Rachel Sheedy: That concludes today's Jump-Start Your Retirement Plan Live Discussion. The transcripts for both 2010 Live Discussions are posted on the Jump-Start Your Retirement Plan Special Report. For more retirement advice throughout the year, bookmark Kiplinger.com/retirement. Thanks for joining us!

Rosa M. Washington: Can I open a Roth IRA for my 23 year old child or a grandchild?

Cary Carbonaro: As long as he has earned income from a job you can put in up to the limits or up to his pay. All the best to you!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Audley: Hi, I was curious on my overall financial health. Any opinions on how I'm doing now and steps I should be taking next? I'm a single 35 yr old earning 41K, recently paid off all student loans, no credit card debt. I have 65K in savings, 20K Trad IRA, 13K in 401K, and 15K in other managed stocks.
FYI -- possible future plans include further education for another degree, purchasing a home, starting a family.

Cary Carbonaro: You are in really good shape. No debt is a big plus. You have more in nonretirement than retirement money. Based on your age, it is usually the other way around. Have you been maxing out pretax retirement plans? Great net worth based on your income. You must be great with your finances and saving. Congratulations and all the best!

PS A house would be a good next move in building assets and most of the USA is very low.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

AJ: I am 33 years old, and I just started my career 18 months ago after years of schooling and amassing a mountain of debt. I am doing everything I can to restructure my debt, but it will remain a significant drain (20-50%) on my net income for the next 20 years. I will be eligible for a simple IRA through my employer in 12 months with a match up to 3%. I have essentially no savings and no investments at this time. My question is, what is the single most important vehicle I can put money into now to start saving for retirement?

Cary Carbonaro: OK based on what you have told me, I would do a Roth this year. When you are eligible for your company plan (simple ira with match) you should do that since a match is free money. You are still young and if you live within your means in spite of the college (good) debt, you will have a financial future. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Judy: I subscribe to The Kiplinger magazine and have read several articles regarding Roth conversions, but still have a question. My husband and I have both converted some funds from our traditional IRAs into Roth IRAs. We have and are currently paying taxes on the amount converted from a taxable account. We are both over the age of 59 l/2. I am also disabled. Can we take a distribution from our conversion amount of the Roth at any time, tax free? I understood from the article that only the earnings received after the conversion had to stay in the Roth for at least 5 years. Is this correct?

Cary Carbonaro: There are specific ordering on the 5 years. A disability if total is an exception to the rule. I would sit down with an Ed Slott advisor and have them examine your specific case. All the best to you!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Carole: Hello. Advice as to whether or not I should convert my IRA ($39,000) to a Roth ($7800). Have approximately $26,000 in other mutual funds/stocks. House appraised last year at $1.1 million. I just turned 60 years old. Thank you.

Cary Carbonaro: This is not something that can be answered with the information you have given. It is much more complex having to do with spending, savings, taxes, beneficiaries, estates, etc. Find an Ed Slott advisor and pay them for an hour of their time to run the numbers and have the discussion with you. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Dick: I'm 73, retired and lucky to have a traditional pension and Social Security that I have been considering as fixed income investments when I determine asset allocation for my IRA portfolio. I'm single and have only one dependent, my spouse who is 20 years younger. We have cash equal to 2 years' IRA withdrawals.

This approach obviously raises my equity allocation over the usual level, to about 80% instead of 50%, which I hope will help us deal with future inflation.

Does this sound prudent?

Cary Carbonaro: We as planners never consider pension and Social Security as a fixed income investment. It is cash flow not an investment unless you can covert it to one and roll it over. I would redo my allocation and take that out. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Robert: 1. If you are 59 1/2 in March 2011, can you take an IRA withdrawal in January 2011, without the 10% penalty or invoking a SEPP?

2. Do I need to update my will in 2010 for any of the recent estate law changes and
expirations?

Cary Carbonaro: It is the year you turn 59 1/2 so you will be fine. Do you have a SEPP set up? If so, then you have to follow that schedule.

Most wills prepared by an attorney should have been set up to already accommodate the changes.

All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Steve Presby: What should the bond and short-term portions of a portfolio look like (internal asset allocation) if someone is 7-10 years from using it?

Cary Carbonaro: In my view it should be at least 50%. Bonds held portfolios during the crisis of '08. You should redo your risk tolerance. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Vicky: I have a 401k, which I only contribute 2% of my income, which is set at 40,000.00 yearly and does not look as if it will be changing anytime in the near future. If I want to retire with at least the same amount of income, which is best, to contribute more to 401k or seek IRAs or other investments such as Roths? FYI my age at this time is 45.

Cary Carbonaro: You should max out your 401K first which is $16500 a year. You are putting $800 a year currently. You should up this as much as you can because you will feel an immediate tax savings since it is pre tax savings. IRAs are after-tax savings. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Angie: I am 61 years old and may decide to retire early at 62. I was married in 1970 and divorced in 1982. Since I was married more than 10 years and did not remarry, I believe that I can collect spousal benefits based on my ex's work record. I am no longer in touch with him nor do I know his Social Security number. What steps do I need to take to get this benefit, and can I switch to my work record for benefits later?

Cary Carbonaro: You are correct, and it is great news for you. Contact your local Social Security office asap. They will be able to find him even if he is deceased or remarried. You should take whichever is higher, they will be able to run the calculation for you! All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Renee: My husband and I both max out our employer retirement programs (401K for him and the Federal TSP for me). Our AGI exceeds what is allowed for a traditional IRA and a Roth IRA. Do I understand correctly that we can now contribute to a tax deductible IRA and convert to a Roth IRA? How does this work? How quickly am I able to convert from one to the other? How do I make future contributions? Do I have to open a new tax deductible IRA every year and then convert every year? Will I be able to roll a tax deductible IRA into the same Roth IRA every year? Thanks!

Cary Carbonaro: Here is what you can do, open a NON deductible IRA not a deductible one since you make too much. The same year you can convert to a Roth and pay the taxes. It is extra paperwork, but this is the only way. If you want to contribute to a Roth ongoing you have to fall within the married filling joint limits approx 166K of AGI. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

DP: I have $100k sitting in a mm fund earning 1.5%. CD rates are low but I expect them to increase. Can you suggest another safe place to park the money other than Treasuries? I also have a short term bond fund that I am concerned about when rates start to increase. Any suggestions on where to move it? What about corporate bond funds?

Cary Carbonaro: It depends on your time frame. Everyone is struggling with this right now. If your time frame is 5 years or greater I would use a corporate bond fund. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Mary: My husband and I both have government retirement plans. We invest in deferred comp accounts as well. We would like to invest a percent of our salaries to an account that will allow us to have greater purchasing power in the future or even retire early. We are in our 40s. We are not very knowledgeable in the investing arena. It seems that no-load mutual funds are a good option. If so, how do we begin to choose one and how do we set it up on our own?

Cary Carbonaro: If you want to do it yourself, go with a target date low cost like Vanguard or Fidelity mutual fund. It is a good start. You might want to work with someone down the road who is trained and can give you the education in the investing arena. All the best!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

charlie: I am getting conflicting answers as to whether an annuity is a good investment and what type of annuity would be a good investment. Can you help clarify this and recommend what the best type of annuity would be?

Cary Carbonaro: Hi Charlie, There is no such answer. An annuity means stream of payment. There are fixed, variable, indexed and many more variations that have many bells and whistles. Go to an independent fee-only advisor, pay for an hour or so of their time, and let them look at the options you have been given. Also one size does not fit all.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Kirk: I use Value Line and Standard & Poor's Net Advantage to research stocks. I also use free sites for general information like finance.yahoo.com and marketwatch.com. Are there other inexpensive tools that I can subscribe to that will aid in stock research?

