify your savings and allow for multiple income streams in retirement.” 

For a full look at out web chat with Torabi go here:

Who would have thought the I-want-it-now generation would be concerned about the future?

When it comes to retirement savings, Gen Yers are out-investing 30 and ups, according to a survey titled Retirement & Long-Term Savings Habits of Working Americans conducted by TD Ameritrade released this week.

While 85 percent of employees of all ages have savings vehicles such as IRAs or 401(k)s, only 16 percent of Baby Boomers say they are doing all they can to save for retirement by funding such accounts, compared to 25 percent among Millennials. Gen Xers are also doing better than Boomers at 23 percent.

Tough economic times for many working parents during the Great Recession may have spooked younger workers. “They learned some tough financial lessons from their parents over the past few years and as a result have taken matters into their own hands and are doing what they can to be better prepared,” said Carrie Braxdale, managing director of investor services for TD Ameritrade.  

Wealth has been a preoccupation for younger workers. One Gen Y survey by Pew Research found, “eight-in-ten say people in their generation think getting rich is either the most important, or second most important, goal in their lives.”

Their parents may be fostering such ideas by not pushing them to stand on their own feet, and in the end Gen Yers could end up better off financially when they retire than their moms and dads.

Twenty-somethings “are returning home to live with parents post-college in record numbers,” pointed out Doreen Dodgen-Magee, a licensed psychologist and Gen Y expert.  “In many ways this alone provides them with greater amounts of income to put toward retirement than others who went before them; paying off mortgages, covering rent, buying food, etc.”

Braxdale also believes an emphasis on financial planning and the availability of so much about investing online has contributed to making the younger generation more money savvy.

But given historically low tax rates, are Gen Y workers being smart by putting so much money in tax-deferred investment vehicles?

“I think it’s always better to save in a tax-free environment,” Braxdale stressed.

So how did saving work out for older workers? According to the survey, Baby Boomers aren’t feeling great about the future:

• 47 percent are somewhat confident they will reach their savings goals in time.
• 27 percent of Boomers are less confident or not confident at all that they will reach their savings goal by the time they are ready to retire.
• 23 percent of Boomers are completely confident they will reach their savings goals in time.

Since parents have a lot of influence on their kids, this reality may be making everyone nervous about the future.

Today Money financial expert Sharon Epperson joined us for a live Web chat Wednesday to answer your questions.

Here’s one of her answers to questions from the live chat. (See below for the full Q&A and video of Sharon’s TV appearance this morning.)

Darla asked:

“Hi Sharon. Me and my husband would like to downsize on our home, but our credit isn't good so we probably aren't in a position to purchase another home. We'd like to get something less expensive but see no way out. Any advice you can provide? Thanks!”

Sharon replied:

“Why don't you rent? Take the headache of home ownership (lawn care, home repairs and unexpected emergencies) off the table and focus on rebuilding your credit and building your savings.”

Here’s the full chat archive and Sharon’s TV appearance:

If you have a question for our TODAY Money experts, submit it here.

To sign up for an e-mail reminder for our next chat, click here.

Reuters

While many of us were still pinching our pennies as a result of the recent recession, some lucky folks were becoming newly minted millionaires.

A new report from The Boston Consulting Group finds that the number of millionaire households worldwide increased by 12.2 percent in 2010, to 12.5 million.

Although those millionaires represent just 0.9 percent of all households, they control about 39 percent of all global wealth, according to the report. That’s up from 37 percent in 2009.

The general rise in global wealth can largely be attributed to last year’s strong rebound in the financial markets 

The United States has the most millionaires of any country, with an estimated 5.2 million households holding assets into the seven figures. But your chances of being a millionaire are better in Singapore, where the report says 15.5 percent of all households have at least $1 million.

The Boston Consulting Group defines millionaires as having $1 million in cash and investments, excluding things like houses, cars and investments in a business.

Tip of hat to The Wall Street Journal, which first reported the story.

Mandel Ngan / AFP - Getty Images

Malia, second from left, and Sasha Obama will have a well-funded education. Their parents have invested between $100,000 and $250,000 in a 529 college savings plan for the two girls.

President Barack Obama and his family appear to have gotten a bit wealthier over the past year, but they are taking few chances when it comes to investing their millions.

Obama and his wife, Michelle, had assets valued between $2.8 million and $11.8 million in 2010, according to their recently released financial disclosure report (.pdf file). That range was higher than what they reported for 2009, when their disclosure form reported assets between $2.3 million and $7.7 million.

(The Obamas are allowed to be somewhat vague about their financial situation, hence the wide range in values.)

The bulk of the Obamas' wealth is invested in about the most conservative way possible, helping to fund the ballooning federal debt by buying Treasury securities, which currently pay from about 0.25 percent annually for short-term bills to a bit over 3 percent for 10-year notes.

The couple has between $1.1 million and $5.25 million invested in Treasury bills. An additional $1 million to $5 million is held in Treasury notes.

Other highlights:

• The president had between $250,001 and $500,000 in his JPMorgan Chase checking account.
• The Obamas aren't playing it crazy when it comes to stocks — between $200,000 and $450,000 is invested in the Vanguard 500 Index Fund.
• Royalties from the president's two books — "Dreams from My Father" and "The Audacity of Hope" — totaled between $1 million and $5 million last year. In comparison, his annual salary is $400,000.
• The couple's children will have a well-funded education. Between $100,000 and $250,000 is invested in a 529 plan for  daughters Sasha and Malia.

