Take control of your employer retirement plan!

This post is inspired by Broke Now, Rich Later's post on getting a Roth 401k offered at his company.

I love to hear about people like BNRL who are taking control of their retirement options at work. There are too many people who are stuck with horrible investment options at their jobs but prefer to complain about it than to do anything. They just assume that since it's what's in place, it's what the company thinks is best.

In reality, what probably happened is that a representative of your company who knows nothing about benefits was sold a policy that sounded good at the time. They may not have known about things like sales loads, expense ratios or asset allocation options so they trusted the sales person to set them up with a good plan. Unfortunately, what likely happened is that the company got stuck with an expensive plan with bad investment options (like the one I saw recently with no international but 5 bond funds) and, that's what will reamain until someone who knows better comes along and makes an issue out of it.

You should be that someone. For your benefit and the benefit of others in the company.

Will it be easy? Nope. It will take time, effort and persistence. And, it may never happen. But you don't know if you don't try.

If you are going to go down this path, there are things you should be prepared for.

1. Whoever chose the plan, if they're still there, probably won't like that you're trying to change it because it will make them look bad. So, be *very* delicate in how you approach this. Don't make them wrong, just point out alternatives.
2. You should be willing to do this on your own time unless your company assigns this to you as a project.
3. You'll get much further if you have people standing behind you so rally the co-workers but don't be obnoxious by complaining about how horrible the benefits plan is. This will not make you any friends in management and those are the people you need to convince.
4. People like numbers but they like charts and graphs too. This is a sales pitch and you should treat it as such. Offer concrete examples and run the numbers of how this will impact the company and each investor bottom line. For example, if the cheapest fund in your selection is a S&P fund with a 1.15% ER (don't laugh, this is a real example) then run the numbers. Show the difference that a 1.15% ER will have on $10k invested over 30 years. Compare that to $10k invested in VFINX (Vanguard's S&P fund) with an expense ratio of .18% and you will have a nice fat number to show them.
5. Follow the chain of command. Nothing will tick people off more than if you skip them and they hear about it from someone else.
6. Provide expert commentary. If your company is ok with it, find a consultant to hire to set up the new plan. If you're flying solo and have to convince them, do your homework and bring in supporting documentation from known sources.
7. If at first you don't succeed try, try again. If you're automatically shot down, then you need to really rally the troops. Start a grass roots campaign for financial education and get a petition going. Make your point clearly and without emotion. Whatever you do, don't lose your cool.

There are other things, but that should get you started. I'm hoping that BNRL will post about how things are going for him so others can get ideas to use.

If you do decide to go down this path and they agree to change the plan/policy/whatever, see if you can shoot for the stars and get them to implement an auto-enrollment policy. I am a huge supporter of these for two main reasons (the first one is most important to me).

1. It will get the people who otherwise wouldn't enroll on their own to start investing. People don't enroll for lots of reasons, most of which are excuses so if you make it opt-out instead of opt-in, most people won't complain. True story: Recently I was presenting a basic financial education seminar at a local small business. At the end of the seminar I did a little poll to see how many people in that office were enrolled in the 403b plan which had just started a matching program. I was not surprised to learn that a full 2/3 of the people attending the seminar were not enrolled in the plan. ALL of them intended to enroll but just hadn't gotten around to it or didn't understand the process. The solution: everyone got their forms, sat around the table and we got them all enrolled right then. If that company had an auto-enrollment program, all of those people would have been participating the whole time (some had been there for 3 or more years) and they would be much further along the road to retirement.
2. It will benefit the company by getting more money into the plan. This will do a few things: 1 - they will probably get better deals on plan fees. 2 - it will help with non-discrimination testing. 3 - it will allow highly compensated employees to contribute more if they've been phased out.

If you decide to take this all on, then good luck! If you have any questions, just ask I'll be happy to help in any way that I can.

