Retirement planning is tricky. There are so many unknowns that making choices now, while you are still working can literally cripple the decision making process.  You have no idea what your tax rate will be when you retire.  You have no idea what your income will be ten years from now, whether life will change everything including your outlook or you will simply bump along at a reasonable and modest pace.  At some point though, you must make some sort of educated guess and be flexible.

The educated guess is a lot harder than you might think.

Planners/advisers/brokers all make educated guesses.  The divine some sort of idea based on your initial and subsequent conversation, and in doing so, guide you along an investment path that is tailored to your needs. in this scenario though, it is us that is the problem.  As Francois de La Rouchefoucauld pointed out, “We confess our little faults to persuade people that we have no large ones.” But we do and we don’t often confess them to the person we enlist with our future (fortunes).

But for the vast majority of us, we are left to self-confessionals and the choices in our defined contribution plans. Sometimes those choices are good; sometimes not.  While most plans offer the basic investment opportunities (mutual funds, sometimes stocks, money market accounts) the landscape on how you choose to employ those choices is changing.  Since 2006, the new choice in the defined contribution plan isn’t really a choice so much as a way to choose differently.

The 401(k), in its original form was designed to allow you to take money out, pre-tax and put it towards your retirement.  It was and is still considered wise to defer these taxes until later in life, the theory being that you will be in a lesser tax bracket.  You might be earning less and theoretically, you would be paying less.  But no one can say for sure whether 20, 30, or 40 years down the road that taxes will be reasonable enough to make the bet on deferring now worthwhile.

Some folks insisted on hedging that bet and this created a new kind of entrant into the 401(k) world, the contribution that was made after taxes were paid. The Roth 401(k) allows after-tax contributions to be made, which in turn makes all qualified withdrawals tax-free. It does sound tempting.  But there are certain groups of people that should use this and others, who may have access to it in the near future, who should not.

Plan advisers are paying close attention to the growth of the Roth 401(k) as it makes its way into more plans.  Currently, according to Hewitt Associates, 29% of the plans now have it with an additional 25% considering adding the feature in the future. In a recent opinion piece examining this growth, they write: “Hewitt researchers had sympathy for those reluctant to jump into the Roth 401(k) waters. “Adding a Roth feature is not as simple as clicking an on/off switch—it takes considerable planning, implementation, and communication,” Hewitt wrote. “Communication is especially important, and tools must be made available to help employees navigate this new and complex decision.”

And it is this complexity that will find people who should use not doing so and those who shouldn’t use it, electing to. But to boil it down to its basics would do only partial service to the choice you might want to make.

In a nutshell, a Roth 401(k) is ideal for those who anticipate a higher tax bracket when they retire.  Compared to a traditional 401(k), the Roth 401(k) begins to show its advantages when the taxes owed begin to impact your Social Security benefit.  For the sake of this discussion, Roth 401(k) withdrawals are not seen as income and do not impact that benefit, which can be taxed should your income breach a certain threshold.

So it you are making less now and are younger but assume that this sort of income earnings will rise as you get older, starting a Roth 401(k) now might be a good choice. If you are making quite a lot and would like to increase your ability to put more money away, starting a Roth 401(k) might be a good idea as well.  If you would like to leave your retirement account to a non-spouse or non-charity beneficiary, this is an excellent choice.

It is not a good idea if you can reasonably predict a lower or the same tax bracket when you retire. If you see your retirement as more reliant on Social Security than not, then the Roth 401(k) is something you should probably avoid.  Employers, at least so far, offer no matching contribution for the Roth 401(k).  So if your contribution to it impacts this employer match, it probably isn’t right for you.

There are numerous other considerations and this white paper put out by HeintzBerger (pdf) does a good job explaining it.

I have found that many 401(k) plans are not as good as they could be, with less than stellar choices.  If you are concerned about your tax bracket or the inheritable feature that the Roth provides, use it outside your 401(k) in the form of a Roth IRA.  Here the choices are almost limitless.  You can adjust your contribution and you are permitted to withdraw those contributions after five years.