Cary Carbonaro: It is not free, but Investor Business Daily has great tools on their Web site and you can do a trial for free or cheap. Best of luck to you!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

rich: My 8 yr old son has some money in the bank, and I'd like to take some of it and invest in a mutual fund for him. Can I open a mutual fund for him at the age of 8? We already have a 529 account set up for him.

Cary Carbonaro: Yes, but you will have to be the guardian so it will be in your social security number. It sounds like you are looking for a UGMA account. All mutual funds should offer that account type.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

John: Talking with a financial planner about IRAs, Roth or Traditional -- are his hourly rates tax deductible? How about the commission in buying stocks for the IRAs and trading within the IRA?

Cary Carbonaro: Yes, hourly fees are tax-deductible. Commissions are not tax-deductible as advice but will be added to the cost basis when sold.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Darryl: I'm going to turn 62 at the end of March. I've been unemployed since Sept. 2008 and have collected unemployment for a year. At present I have a little over $1.4 mln that I've left in my old 401k, and another $577,000 available as a lump sum payout in my old employer's pension plan. I've another $100,000 plus in various savings accounts, and my wife just sold her place and is still working (probably for another 4 years). For both of us, this is our third marriage and we still keep things separate. I thought with all my reading on investment matters, and retirement issues I'd know what to do now but I don't. Any thoughts?

Cary Carbonaro: I am not sure I am understanding your question. Is it regarding retirement, investing, goal setting or estate planning? I feel it is all of the above. You have large assets and some complexity to your current situation which would be served best if you paid to sit down with a comprehensive fee-only professional.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Doug: When I see the limit to 401k contributions are $16,500 in 2010, plus another $5500 if 50 or older, does the $16,500 include the company match contribution, or just my payroll deduction amount?

Cary Carbonaro: Great Question! That is for what are called "elective deferrals." That is the money that is yours. There is another limit, which is section 415 that includes what employers can put in on top of that.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Colleen: Hi! For reasons beyond my control, my school district dropped two of my 403b plan providers and now I have started on a third company. I already have a Roth IRA. I want to take those two older plans and roll them over to a regular IRA through Vanguard. Good idea or is there something that would be better?

Cary Carbonaro: That sounds like a very good idea. You can use Vanguard's Web site tool to determine the asset allocation or pick a target retirement fund. Best of Luck!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Bryon: Is there any advantage to staying in a money market fund as opposed to transferring into a FDIC insured savings account paying 1.50%?

Cary Carbonaro: The only difference is the money market can be used the same day to invest. You would have to wire money from a bank to invest the same day. I hope that helps!

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Donna: My husband and I are in our low 50s. He has a small pension, and we have a combined retirement income of $100,000. We don't make much money but have contributed about 18% of our salary towards retirement (IRA, 403B). We have about 4 months of an emergency fund. Our taxes are high and our home needs energy improvements. How would you prioritize our income? Thanks.

Cary Carbonaro: This is a difficult question without knowing what your current budget looks like. Do you have any equity in the home? Have you inquired about green tax credits? I would not take it out of retirement money. You will need that when the time comes.

Cary Carbonaro is a partner at Stonegate Wealth Management and works in the firm's Huntington, N.Y., and Clermont, Fla., offices.

Rachel Sheedy: Cary Carbonaro, a partner at Stonegate Wealth Management, which has its main office in Fair Lawn, N.J., will be taking your questions until 6 p.m. EST. Planners are also available by phone until 6 p.m. EST -- just call 888-919-2345.

James: Thank you for your time today. I am currently contributing a total of 16% of my income to my company's 401k. They match the first 6% and allow up to an additional 19% pre-tax contribution (unmatched). I am currently 35 yrs old, married, make about $100k and have about $140k in my 401k. Would you suggest I raise my unmatched contribution amount to maximize my 401K? Will it make a big difference in my take-home pay?

Eve Kaplan, CFP(R) Practitioner: Hi James, The amount you defer overall has to make sense re: having enough money to live on. There are limits to the total amount you can defer in a 401k (16.5K/year since you're under age 50). Anything you can set aside -- up to that amount -- reduces your tax-home pay and lowers your tax burden by deferring income. It's all up to you to determine what you can afford to set aside overall, up to federal limits.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Dave: My wife and I have 300k in 401k and IRA accounts; she is a stay at home mother. We are both 55. My company recently stopped my 401k match and probably won't start it again. Should I start a Roth and put the majority of my future retirement contributions into that instead of the 401k? I have 10 years before I plan to retire.

Eve Kaplan, CFP(R) Practitioner: Hi Dave,
There are a number of issues you need to consider (probably in conjunction with your CPA and/or financial planner):
1. Is your income low enough to qualify for funding a Roth IRA? (income threshholds only were eliminated for Trad IRA rollovers to Roth IRAs).
2. If your spouse isn't working, don't forget she can contribute 6K/year in a spousal tax-deferred IRA.
3. If your tax rate is relatively high, it still may be more beneficial to defer money in your 401k (even without a match) than paying tax and funding a Roth IRA with after-tax money.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Sharon: I have money in a 401K with an employer I am no longer with. I'm thinking of moving it to an IRA, but am hesitant to do so as my understanding is that, by law, 401K money is "safe," i.e. no one can get to it, even if I am sued for example, and I don't know if this is also true for money in an IRA...is it? What are the pros and cons of leaving the money in the 401K vs. moving it to an IRA? (I like the flexibility of being able to invest in anything vs. just what the employer plan offers.)

Eve Kaplan, CFP(R) Practitioner: Hi Sharon, Some states also view IRA assets as "off limit" in the event of a lawsuit, but 401k assets overall may be safer. The downside is that you're paying management fees in your 401k and -- as you noted -- your investment alternatives are confined to what your 401k plan offers. If you have sufficient umbrella liability coverage, IRA rollover assets also can be fully protected but may still be "game" in the event of divorce or in the event of an incident not covered by your umbrella liability policy.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Katie: Is it risky to have all investable money with one fund company? I have a diversified mix of assets/funds all with the same fund company (various funds) and am wondering if it is high risk that they are all within the same company?

Eve Kaplan, CFP(R) Practitioner: Hi Katie, It would be useful to know which company you have your investments with. The US government has some coverage for investment assets, but cannot guarantee 100% coverage above a certain threshhold.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Kathy: I'll be 60 in June, and am living in my townhome with my fiancee who contributes to household expenses. I currently work freelance; only made $9300 gross in '09. I currently have just over $1M in stocks, mutual funds, etc,. with about $500K in traditional IRA. Very little cash, and all investments are highly taxable. Should I bite the tax bullet and move some stocks into more liquid investments? Most have been held for 20+ years and will probably generate big capital-gains taxes. I have been in as high as 28% tax bracket due to more income and capital gains in previous years. How can I hold on to as much principal as possible and not give it all to IRS?

Eve Kaplan, CFP(R) Practitioner: Hi Kathy, I think you have no choice but to sell some holdings (try to sell things that generate less of a capital gain). Conventional wisdom is that it makes sense to tap taxable holdings first, then IRA money -- but you're in a very low tax bracket so it actually may make sense to liquidate some of your IRA assets instead of incurring large capital gains. Your biggest asset may be your professional experience (which you didn't disclose) -- is there any way to earn more and give up freelance work since freelancing isn't generating enough to cover your expenses?

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Ray: OK, this year I am retirement eligible from govt service. I have a long commute to and from work...and would like to retire. However I am only 47 yo, lack a college education and there are real questions the pension eligibility would be about 40 k per year. And though I have a 401k, 457 and a roth and an annuity, I have a mort of 129 k. I am worried about tax penalties, Social Security and living on such a low amount with the economy so bad...does this move make sense?

