Retirement Accounts

T. Rowe Price Group Inc. reported yesterday that its second-quarter profit rose 20 percent as the Baltimore mutual fund company continued to attract investment dollars from clients. The company had net income of $162 million, or 58 cents a share, up from $136 million, or 49 cents a share, a year earlier and matching the consensus estimate from Wall Street analysts polled by Thomson Financial. It also notched a new record in assets under management, which rose 8.5 percent during the quarter to $380 billion, the result of a surging stock market and clients adding $8 billion.

On a percentage ba- sis, 44 percent of our savings is in my profit sharing at work and my wife's pension. My profit sharing, which makes up most of the 44 percent, is invested mostly in bonds (90 percent), and the rest in preferred stock that is beyond our control. The rest of our investments are made up of individual retirement accounts - traditional and Roth - and my wife's 403(b). Of that, 38 percent is in large-cap funds, 31 percent is in small- and mid-caps funds, 26 percent in international funds and 5 percent in bond funds.

Howard County's older homeowners will learn tonight how much of a property tax break they will get come July. The County Council is scheduled to vote on a bill to change the tax cut approved by the previous council just days before the November election. A series of amendments that appeared to move opposing views closer together were submitted Monday by council Chairman Calvin Ball, an east Columbia Democrat, and Greg Fox, a western county Republican. The law, approved Oct. 31, calls for a 25 percent property tax cut on July's bills for homeowners 70 and older with annual incomes less than $75,000.

My wife and I are 55 years old. We have $1.3 million saved. ... I would like to retire by year's end. My wife works part time and makes $24,000 per year. We are debt-free. If I retire, I lose my salary of $45,000 and health benefits. We would have to pay out of pocket per month somewhere around $700 to $1,000 for health insurance. I would probably work some kind of part-time job. My wife will probably work another four to five years. Can I retire? It all depends on how much you'll spend, but many people have retired on far less than seven figures.

SHOULD millions of Americans with individual retirement accounts (IRAs) be discriminated against by the federal government when it comes to financing a home? Should their $2 trillion in savings be effectively kept off-limits for home buying for themselves or a family member?Sounds like a no-brainer, yet it's a fact: If you are an IRA account holder, you cannot borrow money from your retirement plan to buy a home yourself -- or to help a child or grandchild buy a home -- without paying federal income taxes.

DO WE really need yet another retirement-savings account? That's what President Clinton proposed in his State of the Union address.The president wants government-sponsored Universal Savings Accounts (USA), to foster more personal savings. Whether that would happen in practice, however, is hard to say. In recent years, a rash of new retirement accounts has been lavished on workers and businesses without much effect.About half the private work force participates in a retirement plan. That proportion has changed very little over the past 15 years.

WASHINGTON -- Stepping up the debate over Social Security's future, House Speaker Newt Gingrich proposed yesterday that federal budget surpluses should be divided among all U.S. workers and deposited directly into new, personal retirement accounts.The average worker might receive a total of $3,500 or $4,000 over the next decade as a share of the federal government's emerging surplus, the Georgia Republican predicted in testimony before the House Ways and Means Committee.The "Social Security Plus" account is the Republican political response to President Clinton's call to "Save Social Security First."

HOUSE SPEAKER Newt Gingrich is pushing a plan that would transfer government surpluses into personal retirement accounts for workers who now pay Social Security taxes.Under his proposal, government surpluses would be used to start tax-free accounts for the nearly 130 million Americans who pay into Social Security. The accounts would not replace any part of the current system but would be added on.Social Security pays benefits to 44 million Americans, including retirees, the disabled and the families of working-age people who die.Without changes, the system is projected to run out of money in 2029.

THE KIPLINGER Washington Letter feels investors should figure on more slippage in long-term interest rates, with 30-year Treasury bonds sliding to 5.5 percent and fixed-rate mortgages to 6.8 percent. "Hard times in Asia are causing a flight of foreign money to the U.S., a safe haven. The Fed will remain on the sidelines for now and won't risk drawing more money out of Asia by raising rates," the newsletter says.Some people buy stocks and stick with their hand.Others like to trade frequently.

Fidelity is finally closing Magellan to new investors while it is only a mere $62 billion, and growing. If you think you will be missing out on a legend, you have until Sept. 30 to jump in. But you may be alone in doing that: The legend is now more of a myth.Most professional Magellan watchers don't think the giant fund is worth the 3 percent commission you'll pay for it. That's right: Magellan, the top-performing stock fund over the last 20 years, is not worth a lousy 3 percent load.Investors seem to agree.

