In this chapter:
Introduction
Retirement savings plans
The 401(k) plan
IRAs
Roth IRAs
The IRA decision
How your savings grow
Some (minor) drawbacks
Dividing your savings
Inflation & taxation
A newfangled pension
Questions & answers
Security and your 401(k)
The scoop on IRAs
Your savings priorities
If you're self-employed
Financial cramming
 

Dividing Your Retirement Savings Pie

Once you sign up for your 401(k), you’ll be given a menu of investment choices and asked to divvy up the money in your account. Most people urge young investors to put the bulk of their retirement money into stocks—and I agree—but unfortunately there is no magic formula you can use to come up with the right mix. For help, you may want to check Financial Engines (www.financialengines.com). This site helps you determine the best investment mix for your retirement money, using a mathematical model developed by a Nobel Prize-winning economist named Bill Sharpe. (As my grandmother used to say, this man is clearly no dummy.) Currently, Financial Engines can only help you decide how to allocate the money in your company 401(k) plan, but in years to come they plan to offer advice on IRAs and taxable investments as well. The service is intended as an on-going subscription, and charges $14.95 every three months. To minimize your costs consider using the service for just one three-month period each year.