Eve Kaplan, CFP(R) Practitioner: Hi Ray, If I understand your question correctly, you're asking if you should retire at age 47, given your concerns about living expenses versus your assets? I recommend working and saving as long as possible, even if you're eligible for retirement.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Michele: I am 62 and have been on disability retirement for 8 years. Due to my late husband's long illness, my only retirement is about $13,000 invested with Black Rock Funds. I will lose more than 50% of my income when I turn 65 (from $3200 per mo. to $1500), because my long term disability insurance ends. My late husband's illness also made it necessary to borrow against the house. I downsized to a condo, but the mortgage is still significant. I will no longer be able to afford the mortgage payments then. A reverse mortgage may not be enough to pay off the existing mortgage. I am in a wheelchair and have a wheelchair-accessible condo and would like to keep it. Any suggestions?

Eve Kaplan, CFP(R) Practitioner: Hi Michele, I'm sorry to hear about all your troubles. It sounds like you may run out of assets in the future. I'm not sure what to advise, but it sounds like you may become eligible for Medicaid if your assets are depleted (not more than 2K in your name). There is supported housing that is wheelchair-accessible in the event you drain all of your assets and can't cover your living expenses. I recommend you consult a lawyer who specializes in Medicare/Medicaid.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Jess M.: I am self-employed for the first time this 2009. I want to lower my taxes by contributing to an Individual 401K/SEP and to an IRA. My questions are: What are my contribution limits for each and for both combined? Can you recommend an individual 401K/SEP company?

Eve Kaplan, CFP(R) Practitioner: Hi Jess, I can't recommend any particular 401k/SEP company but I can say the contribution levels differ. Without your income, I can't say more but to note that you (generally) can set aside more in a solo 401k than a SEP. Please consult with a CPA and/or financial planner for more specific information.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Roy: I recently got laid off in Dec 2009 with severance payments continuing for 5 months in 2010. Since I can no longer participate in my employer's 401k plan, is there an alternate tax deferred investment option you can suggest? Since I am over 50, I would have been eligible to invest $16,500 plus $5,500 into my 401k. Also, I have already invested in a non-deductible IRA for 2010 ($6000).

Eve Kaplan, CFP(R) Practitioner: Hi Roy, If your spouse is working and you are not, you can consider funding a spousal (tax-deferred) IRA. Otherwise -- without employment income -- there are few tax-deferred investments for you. I would be careful about considering e.g. tax-deferred annuities (which effectively convert taxable money into tax-deferred money) unless there are other compelling reasons for buying an annuity. BTW, I don't necessarily recommend non-deductible IRA investments -- there is an ongoing debate about this (amongst CPAs and planners) but that type of IRA requires paperwork/compliance on your side.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Jane: I am 80, second marriage with not much real property in my name, have about $200,000 in IRA and regular brokerage acct., but... also have $100,000 in money market that I am afraid to touch. Would like to make some money for my four daughters to inherit. Should I buy the allowed I-Bonds each year (one paper and one electric... $5000 each) or other instrument that will counteract inflation's bite!

Eve Kaplan, CFP(R) Practitioner: Hi Jane, I-Bonds are fine as long as inflation truly takes off. It's hard to say if we are going to have a V-shaped recovery (implying inflation down the road, as the economy heats up) or a W-shaped recovery (implying muted inflation). At age 80, you possibly have another 15+ years ahead of you, so I would be very careful about earmarking funds for your 4 daughters just yet. Please remember buying bonds outright is suited to a "buy and hold" strategy whereas buying any mutual fund (including TIPS or other inflation-protected bond investments) is a more liquid form of investing. I recommend the latter (e.g. TIPS) so you don't tie up your money and find yourself selling at a loss.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

bc: I have maxed out my 401(k) contribution (regular and over 50 catch-up) for the past several years. I have 2 questions: (1) is the amount contributed to the 401(k) deducted from total gross income in determining whether or not your AGI is above the limits for contributing to a Roth IRA? (2) If my 401(k) is invested in managed mutual funds using a stock/bond mix that is acceptable for my age, and I qualify to contribute to a Roth would it be better for me to invest in an index fund or in individual stocks for the Roth? I am 54, with retirement 8 to 10 years away.

Eve Kaplan, CFP(R) Practitioner: Hi BC, Your 401k contributions are deducted from your adjusted gross income. Please note income restrictions still are in effect for funding Roth IRAs in 2010 (what is no longer in effect is the income barrier for converting Trad IRAs to Roth IRAs). So the answer to question #1 is - what is your adjusted gross income? If it's higher than Roth IRA threshholds, you can't fund a Roth IRA in addition to funding a 401k.

Regarding your 2nd question, an index fund (several -- so you have exposure to domestic and international stocks/domestic and international bonds) is always preferable to individual stocks. Investing in individual stocks works best if you are an investment expert who can assemble a portfolio that both diversifies and lowers risk. Most folks can't do that on their own -- so broad-based mutual funds that represent various asset classes are a better way to go.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Steve: Hello: First, thank you for your time & today's service. My company's 401k plan allows for contribution to continue after hitting the annual maximum, they are considered 401a or aftertax contributions. Since these are aftertax contributions, can I access those funds at anytime, specifically prior to reaching 59 1/2?

Eve Kaplan, CFP(R) Practitioner: Hi Steve, Although you're additional funding is voluntary (and paid with after-tax dollars) you generally cannot access these funds until you reach 59 1/2, unless you have a mitigating circumstance (see below). I'm enclosing some FINRA-compliant information for you:

"You can also let your employees withdraw their elective deferrals prior to age 59 1/2 if the employee, or the employee's spouse, dependent, or plan beneficiary incurs a financial hardship. Hardship withdrawals are permitted only for immediate and heavy financial need and only in an amount necessary to meet that financial need. Examples of immediate and heavy financial need include the need to:

-Pay medical bills for your employee, and his or her spouse, children, other dependents, or plan beneficiary
-Pay costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments)
-Pay post-secondary tuition for your employee and his or her spouse, children, other dependents, or plan beneficiary
-Prevent an eviction from or foreclosure of the employee's principal residence
-Pay funeral expenses for an employee's parent, spouse, children, other dependents, or plan beneficiary
-Repair damage to the employee's principal residence after certain casualty losses
-Pay income tax and/or penalties due on the hardship withdrawal itself
In general, an employee can't take a hardship withdrawal to the extent the employee is eligible for a non-hardship withdrawal or a loan from your 401(k) plan or from any other retirement plan you sponsor."

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

John P: Can real estate be purchased through a conventional or Roth self-directed IRA?

Eve Kaplan, CFP(R) Practitioner: Hi John, Yes, but you need to make sure your custodian allows real estate investments.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Luis Marrufo: I have a question regarding withdrawing from my ROTH IRA for a first-time home buyer. I understand I can withdraw up to $10,000 penalty- and tax-free if you have contributed at least 5 calendar years. My first contribution year was 2006 so I do not meet the 5 year requirement for withdrawing earnings. My question is this; how is it determined whether you are withdrawing earnings or your contributions? Right now the overall value of my ROTH IRA is less than my contributions due to the large market downfall in 2008/2009. On the flipside, if I'm withdrawing money at an overall loss, is the loss tax deductible?

Eve Kaplan, CFP(R) Practitiioner: Hi Luis, You are allowed to withdraw (penalty free) your basis (amount you contributed) if you wait 5 years -- unless there are extenuating circumstances (e.g. 1st time home purchase). That said, I understand the value of your Roth IRA overall is less than your contributions -- so anything you withdraw is considered return of basis as long as your Roth IRA is "underwater." You can't deduct any Roth IRA investment losses.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Kevin R: My wife is 54 years old, and her office is closing in less than 60 days. She has a pension with her company. We want to take it as a lump sum and manage it ourselves. We assume it is in our best interest to roll this money into a retirement fund. Can it be rolled into a Roth, or must it go into a regular IRA if we don't want to pay taxes today?