Personal Finance 101 posts of the day 4/13/07

• Uncle Bill shows us that negative savings isn't always negative.
• Grad Money Matters talks about whether you should loan money to friends and family.
• Personal Finance Advice wonders if you can save too much for retirement.
• Aimee’s Blog talks about marriage and money.
• Crazy Money talks about the dangers of mental accounting.

Personal Finance 101 posts of the day 4/12/07

• Young and Broke talks about how people aren't saving these days.
• Broke Now Rich Later tells us how he's campaigning for a Roth 401k at his job.
• Consumerism Commentary asks if personal finance should be required in high schools. He says no but I strongly disagree.
• The 6 Month Project talks about ways to trim your budget.
• Mighty Bargain Hunter talks about pre-packing your lunch to take to work.
• The Thinking Men talk about how you can get a free credit report.

Personal Finance 101 Posts of the Day 4/11/07

• Ask Mr. Credit Card discusses debt repayment plans.
• 3 Debt Consolidation talks about debt reduction mistakes.
• My Personal Finance Odyssey talks about the US savings rate.
• 5 Cent Nickel talks about how to prioritize your retirement contributions.
• 3 Debt Consolidation talks about 10 debt reduction mistakes.

Personal Finance 101 Posts of the Day 4/9/07

• Get Rich Slowly talks about choosing to fund a retirement account vs. paying off debt.
• Debt Free talks about the statute of limitations on old debts.
• Blueprint for Financial Prosperity asks if married couples should combine finances.
• Living Almost Large talks about the risks of being a stay at home parent.

Personal Finance 101 Posts of the Day 4/4/07

• PF Blog asks if $1M is still enough
• Money Smart Life asks if you should use your emergency fund to pay off debt.
• 12 Years wonders what ever happened to frugality.
• Grad Money Matters tells us to stop blaming our credit cards!
• Personal Finance Advice talks about debt reduction mistakes.
• Money, Matter and More talks about how to save money and time by making left turns.

Personal Finance 101 posts of the day 4/2/07

• Blueprint for Financial Prosperity talks about Saving Beyond 401k and Roth IRA.
• Resident Alien lists 25 rules to grow rich by.
• Free Money Finance talks about how it’s the little splurges that can get you.
• Grad Money shows us how to get into the swing of cooking at home.

Personal Finance 101 Posts of the Day 3/28/07

• 7CM reminds us to Take a Money Day to Organize Your Finances
• Financial Baby Steps asks Should Personal Finance Be A General Education Class?. My answer is a resounding YES!!! The reason I started my business was because I kept hearing from way too many people who started their adult lives without even basic financial education and got themselves into trouble. It's horrible! My goal is to eventually start a non-profit geared towards requiring financial education in both high school and college. I think that the basics about credit and debt should be taught in high school before they start getting credit cards and digging a hole. In college they should expand on their basic education by teaching students about investing, retirement planning, goal setting and how to manage debt. Hopefully our government will wake up and take care of this.
• Wealth Building Lessons gives is Ben Stein’s Basic Rules of Retirement.
• Financial Hack talks about the benefits of low-cost living.
• Endless Gibberish talks about why they like credit cards.

Reader question: How do I open an IRA?

Hi Mandy,

How are you? A quick question..I plan to contribute 4000 to IRA this year (I believe this is the max)...Can I contribute anything additional to Roth IRA?

Would you suggest that I put in Roth IRA or traditional IRA?

Also what is the yield I get out of this account?

I am planning to open it with Citibank, since it is close by

Thanks,

ANSWER

Hi,

You can only contribute $4k total to both accounts. Since I believe you have a 401k at your job, odds are very good that you cannot deduct your traditional IRA contribution so I'd strongly suggest you do the Roth instead. And even if you can deduct it, typically a Roth is a much better investment in the long run. See my article: What's so great about a Roth IRA?