Richard Drew / AP file

Stung by two bear markets in the last decade, it's understandable that investors are still wary of dropping money into the stocks, but members of Generation X are playing it especially safe, SmartMoney reports.

Analyzing data from several investment companies and research groups, SmartMoney concluded that Americans in their 30s and early 40s are taking an increasingly conservative stance when it comes to stocks. That could spell trouble in future years if they neglect to adequately fund their retirement savings plans.

Consider these numbers:

• Members of Gen X had just 48 percent of their 401(k)s in equities at the end of 2009, down from 55 percent in 2007, according to the nonprofit Employee Benefit Research Institute.
• Nearly 20 percent of Gen Xers don't have any stocks in their 401(k)s, and 19 percent have less than half in equities, a survey by consulting firm Aon Hewitt found.
• About 56 percent of Gen X households might not have enough in savings to maintain their current standard of living in retirement, according to an EBRI report.
• The average Gen X investor contribute just 4 percent of each paycheck to retirement savings, according to Vanguard. Most financial advisers recommend at least 10 percent.

Interesting statistics, for sure, but with the economy still on shaky ground and the fact that most portfolios have seen basically flat returns over the last decade, can you really fault the MTV generation for its reluctance to invest in Wall Street? 

When it comes to finances, most Americans apparently know better than to reach for the "shiny object."

Paul Sakuma / AP

Asked if an immediate one-time bonus would be preferable to a smaller raise in salary, 87 percent of Americans said they would forgo the bonus and take the smaller raise that would eventually end up being more, according to a new poll conducted by Harris Interactive.

The poll, which was sponsored by life insurer Northwestern Mutual, also found that a majority of adults are willing to pay a premium price for quality products that last. Only 18 percent of consumers said they prefer pending less for products that are lower quality and need to be replaced sooner.

And when it comes to financial risk, 83 percent of people said they would take a smaller, guaranteed reward instead of an investment that offers a higher yield with greater risk, the poll found.

Worried you're not saving enough money for retirement? You’re not alone.

Roughly seven out of eight Americans believe that the nation’s retirement system is broken, and they worry that a weak economy and volatile stock market make it impossible to keep their own retirement plan on track.

Even as some state governments consider trimming public employee pensions, most Americans also support the idea of government incentives to encourage employers to provide traditional defined-benefit pensions. Anti-pension statehouse protests aside, three out of four Americans blame the decline of traditional pensions for their retirement insecurity, according to a survey by the National Institute on Retirement Security (NIRS), a group of financial services companies, retirement plan sponsors and trade associations.

Four out of five respondents told NIRS that they think Washington is clueless about the problem and should make a higher priority of rebuilding the private pension system.

The high level of retirement anxiety shouldn’t come as a surprise. As Congress mulls cutting in Social Security benefits to balance the federal budget, many American households have little or no savings to fall back on. Even those who have set up their own 401(k) account are likely to come up short: half of those aged 60 to 62 with a 401(k) account have stashed away less than a quarter of what they’ll need to maintain their standard of living in retirement, according to NIRS.

High anxiety is also reshaping the idea of what it means to be “retired.”

About one-third of survey respondents said they figure a “secure” retirement means just being able to live comfortably into old age. Only one in ten expects retirement will include travel, going out to restaurants, hobbies or leisure activities.

Looking for a winning bet on this year’s Super Bowl? Buy stocks.

That’s the conclusion of a tongue-in-cheek analysis by Capital IQ, a unit of Standard & Poor's, that looked at correlation of stock market performance to the past winners of the NFL championship game.

The results of the analysis show that the upcoming matchup of the Pittsburgh Steelers and the Green Bay Packers should produce a no-lose bet on stocks. In the past, the U.S. market rose by more than 20 percent in the year following a Super Bowl played by either team.

The average annual return for the S&P 500 index when the final game includes the Steelers is 25 percent; if they win, market returns average 26 percent, according to the study. Even when Pittsburgh lost Super Bowl XXX in 1996, the market rose 23 percent the following year.

When the Packers play the Big Game, the stock market gain averages 24 percent. When they’ve won, the market rose an average 23 percent; when they’ve lost, the gain was 29 percent, the study said.

Say what you will about the Chicago Bears playoff performance Sunday, the record shows they just don’t measure up when it comes to stock market performance. When the team won its Super Bowl in 1986, the market rose just 19 percent. Stocks gained 5.5 percent after the Bears' loss in 2007.

The hapless New York Jets, who lost to the Steelers in the AFC finals Sunday, are no help at all to investors. The S&P 500 fell 8 percent after their one and only Super Bowl appearance in 1969, according to the study.

Odds makers looking to handicap this year’s outlook for stocks might want to factor in a few other variables tracked by the folks at Capital IQ, including this year’s Super Bowl venue, Dallas. Games played in Texas brought an average 8 percent decline in stocks - the worst performance of the eight states that have hosted the NFL's final game. Throw in another 3 percent decline for domed stadiums like the site of this year's game.

On the hand, both teams have already won the Super Bowl at least once; the average market return after a repeat victory by a past winner is 13 percent, the study said.

To be sure, there’s no conceivable connection between the outcome of a single football game and the 12-month outlook for the 500 stocks that make up the S&P index. As your broker usually mumbles as he’s touting his latest recommendation, “past performance is no guarantee of future results.” Capital IQ says as much in a disclaimer, noting that the analysis is “not intended as a basis for investment decisions.”

Still, over the years, the so-called “Super Bowl” indicator has had a better predictive record than many Wall Street analysts.