It is far easier and quite possibly trendier to be a pessimist these days.  The world is full of a certain sort of anxiousness about every aspect of accumulating money for another purpose.  Aside from the obvious uses of our cash, such as protecting the roof over our heads, feeding the family and ensuring that they are safe, repurposing money for anything such as retirement, emergency accounts or college savings makes us wonder if the effort is worthwhile.  We never used to be like this.

But bad economic spells, particularly those that last longer than we anticipated they would, can make doing anything constructive with our disposable cash doubly difficult.  We run from risk.  We second guess our intentions, plans and even motives. We project regret before we even make a move and this leaves many opportunities to languish untouched.  Yet things aren’t really as bad as they seem.

Consider this: Roughly 25% of the population is having trouble with their employment.  They are either unemployed, underemployed or underqualified. There are not enough enough jobs being created on a monthly basis to accommodate the workforce looking for work.  But 75% of us don’t have too many problems.  We are gainfully employed (not overworked but receiving enough hours and pay to get by) yet we feel as though that is tenuous situation at best. It probably is far more secure than you realize, if as my late father used to suggest to me, “you keep your nose clean”.

The truth about your job is simple.  IF you do what you can to protect it, you probably are a lot safer than your realize.  That 25% that isn’t working si not a problem for you, it is a problem for the whole of the economy, a rather large beast that lumbers these days rather than sprinting.  But it isn’t going to have a huge impact on what you do.

So why do you treat your own personal economy as if you were in a recession? Why do you approach the whole concept of making your money work for you in the same way you would approach self-surgery? Let’s take a look at some of the things that are rbinging you down and why they really shouldn’t be too worrisome. For the sake of this article’s length, we’ll assume you are middle aged, between 30 and 50.

Retirement: if you aren’t doing it by now, you should start.  The stock market isn’t going away and neither is the bond market.  But for those of us still somewhat unable to trust the financial professionals that make this market do what it does, buying into it with mutual funds is still the best way to go.  Now there are sorts of folks out there who feel as though bonds should be part of a portfolio no matter what age.  And when you can actually see the possibility of retirement, then bonds and bond funds will play a role in protecting your assets.  But folks tend to buy the car first and then build the garage.

Social Security: As one gentleman pointed out recently, it will be there.  It always has been and probably always will.  It will spare us from poverty in old age and has been doing exactly as it has promised since its inception.  Fearing the future too far off, like 27 years from now doesn’t mean you shouldn’t plan for some cuts to keep the program solvent.  You should. But planning as if it will simply not be there is creating a scenario much larger than you need.

Housing: It may seem really bad in asome parts of the country and in many parts it is, but the “bad” is usually due to previously higher-than-realistic expectations concerning value and worth.  We calculated the overall value of our homes into our overall net worth.  If we thought about our ownership as stewardship, sort of like temporary caretakers and our reward for maintaining the home for the next user, and there will probably be one after you, as a dividend rather than profit at sales, we might be less inclined to be upset about the value. If you are able to keep it in good shape, satisfy the lender’s requirements, and pay the needed insurances, what your house might sell for really isn’t an issue unless you are intending to sell it. It is little more than a parlor game.

Family: We have kids.  We want to give them what we never had and do for them better than our parents did for us.  And we feel very bad if we can’t.  But we shouldn’t.  We should be forever known as the selfish generation and our kids will thanks us for being so when they are our age – which will make us our parent’s age now.  We need to focus on our futures because, if we don’t, we will be a much larger part of our kid’s futures than they would want or like us to be.  If you are torn between college saving and retirement investing, choose the retirement.  And tell them why.  This is a very visual generation and they can easily visualize what a future might look like where mom and dad are moving in with them.  Tell them early enough to allow them to overachieve, get grants and scholarships and be prudent about their own student loans.

We also have parents.  And we are a visual generation projecting what might happen to our best laid plans if our parents move in with us. You need to find out where they are financially and get them to understand their options – and yours – before it become too late to do anything about it.