Also, you should never invest through a bank. They are the worst places for investments since they typically offer loaded funds that have high annual expenses and underperform. Instead you should open your account with Vanguard or Fidelity.

As for what kind of yield you can expect, that is completely dependent upon what you invest in. IRAs are only accounts within which you buy an investment. You can choose almost any investment. Considering your age, you should be as aggressive as you are comfortable with. Since your balance in this account will only be $4k to start (assuming you don't have an existing IRA that you could add to) you probably don't want to invest in more than one fund (to minimize fees). If you're ok being very aggressive, or it's balanced out with your other investments, you could choose a total stock market index fund as it will give you great diversification and be 100% stock. If you prefer to be a bit more conservative and/or you just don't want to think about it again besides to put more money in, you should consider a Target Retirement Fund.

Target Retirement Funds are funds that hold a basket of funds that ensure that you are completely diversified and have an appropriate asset allocation based on your expected retirement date. They are a one-stop investment and you can put your money in and never think about it again because it automatically gets more conservative as you get older.

Final thing, assuming you didn't make a contribution in 2006 (otherwise you'd just add to it right?) when you open this account you should identify this money as 2006 money. You have until tax day to do this. Then you still have all of 2007 to contribute another $4k.

Let me know if you have any questions and unless I hear differently from you I'm going to post this (with your name removed) onto the meetin forums since it's a great question that lots of people probably have.

Have a great day!
Mandy

FOLLOWUP QUESTION

thanks Mandy,

I was planning on Citibank since some of my friends have opened accounts there...they don't charge any fees too.

Does Vanguard charge any fees?

However the trick is to find the mutual funds that I should be investing in.

I do not mind being aggressive...but i need to know how and what to look for in mutual funds...Any pointers on links, details that i should look for?

and no, I do not have a 401K account, since my company does not contribute...

thanks,

FOLLOWUP ANSWER

Ok. Well, since your company offers a 401k and you just choose not to participate you still may not be able to take the deduction. Check your tax form and see if there's a mark on it that indicates you're covered by a retirement plan. If that box is checked then you can't take the deduction.

Even if you can take the deduction you should still probably consider the Roth. The advantages are much better with a Roth than a Traditional IRA.

Regarding Citibank, they may not charge fees up front, but odds are great that the products they offer are loaded funds (means you have to pay a sales charge to buy them) and have high annual expenses (anything over .5% is too high unless it's a very specialized fund).

Vanguard charges $10/year/fund for investments under $10k which is why you only want to do one fund at a time. $10 may sound like a lot compared to Citibank's $0, but when you take into account that a load is typically 5%, that means on a $4k investment you're paying $200 just to buy the fund. That doesn't even include the difference that a .25% expense ratio will make over one that's 1%.

The main things you should look for in a fund are: Load (never pay a sales load. They're a waste of money), ER (stands for annual expense ratio) and should definitely be below 1% and ideally below .5%. You also want to look at what the fund is invested in. Funds can invest in almost anything so you want to make sure that whatever it is invested in meets your needs.

As a younger person you want your investment to be much more heavily weighed towards stocks than bonds. You also want to make sure that you have a little bit of everything (small, mid, large-cap and international) which will keep you diversified and boost returns and lower risk.

Since you're just learning how to pick funds, I would definitely recommend the Target Retirement fund. I would choose the 2050 fund which is the most agressive. I would do this just to get the account set up and then you can spend some time learning more about how to choose funds. After learning more you may decide to just stick to the target fund (they are great investments) or take a more active hand in your investment choices.

On my book recommendation page I list 2 books which I think are must reads for everyone. The first is The Automatic Millionaire and the second is Investing for Dummies. I'd recommend reading both since they'll give you a great educational foundation to get you started.

Mandy

Personal Finance 101 Posts of the Day 3/22/07

• Blueprint for Financial Prosperity posts about why budgeting to the penny isn't a great idea. I agree 1000%. I actually just taught a budgeting class tonight and covered several of the points that BFP made. The biggest one IMO is that the harder you make things the less likely you are to stick to them. That's why I'm such a fan of making things automatic.