Eve Kaplan, CFP(R) Practitioner: Hi Kevin, If your tax rate is higher now than your projected rate in retirement, it makes sense to defer this income and tap it in retirement. I would not necessarily recommend setting this up as a Roth IRA unless you have outside assets to pay the anticipated tax bill (the decision to convert to a Roth IRA or not is multi-faceted -- you need to consult a specialist).

By the way, is it possible to take the pension as an annuity stream instead of lump sum payment? If so, I recommend you run the numbers with a financial planner to compare lump sum distributions with pension streams. Why? We planners see too many examples of lump sum distributions that are poorly managed so the retiree ends up with far less than an annuity stream would have given him/her. Annuity streams also allow for joint and survivor options, so you would have something if your wife predeceased you.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Art: My wife and I are 50 and planning ahead for retirement, and for college now. Would it make sense to pay down a 90k 2.99% home equity line out of non-ira mutual funds? The thinking is it would help lower our EFC (about 35k) on the FAFSA form.

Eve Kaplan, CFP(R) Practitioner: Hi Art,
I've copied some FINRA-compliant information to help you better decide how to proceed with paying down a home equity line in order to reduce assets factored into the EFC. I hope this helps:

1. Use cash (an assessable asset) to pay down consumer debt, which is not a factor in the federal methodology
2. Use cash to make large planned purchases the year before your child starts college
3. Use assets assessable under the federal methodology to pay down your mortgage, which increases your home equity (an excludable asset)
4. Shift assessable assets above your asset protection allowance (a sum automatically excluded from consideration) to assets excluded by the federal methodology (e.g., home equity, retirement plans, cash value life insurance, annuities)
5. Use your child's assets to pay for the first year of college, which reduces (for subsequent years) the student asset contribution that the federal methodology factors into the EFC

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Anne: I have a traditional IRA made up of stocks and mutual funds. If it were to be converted to a Roth IRA, do the stocks and mutual funds get liquidated first? Or do the "contents" of the account stay the same, provided the tax to be paid on the conversion is paid from other funds?

Eve Kaplan, CFP(R) Practitioner: Hi Anne, You don't need to liquidate your investments when you convert from a Trad IRA to a Roth IRA. If you have e.g. a 100K Trad IRA and you're in a 35% tax bracket, you can convert your holdings to a 100K Roth IRA and pay your 35K in taxes from an outside source.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Clay: I am retired and 60 years old. I plan on taking SS at 62. I have slightly less than 2 yrs of living expenses in a taxable account. What's the best way to invest it? Do I use all of it before switching to an IRA account?

Eve Kaplan, CFP(R) Practitioner: Hi Clay, Since you have approx. 2 years of living expenses in a taxable account, it's advisable not to defer anything (put anything into an IRA) since you'll need your money shortly. You need to be very conservative with your taxable account funds since you plan on tapping this in 2 years. You're not in a position to incur investment losses because you don't have time to recover your investments.

Although interest rates are extremely low, I recommend a layered CD approach with some CDs going out as far as 2+ years. This avoids any risk of investment loss. Another option is to try to stretch your taxable account by putting up to 20% or so in a fixed, deferred annuity. This may or may not work for you since you'll effectively be tying down funds you can't otherwise access -- but if you're long-lived, you'll essentially stretch your savings further by having a fixed annuity structure. Please confer with a specialist since annuity purchases require analysis of your specific situation.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Lee: After a layoff and finally securing a job last year in April and now have a bit more financial stability, I am ready to reinvest and start my retirment fund....again. I am 32 years old and looking to retire in 30-40 years from now. I am a bit nervous about investing in stocks alone. I want to start my investments with 100 a month and not sure which direction I should go in.

Eve Kaplan, CFP(R) Practitioner: Hi Lee, Congratulations on securing a job and sticking to plans to fund a new retirement fund with $100/month! I assume this retirement fund isn't through work (i.e. a 401k or 403b) but instead is a Trad or Roth IRA? If your income isn't too high in 2010 (less than 105K if you're a single tax filer), consider funding a Roth IRA. Not knowing anything else about your situation, I can recommend a 60/40 stocks/bonds balanced fund to start. Vanguard has many low-cost asset allocation funds but you may need at least 1K or more (depends upon the fund) to start. Good luck!

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

ron: I am about to retire and plan to take early Social Security at age 62. I receive a pension in two forms. One is characterized as "retirement" pension, for which I receive a 1099R each year. The other portion is part of an executive retirement supplement and is reported on a W2. My question is will my Social Security award be reduced as a result of my receiving this compensation, as neither of them is the result of "working"? Thanks for your help.

Eve Kaplan, CFP(R) Practitioner: Hi Ron, Hmm...I'm not a tax specialist (CPA or EA) and I prefer giving you correct information instead of guessing. I only can say the pension and executive retirement income streams are taxable events. You should consult a tax specialist to see if you really need to take Social Security early (age 62) -- if you have sufficient income from your pension and executive retirement supplement already, it's advisable to delay taking Social Security.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

kevin: My wife and I have about 100K in our traditional IRA accounts -- what are the considerations to converting to a Roth IRA? We are both 51 years old and both plan to be retired about 8 years from now with currently 1M invested net worth and 50K pension to retire on. Annual income for 2010 and beyond is trending toward 180K. Thanks.

Eve Kaplan, CFP(R) Practitioner: Hi Kevin, There are a number of pros and cons re: converting your 100K Trad IRA to a Roth IRA. You likely are in the top tax bracket (with 180K incomes), so you'll immediately be paying approx. 36K (I say approx. because I don't have access to your adjusted gross income figures). This would need to come out of your $1 mln invested net worth (I assume this means $1 mln of investment assets).

If this amount isn't liquid enough to pay your tax bill (can be paid 50/50 in 2011 and 2012), that could be a problem. It's also possible tax rates will increase in 2011 and 2012, so your tax liability could be higher than paying it all in 1 go in 2010.

Converting to a Roth IRA makes sense if you're certain your tax rate will be HIGHER when you retire in 8 years. It makes sense to convert if you're in a position to gift this Roth IRA to beneficiaries and you don't otherwise need the IRA to fund retirement.

It does NOT make sense to convert if you plan on donating any of your IRA to charity. If your IRA has fallen in value significantly, converting and paying tax is beneficial because you're paying tax on a lower IRA value. These are just some of the many considerations re: conversion. You should consult with a financial planner or CPA to nail down the best strategy for you.

Eve Kaplan is founder of Kaplan Financial Advisors, in Berkeley Heights, N.J.

Rachel Sheedy: Eve Kaplan, founder of Kaplan Financial Advisors, in Berkeley Heights, N.J., will be taking questions for the next two hours. Remember, planners are also available by phone until 6 p.m. EST -- just call 888-919-2345.

Marjorie: As far as creating a passive portfolio, is it better to invest in ETFs or Index Funds? What is the best way to invest in TIPs or any other inflation protected security?

Heather Summers: We use both ETFs and index funds for our clients. This is a very complex area of investing and I would recommend hiring a firm that specializes in this area of investing. Our firm has taken on strategies to reduce equity risk but this is a complex matter to discuss in writing on this forum.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

BP: Hello, I have already started the process of converting my nondeductible, traditional IRAs to Roth IRAs. I am in my early 40s and believe the Roth is best for my family situation. I just wish that my employer would offer the Roth 401k. My question is regarding converting a portion of my 401k into an IRA and then that IRA to a Roth IRA. I max out my annual contributions to the 401k ($16,500 this year). I also have a good amount in my 401k that is from after-tax contributions from previous years. How can I calculate how much of my 401k can I convert to a Roth IRA? And what's the process and where can I get more info? My wife has a 403b at a hospital. Can we convert some of her 403b to a Roth IRA too? Thanks!!!