One good thing you can say about the effect of the stock market swoon on 401(k) retirement accounts: It has pushed some employees to examine their statements. Many workers hadn't paid attention since they first signed up, often when they were hired. This neglect meant their 401(k) asset mix and the amount deducted from their paychecks never changed. Some investors have been making moves: About 6 percent of assets in 401(k) plans were shifted out of stocks and into bonds last year, mostly during tumultuous October and November, according to an analysis by human resources consultant Hewitt Associates.

TIP 6 You don't have to tap your IRA this year in hopes that you can recover some of your Wall Street losses Older savers get a one-year reprieve in 2009 from having to take distributions from retirement accounts because of the recent stock market turmoil. This helps if you don't need to dip into a traditional IRA, 401(k), 403(b) and 457 plans to live on. You can leave the money untouched, where it may recover from last year's losses. Mandatory distributions from these accounts kick in after you turn 701/2.

Retirement savers won't have to take mandatory withdrawals from their tax-deferred accounts next year, and the reprieve creates some opportunities for financial planning, some experts say. This month, President George W. Bush signed a law that suspends required distributions from 401(k) plans and individual retirement accounts in 2009. The move was an attempt to ease some of the pain caused by this year's stock market meltdown for those subject to required minimum distributions, generally people beyond age 70 1/2 or holders of certain inherited IRAs.

It's official! The bank bailout has not worked. Global stock prices are in a panic rush to the bottom. The bailout cannot fulfill its primary mission to restore investor confidence, because it does only half the job. It will provide banks with much-needed liquidity, but it does not address the compensation and management practices on Wall Street that drove irresponsible decisions and gave rise to the crisis. It does not address the void of sound leadership at the top of major financial institutions such as Citigroup and Merrill Lynch.

Among all the retirement savings concerns out there, how a company is handling its 401(k) accounts should be the least of employees' worries. But it's potentially a real problem, experts say. It's unclear how many companies are operating retirement plans that are not in compliance with Labor Department and Internal Revenue Service rules, but enough of them are cropping up in audits and voluntary compliance programs that the IRS is issuing new instruction manuals...

A retiree recently wrote to Your Money asking for suggestions on where to invest the savings he has been generating by not spending all of his retirement income. He has $30,000 in a taxable savings account, but the bulk of his income is generated from retirement accounts. He's looking for longer-term returns, not income that he can spend right away. But he may be locked into the assumption that because he can no longer contribute to his individual retirement account, his options for investing in his taxable account should be limited to ultra-safe bank products.

Retirement savers have been plowing money into foreign stocks, but experts say many are failing to consider taxes and how the investments fit within their overall plan. Foreign stock mutual funds accounted for $722 billion in workplace retirement accounts, including 401(k) plans, and in individual retirement accounts last year, says the Investment Company Institute, a mutual fund trade group, a more than 80 percent increase in just two years. As investors pile on, however, many fail to realize their foreign dividends are subject to tax, even though their money is sitting in tax-deferred retirement accounts.

Now that a fill-up costs them $90, Minnie and William Lewis of Baltimore County have given up weekly pleasure drives on scenic routes. East Baltimore resident Leonard Cochran is buying less meat at the grocery store and eating the wild rabbit and venison he can get free from his hunter friends. As for Thomas Brown of Baltimore and companion Dorothy Lewis, they're looking for jobs. He's 84; she's 75. "Everything is up," Lewis lamented. "The gas, electric, rent." This is what happens when consumers feel stretched, pressed and battered by escalating costs as incomes aren't keeping up. Even as the U.S. economy worsens and businesses have begun cutting jobs, the price tag for everyday necessities such as food, heating oil, gas and electricity is spiking.

We marry and start families later than previous generations. Some of us will even launch a second family late in life. The result is that more parents will be paying college tuition bills during retirement. Paying for college while working is tough enough. Juggling tuition bills on a fixed income can be a more difficult feat. There's financial aid, of course. But will schools expect older parents to crack open a retirement nest egg to finance college? That's the question on Larry's mind.

My wife and I are 55 years old. We have $1.3 million saved. ... I would like to retire by year's end. My wife works part time and makes $24,000 per year. We are debt-free. If I retire, I lose my salary of $45,000 and health benefits. We would have to pay out of pocket per month somewhere around $700 to $1,000 for health insurance. I would probably work some kind of part-time job. My wife will probably work another four to five years. Can I retire? It all depends on how much you'll spend, but many people have retired on far less than seven figures.