• Broke Now, Rich Later has an interesting post about emergency funds. I'm not a huge fan of large emergency funds unless you're high risk. I think they're kind of a waste because there are other things you could do with your money that's more productive. I think that if you have decent credit lines that are empty you might be better served by putting your money into a balanced fund. They're more agressive than cash but not ultra volatile so odds are against you taking a huge loss at the wrong time. I particularly think that having an emergency fund while you are carrying credit card debt is a waste of money.

• No Credit Needed tells us 10 things they've learned about their finances.

• My Retirement Blog gives us 1-5 of 10 things your 401k provider won't tell you.
  

Personal Finance 101 Posts of the Day 3/15/07

• Living Almost Large has a fantastic post about the dangers of paying for your children's education instead of saving for your retirement. It's something that anyone with kids should read.
• Queer Cents talks about why it’s important to talk to your partner about money BEFORE you merge households.
• Consumerism Commentary talks about the cost of buying a home over 30 years.

Personal Finance 101 posts of the day 2/26/07

• Empty Nest talks about the pros and cons of lifestyle/target retirement funds.
  

Borrowing money to pay off debt

War On Credit Cards posted a discussion about whether you should borrow money to pay off debt. They are in support of it if you can get reduced rates on your debt and I agree with some of their points. The biggest concerns I have are when people do the following:

1. Trade unsecured debt for secured debt by using money from a HELOC to pay off credit cards. There are advantages and disadvantages to this, the main being: you get a lower rate but you potentially put your house on the line. My biggest concern with this method is, if you haven't learned your lesson, you can put the debt on your HELOC and then you run up your credit cards again compounding your problem. There's also the problem of, if you hit a financial rough spot and can't pay your HELOC payment, with credit cards they just trash your credit but with a HELOC they can take your house. It can be dangerous so keep that in mind.
2. Borrow money from a 401(k) or 403(b). It sounds like a great idea because you're paying interest (at a low rate) to yourself. However there are some dangers. First, if you lose your job, most likely your loan is due within 60 days and if you can't pay it, it's considered a taxable distribution and you have to pay taxes and penalties. Second, many times if you have an active loan you can't make additional contributions. This may mean that you miss out on employer match. It definitely means that you miss out on the ability to contribute (you can't replace missed contributions) which can drastically reduce the money you have in retirement since you also lose all of those earnings. Third, as in the second example, when the money is out of your account for the loan it isn't earning for you and you can never replace the benefits of those compounded earnings which could have a much larger impact on your financial future than carrying credit card debt.

So, basically, if you're borrowing money from credit cards or prosper or something similar in order to get a lower rate then go for it. However, if you're borrowing from your house or retirement, please, think long and hard because if something happens you can really do serious damage to your financial future.

What's so great about a Roth IRA?

It’s a question I hear a lot and the answer is: almost everything.

Let’s start with the basics. A Roth is a type of Individual Retirement Account (IRA) which allows you to save in a tax advantaged way even if your employer does not offer a retirement plan. The thing that differentiates the Roth from other types of IRAs (Traditional, SEP) is that the money you put into a Roth is put in after taxes are taken out which means that you’ll never pay taxes on that money again.

“No taxes?” you ask. That’s right. No taxes. That means if you contribute $40,000 to your Roth over the next 10 years and it grows to be $400,000 when you retire, you won’t pay a dime of taxes on that $360,000 that your investment earned.

Sound too good to be true? It really isn’t. Of course, there are a couple rules that you’ll have to follow.

Disadvantages

First, you are only allowed to put in $4,000/year (as of 2007, changes to $5,000 in 2008) and you have to have earned at least that much in income (unless you are an unemployed spouse in which case you can still contribute).

Second, there is a cap on how much you can earn each year and still be able to contribute to a Roth.