Heather Summers: You will need to contact the plan administrator for your 401(k) and your wife's 403b. In the majority of cases if you are still employed, they will not allow you to take money out of your plan. Please check with them first.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

John O.: I am 58 1/2, and plan on working until age 66. I have my 401K in a target date retirement fund.
Should I devote some of the 401K (say, 10%) into something like an emerging markets type of fund offered within my 401K as a means of diversifying my portfolio?

Heather Summers: I'm not a big fan of target date funds. I think there is a better way to diversify out your money. Without having a list of your investment options in your plan, I'd ask you to consider your risk and make sure your allocation matches that. If you should have a percentage in international investments developed and emerging, than by all means get it implemented.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Pat: I am currently serving in the armed forces, I contribute to the TSP, which I come to realize doesn't match any of my contributions. Should I keep contributing or roll that money into my Roth IRA?

Heather Summers: Thanks for serving! This is an apples to oranges type question. Your TSP money is taken out of your check and is not taxed. If you put money in a Roth it is after-tax money you are saving. Both have their advantages. If you have maxed out your TSP savings, you might want to consider a mix of savings.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Eric: I have a question about saving for retirement. My wife and I, both 51, are fortunate to both be employed with good-paying jobs. Our combined incomes total nearly $180,000, so we're over the income limit for contributing to a Roth IRA. Her job has a pension plan, and mine has a SEP-IRA plan, neither of which allow us to make additional contributions, and because we both have retirement plans, we can't contribute to a regular IRA tax-free. So the money we are putting aside to save for retirement is accumulating in taxable investments. What options are there for us to save more effectively? Should we create IRA accounts separate from our existing IRAs for post-tax money, so investment gains won't be taxable? Are there better options? Thanks.

Heather Summers: If you plan to invest in equities, a taxable investment account is probably the next best thing given the current 15% maximum federal rate on long-term capital gains and qualified dividends. The key to choosing taxable investments for your retirement savings, however, is to keep your expenses down and get the most benefit from that 15% rate. That entails holding your stocks for more than 12 months -- longer, if possible -- and choosing mutual funds with a low annual turnover (the rate at which the fund manager buys and sells holdings). Since the law requires that gains from selling stocks be distributed to mutual fund investors, the higher the turnover rate, the greater the amount of your return each year that will be subject to taxation -- and that amount may be taxed at higher rates.

As far as your after-tax IRA question unlike a deductible IRA, anyone with earned income from a job or self-employment can open one. And since these accounts grow tax deferred, if you have a long investment horizon, the tax-savings can be significant. That said, withdrawals are taxed as ordinary income, rather than at the lower long-term capital gains rates applied to taxable accounts. Given the current 15% maximum federal rate on long-term capital gains and qualified dividends, these accounts aren't as attractive for those with a relatively short investment horizon.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

david: I have a portfolio of stocks, funds and lots of cash. Almost half is in a traditional IRA and 10% (100K) is in a ROTH. I will be 66 years old this year and will apply for Social Security. I will probably work for another 3 years. I'm considering converting 50K from the IRA to my ROTH to take advantage of the 2 year window to pay the taxes. My current tax rate is 20% and I will probably start using the ROTH money in 10 years. My question is how can I compare the tax consequences of putting myself in a higher tax bracket now against paying the tax if I just took it out of my Traditional IRA?

Heather Summers: I am going to make a very stereotypical statement and say that in most cases I have crunched out the conversation, along with the fact that you are telling me you are going to use this money in 10 years, you will probably be better served to leave the money alone. Please discuss this decision with your financial advisor and CPA.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Desiree: By what percentage can we lower our retirement nest egg goal if we will have a pension equal to 22% of current income at the time we retire? Thanks.

Heather Summers: I'm sorry, to give you an accurate answer there are key pieces of information missing. Please contact a fee-only planner in your area to help you out with your savings goals.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

George Stalker: What are the pros and cons regarding investing in tax-free bonds versus tax-free bond funds?

Heather Summers: In our view the purpose of bonds in a portfolio is to guarantee the return of invested principal and generate interest earnings as high as possible consistent with that primary objective. And in a bond fund an investor can NEVER be assured of the return of their invested principal.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Andrea: Hi, I foolishly didn't save money for quite sometime and now find myself at 48 yrs old and not much to show for it. I also have about $5,000 in debt. I have a 401k with my job (city employee) that has approx $40,000 in it and I contribute 10%. I'm sure I should be contributing more. Is there a way (calculator) to determine the impact on my paycheck so I can contribute more? What is the most you can contribute per year? I also have a separate Traditional IRA that I opened when I left a previous job. It has about $16,000 in it. Would it be a good idea to roll that into a Roth IRA?

Heather Summers: At age 48, you can put $16,500 into your 401(k) this year. Try to get to this level if you can and still have enough money left to pay your bills.

Without knowing what state you are in, there are some payroll calendars you might be able to find online to see how it will affect your paycheck if you up your savings percentage.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

kw: I earned approx. 60k in 2009. I contributed 12k to my company's 401k. My employer contributed approx. 2k. Can I still take a tax deduction for an IRA, and if so, for how much?

Heather Summers: Your CPA will be able to give you the exact amount. There are additional factors I would need to accurately answer your question if you are trying to max out pre-tax dollars.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Sal Mirando: I am 70 years old and have to take a distribution from my 401k plan this year. I have 10 funds, stock and bond funds -- total value approximately $200k. What is the minimum amount I can take out? Should I take the distribution from the funds that are not doing well? Thanks, Sal

Heather Summers: So now you've turned age 70 1/2 and it's time to start calculating your RMDs. But how? The most common way is to divide your account balance at the end of last year by a life expectancy factor (available at irs.gov) based on your current age. Your financial advisor can do a fresh RMD calculation for you each year. Please contact whoever is in charge of your 401(k) plan and they will help you.

If your spouse is more than 10 years younger than you and is the sole plan beneficiary for the entire year, you should use the IRS Joint Life Expectancy Table to calculate your RMD. Because this table is based on a longer life expectancy, using it will result in lower annual RMDs.

Understanding and following the rules regarding RMDs can help you avoid costly penalties and pursue a tax-smart strategy that gives you control of your money and supports your retirement goals.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Mark L: How do we accurately forecast our retirement income needs? We are 5 years away from retirement and will have our primary home paid off, and a mortgage remaining on a second home. The 80% formula just does not seem to make sense the more I do the analysis.

Heather Summers: Most of the time when I do retirement planning with clients we do not end up at the 80% formula you are suggesting, so I can see why this is not making sense to you. I would use real numbers. You know what you are spending on your monthly expenses. If you think some are going to go away then you can remove those items. Many times after sitting down I find out people are going to spend more because they will have time now to travel or certain hobbies they have or they didn't spend a lot at "work" type functions so their expenses are pretty flat.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Tom: I'm managing my Mom's investments since my Dad passed away last year. There over 20 investments held at more that 8 different companies. I'm reviewing all the holdings with Morningstar ratings and information trying to determine the best asset mix and where to consolidate the holdings. I need to maintain some investment income for my Mom and still keep the portfolio growing for her long term needs and for eventual inheritance by my disabled brother and myself. Please provide your thoughts on trying to balance these two goals in the investments and asset classes I should move into?

Heather Summers: That is great you are trying to help your mom. I do not have enough information to give you an accurate asset mix or percentages and this is actually a complex matter that needs the attention of a meeting with a fee-only planner. They can help get you going in the correct direction so it is easier for you to manage. Good luck!

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Mark: I have retirement funds spread between tax-deferred accounts (401k's) and taxable accounts. I invest mainly in index funds. In doing my research, I run across statements indicating that certain types of funds should be in tax-deferred accounts, while others are OK in taxable accounts. I'm assuming this is all related to the income each fund generates and that the ones that generate the most income should be in tax-deferred accounts, but it is never really explained. So the question I have is the following: Are there general guidelines on what funds are best in taxable accounts and which ones are better for tax-deferred accounts (e.g. bond funds (except muni's) in general should be in tax-deferred accounts, as well as foreign index funds)?