Saving and Investing: Emergencies happen to some of us.  Sometimes, it never happens.  The need for an emergency account is still important even if it takes a long time to build it.  For the average person, a six month emergency account can take two to four years to build.  It is still worth doing.  Now this type of account building is called savings – because it is put somewhere with very little risk once the money is accumulated.  Investing happens in your retirement accounts.  No matter how much money you make, or how little. investing 5% will not change your take-home pay.  Ten percent will and it should be your goal to get there in five years once you begin. By the time you reach fifty, you should be maxing the account out.  This is sort of a self-tax that can be financed with raises and bonuses, clever and practical budgeting, and a cohesive plan to do what you can do.

The bottom line: You are probably more financially secure than you might have imagined.

Did you ever wonder why the cost of insuring a driver is much higher when you are younger than 25?  Did you ever wonder why it seems socially acceptable to take on huge amounts of college debt at a time when you have no income to show for it? And even though President Obama’s health care plan will add those younger than 26 to the roles of insurance policies, you would have to wonder why it took legislation to get to that point?

Risk. Simple as that.  The younger you are the bigger the risk.  Even the college loans you might have are a risk lenders are willing to take in large part because they know you can’t run or hide from them – and they lend this money in the hope that you will get a job at some point to help with paying them back.  The lender may have taken a risk.  But the very risk that insurers worry about was assumed by you. quite possibly without much of a concept of what it entailed.

And then, if you are fortunate enough, you make your way into the workforce.  And then, if you are fortunate enough, you have a 401(k) to deal with, with any luck right away; with some luck, after you spend some time on the job; with no luck, you have to have the initiative to develop a plan of your own.

And what do you do, in the vast majority of these situations? You do nothing, claim you have no money to invest, or if you do, take no risks.  There are basically three things you need to understand about investing (it is not savings) for your future.

First: No matter what sort of economic hardship befalls you and I truly hope that none does, your retirement accounts are safe from bankruptcy proceedings.

Second: You are going to live a long time.  Once you breech that actuarial barrier of 25, most folks who predict such things believe you will live another sixty plus years.  If that sounds daunting, it is.  But it is also a financial opportunity to really do something with your investable dollars (your 401(k) plan, match or no-match with a contribution of 5% will not have any effect on your take-home pay). Sixty years was the old school target for retirement, although done right, living until 80 years does not mean working all of those years.

Third: You will never be able to entertain the idea of retirement unless you embrace risk.  Risk allows your money to grow.  No risk investments allows your money to grow only at a safer rate of growth.  But it is not the growth or the markets that is at play, it is the healing power of time. The argument goes something like this: You invest a dollar and buy a single share of a mutual fund.  The next time you make your payroll purchase, the market has lost some of its value for whatever reason and now the share you are buying is worth fifty cents.  Now your dollar buys two shares. Then, as markets do, it recovers and your shares are now worth $2.  Your dollar now buys only half a share. You have now have two and one half shares valued at $5 when you only paid four dollars. Now imagine sixty years of this sort of average, gain, loss and steady investment in this sort of chaos.

These are the risk years.  The ones where you can take advantage of chance, turn it to your advantage and grow your money.  There are no guarantees that there will be more up-markets than down.  If history is any indication, and these days, history seems to writing itself on a much more frequent basis, there is a greater possibility that bull markets will occur more times than not.

TERMINUS
Ralph Waldo Emerson

It is time to be old,
To take in sail:–
The god of bounds,
Who sets to seas a shore,
Came to me in his fatal round,
And said: ‘No more!
No farther spread
Thy broad ambitious branches, and thy root.
Fancy departs: no more invent,
Contract thy firmament
To compass of a tent.
There’s not enough for this and that,
Make thy option which of two;
Economize the failing river,
Not the less revere the Giver,
Leave the many and hold the few.

As the bird trims her to the gale,
I trim myself to the storm of time,
I man the rudder, reef the sail,
Obey the voice at eve obeyed at prime:
‘Lowly faithful, banish fear,
Right onward drive unharmed;
The port, well worth the cruise, is near,
And every wave is charmed.’

Eventually, in the course of a serious relationship, the topic of marriage is discussed.  Because marriage is more than just being able to “kiss whenever you want to”, the topic of money enters into the conversation.  This might come very early on as one half of the couple reveals their ability or inability to handle their own finances. Should it be a dealbreaker? Should you still consider the union of two people, which is more than love and compatibility but a business agreement when you are picking a spouse? Will it affect your retirement goals? Will you be able to buy a house, secure a lease or have a baby?