• Single: Under $95,000 = Full Contribution; $95,001-$110,000 = Partial Contribution; over $110,000 = No Contribution.
• Married filing Joint: Under $150,000 = Full Contribution; $150,001-$160,000 = Partial Contribution; over $160,000 = No Contribution.
• Married filing Separate: $0-$10,000 = Partial Contribution; Over $10,000 = No Contribution
  

* The above salaries are all your MAGI. MAGI stands for Modified Adjusted Gross Income and is an amount that is used for determining a taxpayer's IRA eligibility; it is generally the taxpayer's adjusted gross income (shown on IRS Form 1040 or 1040A) calculated without any IRA deduction, foreign earned income exclusion, foreign housing exclusion, student loan interest deduction, exclusion of qualified savings bond interest from Form 8815, exclusion of employer-paid adoption expenses from Form 8839, or deduction for qualified tuition and related expenses.

Third, since this is a retirement account, there are some rules for how and when you can get at your money without paying penalties and taxes. Luckily those rules aren’t too bad and the advantages make them worth it.

Advantages

First, as mentioned above, since you are putting in after-tax money, that money and all of the earnings grow tax free so when you access it in retirement you won’t have to pay taxes on it.

Second, Roth’s provide tax diversity in retirement. Because other retirement plans are taxable at income tax rates when you retire, having a Roth allows you to control how much you have to take out of those accounts and therefore control how much you pay in taxes each year. This can come in handy if you are on the border between two tax brackets.

Third, unlike other retirement accounts which require that you start taking money out at a certain age, with a Roth, if you don’t need the money you never have to take it. This means your money can continue to grow throughout retirement and you can leave a nice nest egg for your heirs.

Fourth, the Roth is much more lenient about letting you have access to your money before retirement. With a Roth you can take out your contributions at any time for any reason without taxes or penalties. Additionally, if your account has been open for 5 years, you can access your earnings without paying tax on them and there will be no penalties as long as you are using the money for a qualified reason:

• The distribution occurs on or after the Roth IRA owner reaches age 59.5.
• For un-reimbursed medical expenses
• To pay medical insurance (under specific circumstances)
• Due to disability
• As distributions to the Roth IRA beneficiary
• As part of an SEPP program
• For qualified higher-education expenses
• To purchase a first home
• For payment of Roth IRS levy

Fifth, there is no minimum age to start a Roth which means that if an 11 year old has a paper route they can contribute their earnings and start their retirement savings REALLY early. With the advantage of compounding, that is a great thing!

Conclusion

The Roth offers a great, user friendly way to save for retirement. It’s flexibility, tax advantages and other benefits make it an easy decision to participate and everyone who is able should be maxing out their Roth.

The 5 biggest financial mistakes new graduates make

Graduation is an exciting time and you’ll probably experience more changes during the 6 months following graduation than at any other single time in your life. For many people it’ll be the first time you’ve had a full-time job making good money (you hope), the first time you’ve lived on your own, the first time you’ve lived in a different state (or country) and the first time you’ve been in complete control over what you’re going to do with your life. It’s a stressful time but also exhilarating.

Unfortunately, with the first blush of freedom, both personal and financial, many grads jump into situations without fully thinking them out. Below are 5 of the worst mistakes new grads make and hints on how you can avoid them.

1. Ooh, pretty, sparkly

It’s understandable, you’re finally receiving real pay checks, you have a shiny new job and it just makes sense to have a shiny new car to match. Unfortunately, financially speaking buying a new car is one of the worst decisions you can make. Most new cars depreciate 25% or more within the first year which means that you’ll be stuck paying full price for something that went on sale 10 minutes after you purchased it.