Heather Summers: For tax-sheltered accounts such as your 401(k), a general rule is that securities that generate high incomes (interests, dividends, or capital gains) should be held in these accounts first. But there is much more to be considered when selecting what to invest.

Since stocks historically produce much higher return than bonds, it makes more sense to put stocks in an IRA account if you have a long time to go to retirement. On the other hand, if you want to hold bonds after all in retirement savings accounts (taxable or tax-protected), then they should go to a tax-protected account first due to the taxable income bonds generate. However, if you are close to retirement, the best strategy is to invest more in bonds to preserve your assets.

Index funds usually generate less taxable income due to the passive nature of the funds. If you have your favorite actively managed funds that distribute lots of capital gains (funds with high turnover ratio will generate more capital gains) and consider them for retirement purpose, these funds should be held in tax-sheltered IRA accounts to take advantage of the hefty distributions. The fund price usually drops after the distribution and if you set up dividend/capital gain reinvestment, the distribution will net you more shares.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Charles: I will turn 62 later this year and with that I am entitled to receive two of the three pensions I have coming to me. What should I do with these monthly checks I will be receiving? I plan on working till I reach 66.

Heather Summers: You might want to consider a lump sum distribution and reinvest it into investments of your choosing. If this is not an option and you are going to get a check sent -- if you wait does the amount go up? I would make sure you are maxing out your pre-tax savings at your job; if you are already doing that you could put this additional money into short term investments until you need it at 66. If you are not going to need this money at 66 then you could invest it more aggressively in line with your risk tolerance.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

warren kline: At approximately what net worth should trusts be seriously considered? Husband and wife retired at 80 yrs old-no debt or family complications-3 adult children. Would primary (wife) and contingency (children) beneficiary designations on all major investments and assets be sufficient assuming estate will be under $2,000,000?

Heather Summers: As current law sits (but there is some legislation in Congress) if you pass away in 2010 there is no estate tax but in 2011 it is set to go back to one million and it appears your levels of accumulated assets are over this threshold. If you have beneficiary designations on all investments and real estate you could bypass probate court if done properly without the use of a trust, but I would consult with an attorney of your choice to talk about if your wills are sufficient enough without going through the cost of setting up a trust. Without knowing what assets you have and how you have them set up there is no way for me to give you a black and white answer on this.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

jim: Hi,

I have a 45/k mortgage, and I'm looking into paying it off. I called the Mtg co. and there is no penalties for doing this. I was wondering what advantage would I have by doing this vs investing it somewhere else (CD, etc...) I don't receive much of a tax break on this (due to amount on this MTG). I also plan to live in my condo for a few more years. Would this be something good to do?

Heather Summers: Great job on getting your mortgage down to this level! I don't know what tax bracket you are in or what rates you are currently paying on your mortgage but let's say you are paying 6% interest and after tax it is really costing you 4%. Whatever investment you would use needs to be earning you more than 4%. And by removing this, will this affect other items you are itemizing on your taxes? I'd consult your tax preparer this year and see how it will affect you because I am using really rough math here. There are still some good bonds paying more than 4% so you might decide to keep the mortgage for a while.

Heather Summers is director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis.

Rachel Sheedy: Heather Summers, director of business development for Vigil Trust & Financial Advocacy, in Wausau, Wis., is now taking your questions. Call 888-919-2345 to ask a question via phone.

Becky Coley: I have inherited some money. What is the best, safest place to park this money for 3 or 4 years?

Vivian Honeycutt: The safest is Treasuries, or CDs that are FDIC insured. If you do CDs, make sure to stay under the FDIC guaranteed limit which for now until 2013 is $250,000 at any one institution. In 2013 it reverts back to $100,000. If you do the CDs, I would recommend a ladder approach since in my humble opinion the rates being paid will be going up in the near future. I would make sure that I had money rolling over every six months for now. EX: one cd for six months, one for 12 months and one for 18 months. As each comes due you would roll into a new one, in this example, the new one would be for 18 months, since the 12 month would be coming due in the next six months. If you don't care about earnings you could do a savings account, but again it would have to be under the $250,000 limit at any one bank.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Adrienne: I am considering converting my IRAs to Roths. Most of the contributions have been nondeductible. I would like to know on what portion I would have to pay taxes on if the fund has gained or lost money. Thanks

Vivian Honeycutt: The difference between your contributions and the value would be taxable. I'm not sure about the deductibility of losses if you transfer in kind, but my understanding is that the amount of contributions -- the actual balance = the taxable amount. I would definitely consult a tax advisor on this before doing it. You want to also make sure you have the documentation showing the amount of the nondeductible portion. Hope this helps.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Mike: I'm 62 years old. I have a 401k that is slowly gaining back. My asset mix is Cash 18.42%, Stocks 81.58% (59.79% US Stocks and 21.79% Intl Stocks), and I have 5,189 shares of Company Stock, which I think makes up more than 50% of the whole. I need to change this for sure, but how much Company Stock should I keep? That alone lost over $4,000.00 last quarter, everything else gained.

Vivian Honeycutt: You're right, that mix is way too risky. I wouldn't recommend any more than 10% in one stock, and then only if it's a blue chip and really solid. I would also advise seriously looking at some bond funds in that allocation, unless you have that covered in another account.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Jamie: I am nearly 66, retired, waiting to collect Social Security until the age of 67. Since the government has declared no cost of living increases for this year, am I foolish to wait another year in an attempt to increase my long-term benefits?

Vivian Honeycutt: I don't think so. This is the first time in recent history that this unusual event has occurred. If you were planning on 67, I would stick with it. Who knows, we could see a big jump next year if inflation takes off!

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Cheryl: Was wondering your thoughts on converting Traditional IRAs to Roth IRAs?

Vivian Honeycutt: Great Question! Converting makes sense if: You can pay the increased taxes from current income or a taxable account. Converting and then taking money from the ROTH to pay taxes defeats the purpose of the tax-free growth. Having said that, having a well funded ROTH allows you to more easily control your taxes in retirement, you can take distributions without impacting your Social Security, and you won't be required to take mandatory distributions at 70 1/2. It also passes to heirs tax-free. If you have been hampered by the $100,000 income rule for converting, this would be a great time to do it, if you can meet the caveat above. You can then decide whether you take the hit on taxes all in one year (2010) or spread it out, depending on your circumstances and whether you think taxes are likely to go up or down.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Randy: Thanks for the forum as I regularly read the Kiplinger Web site. I have been laid off since 12/21/2008 as my company closed operations and moved production and equipment to Germany. I was a Team leader of Shipping and Receiving and also purchasing.

I was 56 years old when I got laid off and was wanting to know that if i cash out my 401K how much taxes would I owe now and later (04/15/2011) if any. I understand that I would not have to pay a penalty. I have $65,000 in the 401K.

I know that cashing it out does not make a whole lot of sense but ever since October of 2008 I have lost a lot of confidence in the market and am thinking that once I am older and if it tanks again my money would be gone. I owe $140,000 on my house and $22,000 on my car and those are my only debts. My wife retired as a teacher after 35 years, but the school district has hired her back at 75% of her last salary because of state budget cuts. We are both on her insurance. Thanks for what advise you can offer.

Vivian Honeycutt: If you cash out the 401K, the whole $65,000 is taxable as income in the year it is received. I am not sure about the no penalty part of cashing out either. There are hardship withdrawals with no penalty, but you have to be very careful in ascertaining if you qualify.

You can however roll over the 401K to a rollover IRA that you set up with a bank or custodian. I understand you are worried about the markets, and with that being the case you could consider,after rolling out the 401K, having it in CDs, Treasuries, or another type of guaranteed vehicle that you would feel comfortable with.