There was a time when the look of love was enough.  Now, couples consider each others attitudes towards frugality, their outlook for their monetary future and how much debt one or both bring to the union.  The focus on a far-off distant future has come to the forefront of many conversations in the recent downturn and with good reason.  The inability to handle a budget could restrict the ability to buy a house (for a reasonable interest rate), whether or not children are financially feasible, and should the relationship end for whatever reason, who gets left with what debt obligation.

Numerous couples are now considering the long-term effects of poor financial management as an insight into the future of the marriage.  While you might feel as though you have a bright future, shedding a light on how your potential spouse handled their past financial obligations has become the new pre-nup.

It was just a few short years ago, when everyone held bright and optimistic outlooks for their futures, that these sorts of financial considerations took a place on the back burner.  You understood the downside of poor money habits.  But the feeling that things would eventually work themselves out has diminished. Now, the prudent saver and investor is examining the financial statement of their partner, something you only did when one of the couple was rich.

Now, no one wants to marry debt.  With the current unemployment rate at unacceptable levels and many of those out-of-work folks in possession of large, unwieldy student loans, people are wondering if marriage is such a good idea.  Your outlook may dim your love somewhat as you try to see the future.

Financial responsibility is a learned art.  If you have found the right person for you, is there any proof that your influence over financial matters couldn’t be taught?  Chances are, your experience has given you the financial outlook you possess now.  Can you teach someone who may not have had the same experiences, the same parental guidance, or the same lessons you have learned?

I’m inclined to believe it can happen.  In many marriages, this realization that one member of the couple does not possess the money management skills needed to achieve the hopes and dreams that helped you decide you could spend the rest of your life with came after-the-fact.  In those instances, one of you has stepped up to the responsibility of running the household finances.  This didn’t stop the other half from committing financial infidelity (and some marriages have ended because of it).

There are a couple of things you need to keep in mind before you tie that financial knot.  Your spouses student loans are theirs – should the relationship end badly.  But while you are married, you should assume they belong to both of you.  If they have spent tens of thousands of dollars on higher education, the hope that they can eventually find work with enough income to handle those debts still remains.  We won’t always be in a  downturn.

But your spouses credit record can have a downside effect on any money you might borrow as a couple.  Outstanding credit card debt will need to be handled and in many instances repaired.  And the frugal half of the couple needs to calculate just how long this might take.  To understand this timeframe, you should ask.  Money may not be able to buy you love yet on the other hand, love doesn’t solve money problems.

Ron Lieber, writing in the New York Times suggested: “One advantage to prenuptial agreements is that they force the issue, even if it does turn the talks into a negotiation. “At least half the time, people are shocked at what the other person’s attitude is,” said Susan Reach Winters, a matrimonial lawyer with Budd Larner in Short Hills, N.J. “You ask how they’d handle it if someone wanted to stay home after having a baby, and at the same time they give completely different answers.”

These are worthwhile considerations, even if you are decades away from your retirement. And they need to be asked.  Student debt doesn’t necessarily show that one of you is not able to handle money.  But it does put long-term pressure on many financial decision you might want to make.

To read more of Mr. Leiber’s article.

The question of paying off your mortgage comes up quite often as folks wonder whether the monthly burden of a mortgage payment is worth the effort.  Some have asked if they should use their retirement accounts to do so.  Here’s why one shouldn’t pay for the other and both are bargains worth holding on to for the long-term.

Retirement money benefits from the length of time it remains untouched, the regular (and hopefully robust) contributions you make on a regular basis, assuming the right amount of risk for your age and working horizon.  Keeping it working, no matter what is key to any chance you have at good retirement.  Failing to do so will create a future that might be less comfortable than you had hoped for.