Instead of buying a new car it’s a much better idea save your money for a few months and pay cash for a used car. A 3-5 year old car can look just as nice as a new one and can cost half the price. If you really think that buying a new car is the way to go, do yourself a favor and try it out first. For 12 months, put the amount of your car payment into a savings account each month. Don’t forget to include the extra money that you’ll pay for the higher insurance coverage which you’ll need with a financed car.

If, after a year, you are able to easily save for retirement, pay your bills in full and on time and still make your ‘car payment’ then go for it. Use the money you’ve saved over the last year as a down payment on the car that you want. However, what you’ll probably discover is that the $400/month car payment that seemed so easy to make isn’t quite so easy now that you’re paying on student loans, credit cards, utilities, entertainment and all of the other expenses you may never have had. It’s usually about 6 months into the new car loan (when those student loans start coming due) that most new grads begin seriously regretting their purchase.

2. The super sized apartment with a side of furniture
3. The employee’s new clothes
4. Retirement? I’m only 23! I’ve got plenty of time!
5. Credit, credit, who’s got good credit?

Do you know your money?

Below are 10 questions everyone should be able to answer about their money.

1. Does your employer match any of your retirement contributions and are you getting the full match?

Many employers offer to match all or a portion of the money you contribute to your employer retirement plan. This is free money and you should make sure you are getting as much of it as possible. If you aren’t sure whether your employer matches or if you’re getting the full match as your Human Resources or Benefits office for details about your plan.

2. What are your short-, mid- and long-term goals and are you on track to meet them?

If you don’t know where you’re going, how will you know when you get there? Just like you wouldn’t set off on a cross-country trip without directions, you shouldn’t be saving for your future without a plan. That plan should include your short- (within 12 months), mid- (within 5 years) and long-term (more than 5 years) goals and how you plan to get there. It’s important to come up with a plan that’s reasonable and to review it periodically to see if you’re still on track.

3. What’s on your credit report?

Credit reports are so important. They can impact all areas of your life, not just your ability to get a loan. Did you know that a bad credit report can result in higher auto expenses and that it could even make you lose a great job opportunity? It’s important to check all three of the major credit bureaus at least once a year. You can do this for free at www.annualcreditreport.com. I recommend getting one report (from each of the three) every 4 months. Each credit agency will report different information but with this method you’ll be on top of your credit and see each report at least once. If you want to know what your credit score is, you should visit www.myfico.com to get your true FICO score. Scores gotten from other sources are typically not FICO scores. Before you spend your money on a score, just know that scores are only important if you’re applying for a loan. As long as you are paying your bills on time and there are no negatives on your report, your score should be fine so it isn’t necessary to buy your score very often.

4. How much will you need for retirement and are you on track to get there?

This is a pretty personal question and depends a lot on the lifestyle you want to live in retirement. There are dozens of financial calculators on the web that can help you figure out how much you’ll probably need and how much you should be saving to get there.

5. What kind of expenses are you paying for your investments?

Sometimes we are paying for expenses with our investments and we don’t even know about it. Does your fund have a sales load or a high expense ratio (anything over 1% is high)? Does your brokerage charge monthly or annual account maintenance fees? Review your accounts and make sure you’re getting the most bang for your buck. There is no reason to pay high expenses and fees when there are many well respected low or no-fee brokerage houses.

6. Are you in the right investments for your age, risk tolerance and timeline?

What was a good investment for you at 22 may not be so good when you are 42. Make sure that you periodically check your asset allocation to make sure that you’re investing correctly for your goals. There are many online calculators that will ask you a few questions and then give you a suggested allocation based on your responses. Take a couple of these and see where you stand. Make sure that you’re looking at ALL of your investments, not just one account.

7. Where does your money go each month?

You don’t have to know to the penny, but you should have a pretty good idea of what you’re spending your money on. If you don’t know, you should find out. You’ll probably be shocked to see how much you spend on certain expenses like coffee or eating out. To develop a budget, get a notebook and track all of your spending for 30 days. Write down every penny you spend and then put it into excel and categorize it into expense categories (entertainment, food, gas, etc.). The numbers will probably be eye opening and you might be surprised that by making a couple small changes you can free up a nice chunk of money each year to put towards your goals.