Another option is to take equal distributions from the account, IRS 72T, in equal annual installments for at least five years or until you turn 59 1/2. I would advise seeking advice from an accountant on this since it is very easy to miss some of the rules and cause the whole distribution to be penalized. Hope this helps.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Davenport: I would like to start a retirement portfolio with 4 different mutual funds as a Roth IRA. Would I invest separately in each one of the funds, or is there a way to combine them into a single Roth IRA and simply adjust the allocation? Seems like the latter would be easiest to manage.

Vivian Honeycutt: If you set up the account at a custodian, such as Schwab, TDAmeritrade, etc then you can direct money into the mutual funds of your choice, and they don't have proprietary funds that you are locked into. Most of the custodians also have funds that they do not charge transaction fees on, and all have no load ones that will help minimize your cost. You will then be able to set up an automatic allocation if you like for all incoming monies. Hope this helps.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Stef: My husband and I try to save diligently. This year due to an unplanned bonus we will surpass the maximum income amount allowed to contribute to our Roth IRA. Can we contribute again next year (2011) when our income returns below the maximum Roth IRA income limit? Thank you.

Vivian Honeycutt: Yes, you can contribute again in 2011 if your income qualifies. You may consider for this year funding a regular IRA, even if it's nondeductible, then rolling it immediately to your Roth. The IRS has not closed this loophole as yet. I would recommend you also verify this with your accountant or tax professional.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Nina Walker: I am a 55-year-old retired widow with no plans to work again. I will not be depending on Social Security as the sole source of retirement income. Should I begin drawing Social Security as soon as possible (age 62) or wait until I can draw my full amount at age 66? (This assumes that the system will be solvent in the future and that the amount I am eligible for will not be subjected to a means test.) I worked as a teacher for 23 years, then stopped working in 1999. Thank you.

Vivian Honeycutt: Good question, and it depends on a few things. Is your income now sufficient? Will the amount of income cause you to have your Social Security taxed? Are you drawing down on your portfolio too fast? If you're drawing down your portfolio too fast, taking it at 62 would help conserve some of your monies for later. And finally, since you have 7 years till you have to make a decision, I would advise talking with a financial advisor and having some scenarios run to ascertain whether you are prepared to meet a variety of different scenarios that are possible for your future.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Dan: I have several retirement accounts, Roths for myself and my wife, as well as numerous 401k's from various current and former employers. I am pleased with performance at each and not interested in consolidating to one company to hold them all. Any advice on a good/free Web site out there to manage all of this in terms of portfolio performance, asset allocation, etc.? I am willing to do the input work and maintenance, but am looking for a great Web site to do it on. Thanks.

Vivian Honeycutt: Take a look at the Morningstar site. There is a free portion, that I believe you can set up your various portfolios with. I know the paid portion is very inexpensive, and has great information. I just googled "free portfolio tracking software" and found quite a few reputable ones on there, including Kiplinger. Only check out the ones with national and brand names for security reasons. One of the things you may want to look at is the amount of fees you are paying to the various 401K's. It may change your mind about consolidating.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Nick: Rebalancing my portfolio - I have stock options that I could sell in 2010 that should realize a profit (if I buy and immediately sell). Can I offset these capital gains and the associated tax by selling stocks (for a loss) in my taxable investment account? What documents will the IRS need to see in my 2010 return? Thanks in advance.

Vivian Honeycutt: It depends on the type of option, and incentive option will recognize gains, if it is a non-qualified option, with an exercise date, then the difference between the exercise price and the market value at the time of exercise is taxes as income, not gains. If you're not sure of which they are, I would advise consulting with someone familiar with stock options, such as a CPA or your advisor, or even your benefits administrator. Hope this helps.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Mordy: What is considered a secure amount of money to have in your Net Worth not counting the equity in your home even though it's completely paid off, for your retirement if you are 66 yrs old and retiring Apr 2010?? My wife's SS and retirement is a net of $900 and my SS is $2200. Thanks, Mordy

Vivian Honeycutt: That is dependent on the lifestyle you plan to enjoy in retirement. It's personal to each individual. I would also look at whether you have the proper plans in place for emergencies, such as medical, or catastrophic losses on the home, etc. The average life expectancy in the US is around 86 years of age. Will you have enough income to cover inflation, taxes, medical etc. Unfortunately some of the items mentioned above will escalate more than the increases in your SS benefits. These are some of the things you should explore when determining if you have enough money set aside. I would recommend having a financial plan done to explore the what if's.

Vivian Honeycutt is president of Honeycutt Financial, in Chesapeake, Va.

Rachel Sheedy: Vivian Honeycutt, president of Honeycutt Financial, in Chesapeake, Va., will be taking questions for the next two hours. Remember, planners are also available by phone until 6 p.m. EST -- just call 888-919-2345.

Alessandro Zuniga: I am 27 years old, and I will soon be graduating with a Master's degree in Computer Science. What retirement plan should I look to enroll in once I am hired and how much should I contribute to it?

Jeff Kostis: Depending on your income, tax bracket and personal situation, you should plan to save between 10% and 15% of your pay. If your new employer offers to match money you contribute to the retirement plan they offer, you will want to contribute at least the amount your employer will match against.

The second and third layer of savings are highly dependent on your income level, the contribution maximums allowed by law and your other financial goals. Generally, try to fund a Roth IRA, but this may not be possible if you earn too much money. There are specific rules for contributions to a Roth or Traditional IRA if you also can contribute to a 401(k) or 403(b). Your tax preparer or a financial planner can help guide you through your unique situation.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Jack: Please clarify your comments about the complexities of annuities and its fees. (I am 54 years old and was looking for a safe investment.) I have no 401K. Am I wrong to have most of my savings in annuities? Is an income guarantee annuity a good idea? What is the best bet to get any return on investments in retirement years? Why do they say you need 70 - 100% of your income in retirement if one changes their level of expenses? Esp. if your Morgage is paid off. Thank you

Jeff Kostis: Many annuities offer guarantees and other insurance, beyond the income stream. One example of a complexity involves the "guaranteed return." One of my clients had an annuity with this in place. However, the guarantee applied only if she took annuity payments in retirement. If she decided to exchange the annuity with a different company prior to retirement, she lost the difference between the "guaranteed return" and the actual fund performance. Additionally, the payout rates in the contract were about 40% lower than payout rates from another annuity provider, given the same age, investment amount and payout start date. In this instance, the "guarantee" did not help. I had another client with an annuity contract, but the fees charged for the sub-accounts (mutual funds that you invest in) were so high, there was virtually no way he could do better than the guaranteed rate.

Without knowing the details of your situation, I cannot recommend having all, some or none of your money in annuities. However, I would recommend having an independent professional, who does not sell annuities or manage money, review your portfolio and annuities. As in other parts of life, having all your eggs in one basket (i.e. annuities) is seldom good.

Spending - The amount of money you will spend in retirement is the most crucial part of determining how much you need to save. However, it is hard enough to estimate your spending next year, let alone what your spending will be in 13 years (age 67 for you). The 70% to 100% is a rule of thumb you can use to estimate how much you will spend in retirement. This does have limitations. For example, if you plan to travel extensively, your number may be higher. If you currently save 50% of your income because you make a lot of money and lead a frugal life, you will most likely need much less than 70% of your current income. If you currently spend more than you make and are building debt every month, you may spend much more than 100% of your income in retirement.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Kim: I was recently laid off and wanted to know if I could transfer the funds in my 401k to my Scottrade account to purchase stock without incurring a penalty?

Jeff Kostis: I'm sorry to hear about your layoff.