Your mortgage however, if manageable and if you don’t have a loan around the 5% range or lower, you should consider one, offers you a unique opportunity.  One, the payment is fixed.  As long as there is inflation, this payment will be worth less in real dollars with each successive payment.  Two, you will always need somewhere to live.  Having someplace you can afford is critical if you are, like so many people who are close to retirement have suggested, planning on staying in your own home as long as possible.  Three, it might be centrally located to the services you need and the family you cherish.

But paying it off using those retirement accounts can lead to economic trouble you may not have anticipated.  Once your retirement accounts are depleted, you may own your house but if you should run into financial hardships soon after retiring, the house becomes the tool in which to go back into debt. While reverse mortgages are a good option for some, they are not the most cost efficient means to finance your retirement or leave something to your heirs.

The excuse that you will simply work longer has taken  a dangerous position in the retirement plan for women that a recent TransAmerica Retirement Survey recently revealed.  Granted, this is the new recovery plan among a great deal of respondents, of both sexes.  But for the female worker, this can be the wrong approach to a retirement plan.

The study, just published, suggests that women have the advantage of living longer yet at the same time, are still in a worse position compared to men to finance that longer life.  Only six percent of those who have a retirement plan confidently say they can retire comfortably – although the survey doesn’t pinpoint whether this is at what we consider regular retirement age or beyond.

That plan, a strategy that encompasses all aspects of retirement planning from asset allocation to savings to debt reduction to preparing for a long life with healthy alternatives now is not in place for 54% of the women surveyed.  Only 7% suggested that they have some plan in place, a written roadmap of what to do when.  We talk a lot about the need for this sort of strategy, understanding that a plan is actually the ability to embrace the worst that can possibly happen and readjust how they approach money.

Perhaps the most startling statistic to emerge for the study is the belief that 19% of women do not plan on retiring. No one disputes that this is a problem. But the unforeseen is more probable than many of these women realize.  In fact, this sort of plan fails for half of the people who make this sort of assumption.

There is a bright side to this: women have increased their presence in the workforce and they understand that they need to save more, invest more and work more.  Yet they still opt for part-time work or chose professions that do not offer the highest pay. According to the Retirement Security Project sponsored by the Pew Charitable Trust, women close to retirement have about half as much as men in their 401(k) plans.

While we can’t expect companies to return to the days when defined benefit plans (pensions) ruled the landscape, a time when women were not only able to get a predictable and fixed amount of income that they could plan on and the added bonus of assuming the benefit of a deceased spouse, women can do several things to help change that potential outcome.

Even if they are not investing enough (and both studies cite the numerous reasons why: from not having enough education, not taking enough risk when they do participate, not estimating with any accuracy how much they will need when they retire) they can lobby to have their 401(k) plans offer a lifetime annuity option.  This is beneficial in part because it does deliver a projection of what the retiree can expect when they decide to stop working.

It is also advantageous for women in another way.  At retirement, 401(k) plans often send the newly retired worker packing with a lump sum payout.  To take the money and a purchase an annuity, a form of investment and life insurance plan that pays a fixed amount, the monthly payout is determined by the potential life span you have remaining. This means a lower monthly benefit than their male counterpart might receive.

Spousal consent would be a nice touch as well.  Currently, how your husband decides his distribution at retirement does not require them to consider a wife’s needs.  If the requirement to get a signature from a spouse when this important decision is made would go a long way in prompting men to consider the taking the lifetime annuity with survivor benefits.

There are several things a women can do know, why they wait for legislation to provide the opportunity to contribute to an IRA when taking time off as a caregiver (currently its no income; no contribution), increasing the Saver’s credit (available to households that make less than $54,000 a year) and spreading the auto-enrollment net to include more employees in 401(k) plans and sooner and including the opportunity to be auto-enrolled in an IRA in places where there is no employer sponsored plan.

The TransAmerica study found that women will miss their retirement goals by about 25%.  So what can women do now?

The simplest thing to do is educate yourself about the opportunities. It might come from your employer, it might come from a financial planner, and although women still rely on friends and family to provide investment advice more than men, the importance of getting some help if you are unsure is key to understanding the potential problems that face them.