8. Which is better for you – a Roth or Traditional IRA?

This is a frequently asked question and the answer is: It depends. Much of the decision about whether to contribute to a Roth or to a Traditional IRA (TIRA) has to do with taxes. Generally a Roth is better for most people. See our article What's so great about a Roth IRA?

9. Are you getting the most out of your savings?

Many people are still using the savings account that their regular bank offers, and which only pays .5% a year. With the advent of online banks like ING Direct, Emigrant and HSBC, traditional savings accounts are going the way of the Dodo. With rates over 5% at these online institutions and transfers only taking a couple of days to complete, there’s really no reason to keep your savings in a low-rate account. For the latest list on the highest returns, check out these banking sites.

10. When will you be debt free?

Everyone wants to know the answer to this question. It’ll take some math and usually a budget, but you can find out if you put in the effort. Start by listing all of your debts in order of highest interest rate to lowest. Then list what the minimum payment is for each account. Finally, figure out how much money you have available to put towards debt each month. From there it’s simple math. You want to pay the minimum payment on all debts except for the one with the highest interest rate. You want to throw all of your extra money at that one with the highest rate. Once that one is paid off, you’ll add that entire payment to the minimum payment you were making on the next highest interest rate debt. This method will save you the most money and will get you out of debt as quickly as possible.

Are you ready for the new financial year?

2006 is ending and it’s time to start preparing for 2007 so you can start off on the right financial foot. Here are some things you can do now to make 2007 a financially fit year:

At work:

• Increase your retirement contributions. The 2007 annual retirement contribution limit for 401(k) and 403(b) plans was increased to $15,500, so make sure you adjust your contribution levels accordingly. If you can’t max out the annual retirement contribution, at least try to increase your contribution 1% this year.
  
• Review your FSA contributions. If your employer offers a Flexible Spending Account (also called a Cafeteria or Section 125 plan) it’s a great thing to take advantage of. Try to sit down and use your budget to figure out how much you’ll need for the next year. Remember, you can now use it for over-the-counter medicine like aspirin or cold medicine and things like contact lens solution. Just don’t over estimate since if you don’t use it by the end of the year you lose that money.
  
• Double check your taxes. If you’re getting a big refund for this year, you probably need to take a look at what you’re having withheld each pay check. Your goal should be to break even at tax time and take that money you would have gotten in a lump sum at tax time and invest it monthly. If you aren’t sure how much you should have withheld, www.paycheckcity.com has a great paycheck calculator. Similarly, if you’ve had a major life change (house, marriage, divorce, etc.) that impacts your taxes you should double check that your withholdings are still correct.

On your own:

• Review your asset allocation. As investments rise and fall throughout the year they can impact your asset allocation plan. Make sure that at least twice a year you are rebalancing your investment portfolio to make sure you stay on track.
• Max out your Roth IRA . If you contribute $333/month to a Roth IRA you will have maxed it out for the year. The easiest way to do this is to set up an automatic contribution plan that will deduct money automatically from your checking account and invest it in an appropriate mutual fund. If $333/month is a bit too rich for your blood, look at the program that T. Rowe Price has that will allow you to start a Roth IRAwith as little as $50 to start and $50/contribution. If you haven’t yet maxed out your 2006 contribution you have until April 15, 2007 to do so, just make sure that you indicate that the money is for your 2006 contribution or they will credit it to 2007.
• Do a budget check. Look over your budget for the last 12 months and see if there were any unexpected expenses that you need to plan for this year and adjust accordingly. Better to save up for that license plate renewal than to get caught by surprise!
  
• Review your financial goals. Are you on track for your financial goals? Have you added/removed/changed any of them? Take a look and see where you are. Increase or decrease your savings based on any changes to your financial goals.