Yes, you can do what is called a 401(k) rollover. This allows you to take money directly from a 401(k) account at your former employer and transfer that money to an IRA with no taxes. Pitfalls to watch out for:

1) Do NOT take the check directly. This will trigger an automatic 20% withholding and most people will end up owing the 10% tax on an early withdrawal plus income taxes. Your 401(k) provider and broker can help you avoid this problem.

2) Make sure to set up a new account for this money, titled as a "Rollover IRA". This will help later if you want to put the money in a future employer's 401(k) plan, if they allow it. Once the rollover gets co-mingled with a regular IRA, you will most likely not be allowed to roll the funds into a future employer's 401(k).

3) If you have a low balance, talk with your HR Benefits person and the 401(k) custodian ASAP so they know you intend to transfer the money. Depending on the company, they may automatically cash out the 401(k) if your balance is below a certain threshold and send you a check.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Josh: Do you recommend index funds or actively managed mutual fund accounts? What are the pros and cons of each?

Jeff Kostis: Let me start off by saying my bias is for indexing.

This is a hotly debated issue in the world of financial advisers. I recommend my clients use index funds, but many other financial professionals recommend actively managed funds. For every study about the advantages of indexing, there is a study about the advantages of active management. In the end, it comes down to what you believe. The example I use with my clients is this -- I look at a room with 100 mutual fund managers, all of whom went to the best schools, have great ideas and can back up their investing approach with a proven track record. We know that half of them will do better than the other half next year. The question is, can I pick the 1, 2 or 3 people that will be in the "good" half? I say why take the extra risk.

However, active management proponents feel that they can pick the fund or manager that will beat the average, after fees and expenses over the long term.

There is not enough room to go through the pros and cons of each here, but generally index funds have much lower expenses and no "style drift." Actively managed funds can do better by understanding the risks and rewards in a specific company and make trades accordingly to minimize risk and maximize opportunity.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Todd N: For 4 years my wife and I had not been able to make contributions to a Roth IRA due to our income. We contributed to after-tax traditional IRAs in anticipation of the 2010 conversion changes. We have fully converted those two IRAs to Roths but now my wife is being laid off in the summer.

My question is this. Since 401(k) savings don't count toward any pro rata formula should we wait until 2011 to perform a rollover to a Traditional IRA to not mess with the 2010 conversion?

Jeff Kostis: Great question. If you convert from a traditional IRA to a Roth IRA, any after-tax contributions must be converted on a pro-rata basis, even if the specific account you are not converting does not have any after-tax contribution. From what you wrote, it looks like your IRAs today only contain after-tax money, so you will not need to pay much for the conversion to the Roth. You are also correct that 401(k) accounts do not count towards this pro-rata formula.

However, based on your income and cash flow, this may be a good time to consider converting some of the money in your wife's 401(k) after she is laid off. Depending on when she gets another job and any severance package, your income this year may be lower than in future years. By converting the pre-tax dollars to the Roth in 2010, you may be able to take advantage of your lower tax rate in 2010. You may want to recharacterize the conversion you did earlier, depending on your specific circumstances. This can get very complicated, so you should see a qualified professional for advice.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Dan: As a college graduate as of May 2009 and the owner of an IRA and company-matched 401K, how much do you believe I should be putting away a month for retirement?

Jeff Kostis: At a minimum, you should contribute to the 401(k) up to the amount that is matched by your employer. For example, if your employer matches 100% of the first 3% and 50% on the next 3%, you should contribute at least 6% of your salary. Most financial planners suggest saving between 10% and 15% of your income for retirement.

As a more practical matter, you should look at your personal situation today. If you don't have any debt today (think student loans and credit cards) and are not married, you should save very aggressively, and save the maximum your company allows. The reason is that later in life, if you buy a house, get married, have a child, need to care for an aging parent, etc., you may not have the 10% or 15% later. Conversely, if you have high interest credit-card debt or private student loans at high interest rates, you may want to pay those off first (after getting your company match, of course), then add more to retirement savings later.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Herb: I'm 60 and retired, I'm drawing a pension and will soon need to tap retirement accounts to make up for the shortfall until SS starts at 62....We have multiple sources to draw from including taxed accounts, 401K and Roth.

However...It is possible that in the future we will be in a higher tax bracket for the long term due to inherited variable annuity payouts which I understand will be part of our income and taxes.

Is it better for us to draw out of the tax deferred accounts in the short term given the current lower tax rate bracket?

Jeff Kostis: Generally, if you think your tax rates will go up, you should withdraw the money from tax deferred accounts now, when your rates are lower.

However, you should check with your tax accountant (or find a qualified accountant if you do your own taxes) to understand the impact of the annuity payouts on your taxes. Specific issues to address include A) is the annuity qualified or non-qualified (i.e. are the payments fully or only partially taxable; B) where are you within your tax bracket - in other words are you currently at the very top, in the middle or at the bottom of your marginal tax bracket. If you are at the bottom, the extra income may not increase your tax rate, but if you are at the top, you may want to do some more aggressive tax planning now to prepare for later.

Depending on the amount of the payments and the impact on your taxes, you may also benefit from converting part of your 401(k) to a Roth IRA.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

jon: Hi. Recently retired and am getting tons of inquiries from "wealth managers" about helping me to manage my 401K stuff. My question involves fees. What is a reasonable range of fees I should expect to pay on a portfolio that exceeds $500K? And related: What is a range of fees I should see for the various annuity vehicles that are out there? Thanks.

Jeff Kostis: I hope you are enjoying your retirement! Generally, the fee will range from 0.75% (75 basis points) to 1.75% (175 basis points) on a $500,000 account. However, the fees to have someone manage your investments vary greatly, depending not just on your asset level, but the services that are included with your fee. For example, do you get a fully customized financial plan and annual updates, or just a boiler plate document? Are trading fees and other account fees included in the price or do you pay those in addition to the annual fee? Will you work with the same person whenever you have a question or will your questions be answered by anyone in the office at the time?

Annuities: While many annuities are sold as simple agreements with a lot of upside and no risk, the truth is that they are very complex financial products. The fees also vary greatly, and many annuities come with several layers of fees that are very difficult to find and understand. Kiplinger has written several articles over the years that go into more detail. You can also check with your state Insurance Department, as they should have consumer buyer's guides to help you.

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Chris: I have just started with a company that offers a Roth 401(k). Have always maxed out my 401(k) contributions before, but with traditional plans.

I can't afford to do the maximum deduction with a Roth (and pay the taxes on it). Am wondering if I should still maximize under non-Roth, or maybe go for a lesser contribution under Roth plans (that would come to $16,500 between the contribution and taxes)?

I have 20 years until retirement. Appreciate your thoughts.

Jeff Kostis: Chris,

Congratulations on starting a new job. The decision to use a Roth or traditional 401(k) comes down to your assumptions. If you think your tax bracket will be higher in retirement (not tax rates in general, but the tax bracket you fall in), you are better off using the Roth today. However, if you feel your tax bracket will be lower in retirement, the traditional 401(k) is better. This is true as long as your after-tax contributions are the same, which in your case they are. Other things to consider - 1) the Roth is not subject to Required Minimum Distributions, so if you will not need this money in retirement or plan to work past age 70 1/2, the Roth may be better; 2) as of today, distributions from a Roth do not count as "income" for the taxation of Social Security benefits and Medicare premiums, but this may change in the future; and 3) Any money left to your heirs in a Roth will be free from income tax for them (the Roth is still subject to estate taxes, just not income tax).

Jeff Kostis is president of JK Financial Planning, in Vernon Hills, Ill.

Rachel Sheedy: Hi...I'm Rachel Sheedy, editor of Kiplinger.com's Retirement page, and today I'll be moderating our Jump-Start Your Retirement Plan Live Discussion. Planners will be online until 6 p.m. EST to take your questions -- they will answer as many questions as time allows. Let's get started. First up is Jeff Kostis, president of JK Financial Planning, in Vernon Hills, Ill.