Increasing their retirement investments will go a long way in getting them to the potential of retiring.  Women are not the only ones who are putting off retiring at the age of 65.  But women have better reasons to wait to tap their Social Security benefits.  As a widow, you will only be entitled to half of what your husband received from SSA. This can be a devastating reduction in income at a time when the household assets may have been drawn down significantly with old age medical issues.

Embrace the worst case scenario and adjust your current lifestyle to accommodate it. If you have college aged children, do not spend one dime of your retirement income to help finance their education. If you haven’t saved for this moment in advance, tapping retirement accounts is not a viable answer.  Avoid hardship loans from your 401(k) plan.  Keep in mind that bankruptcy does not include your retirement accounts as part of your assets.

Even though a longer life might seem like a benefit, unless you take into account the increased chance that it will be lived in poverty while you are still working, it will turn into something quite unexpected.  Make sure your husband is involved and if you have older children, involve them as well.

Back in 2002 I had the pleasure of working with my first editor.  He knew I had never written a book before and was patient enough to edit more book than he asked for and along the way, give me some insights on the reading public. Online and in the short form of articles and essays, his advice on lists, the one-through-ten or eight-steps-to-succeed or 30-ways-to-leave-your-lover, whatever compilation we choose, it would appeal to the reader.  But I wonder if when faced with such lists, if you actually follow through.

After reading this past Sunday’s article in the New York Times Magazine penned by Guy Deutscher, I’m not so sure that the language of lists and numbers has done what everyone assumes it should have.  His profile about how language shapes the way you think offers a look into the way our brains sift through information and come to conclusions. Looking back 70 years to an article in M.I.T.’s Technology Review, Deutscher found the turning point in a debate that has continued ever since the publication of a piece simly titles “Science and Linguistics”.  Benjamin Lee Whorf  was at the time, a chemical engineer who worked for an insurance company and moonlighted as an anthropology lecturer at Yale University. “His stirring prose,” according to Deutscher,  ”seduced a whole generation into believing that our mother tongue restricts what we are able to think.”

Perhaps this is why some of us invest and others simple through darts at ideas, creating a hodgepodge of concepts that have no direction, no focus and because we are often left with no results, not much in the way of confidence.  And even more oddly, we don’t blame ourselves for this; we blame the markets, the bankers, the politicians, the black cat crossing our path, anyone who happens to be within our field of vision. Perhaps it is what we hear, how we list our priorities or how we try and take the randomness out of the markets that gives us the real trouble.  We want order where there is chaos.  So we try to lend order through lists.

Consider a recent list on the popular New York Times blog called Bucks. Jennifer Schultz offers a list of the 10 investment mistakes to avoid based on the book “Asset Allocation for Dummies” by Jerry Miccolis. (I haven’t read it nor have I read any book that assumes I am dumb; the search for knowledge in my opinion is a quest for enhancement.) The object of the piece is to see how big the list can grow, when Ms. Schultz prompts readers to offer their items to the list.

Right away, the first item is asset allocation. Wonderfully alliterate and catchy, it has the ability to jive with the concept of “he who has the most toys wins”. But without a deeply rooted knowledge of the language of investing, you know little about allocating what you may not even have.  Mr. Miccolis suggests that this first step is really important and if done correctly, is the building block of a successful plan.

The second item chastises you for the first mistake when it throughs another twenty-five cent word into the investment fray: diversification. He suggests that we confuse asset allocation with diversification.  Which is true.  Think of asset allocation as the division of any number of different types of items into separate containers; diversification simply suggests that those items should be different.

Keep in mind that even financial advisers/brokers/planners intertwine these two terms in a language dance designed to confuse.  If you are looking for advice, you have to look in a lot of different places, compare a lot of different opinions and make a choice.  But we often go with the advice that seems most knowledgeable.  So when we are asked about our current asset allocation (and we say we don’t know what it is) and are questioned about our knowledge of diversification (and we think we know because we entertain lost of different view points), the next item on his list, a mistake you shouldn’t make is failing to rebalance.

Having different containers (asset allocation of different assets such as stocks and bonds although you will probably have an empty container to begin with) and different stuff in each (empty containers, once labeled can be filled with all sorts of stuff from the assets we have chosen), we must learn to balance them.  This is a language play on the old “eggs in one basket” concept suggesting that too many of one thing in one container is just not a good idea.  The trouble with rebalancing when it comes to investments that are different assets and diversified as well is that to rebalance, you simply can’t take something from one container and put it in another.  You have to sell it.

Which makes the next step in Mr. Miccolis’ list of avoidable mistakes seem counterintuitive.  If you are supposed to think long-term, why then are we selling in the short-term to meet some arbitrary balance?  You can see where the language falters with the explanation and in doing so, leaves us more confused than before. So to shift the blame, the next five of six suggests in his list are all your fault.

You are emotional, subject to information that catches your attention by thinking a little knowledge will go further than it should all the while believing that the goal is to perform better than the person in the next cubicle and if you can, you will have outsmarted the markets. You are, as the lists suggests, your own worst enemy.

Deutscher does suggest that there is little evidence “that any language forbids its speakers to think anything, [so] we must look in an entirely different direction to discover how our mother tongue really does shape our experience of the world.” This means more than simply trying to learn what it all means but instead why it means anything at all.  We can talk about starting young all day long but the concept is lost of you don’t enter that phase already speaking the language of investing.

Then we find out sometime later, that we should have started when we were younger and wonder if we can ever regain those important, missed years.  By that time, our investment abilities is allocated alright: between guilt, catch-up, and volatility, between following when we think we should lead, between formulating a plan at a time when we think we should be well on our way.

Some languages have no words for direction, assign female and male attributes to inanimate objects and some have little sense of when something happened. But when it comes to investing for retirement, the great mixmaster of terminology could be reduced to a couple of simple concepts.  Something is better than nothing and what you need cannot be determined by another.  You jst have to figure out what “something”, “nothing” and “need” are and these are well within your ability to communicate.

With all of the pressures on your already squeezed paychecks, insurers are worried that their profits will be impacted by the latest round of predictions that the economy is not recovery at the sped many had hoped, even anticipated it would.  In the near-term, they worry about the lack of products they are selling to the housing industry (insurers protect everything in the process leading up to the sale and then  insure the final product afterwards) and the number fo cancelled or un-renewed auto policies.  This later is of great concern to the insurance industry as this trend points to more uninsured drivers on the road (Allstate suggests that as many as 4 million fewer policies are in effect since the downturn began in earnest two years ago).

According to Robert Riegel, ““With lower GDP you are going to get lower premium [volume], but the more important factor is just the pricing cycle, and that has been driving premiums down in addition to the weak economy over the last couple of years.”  Mr. Riegel, who is managing director for Moody’s Rating Service U.S. Insurance Team worries that this will translate into higher premiums for those who are maintaining their insurance.

Insurance companies are not exactly strapped for cash at the moment.  Their investments have done well with their annuity business continuing to improve.  Although the five largest insurers have not had any enormous casualties so far this year, and the cost of the Toyota recall is being shared by the five largest companies, the projections do not bode well for the individual.  Eventually, this will end up costing the consumer more, impacting an already strained paycheck that is barely making its obligations or retirement needs.

Companies have suggested that they will need to pick up their acquisitions in order to appease shareholders growth expectations.  But the bottom line is that rates will have to go up.  Well known is the rising cost of health insurance premiums, which continue to rise.  less well known is the way insurance companies increase rates after an accident.  If you have been hit in a car for instances, and you were not cited at the accident (tickets usually indicate who is at fault), your rates may go up based on prior driving records. because the insurance business is based on the potential risk, the number of accidents you have, even if they aren’t your fault, can increase your rates.

There are several things you can do however to help keep those costs down.

Increase your deductible. The higher the obligation you put on the insurer, the higher the premium.  If you assume some of that through the promise to pay the first part of the costs, the lower your premiums will be.  This will also give you pause when tempted to open a claim (a claim is often opened by an agent simply when you inquire about whether to or not – too many open claims can also increase your rates even if you went no further).  If money is coming out of your pocket, you might as well pay it.

Take public transportation. The fewer times you drive your car, the lower your premiums.  This also takes you off the road lessening your chances you will be hit by the increased number of uninsured motorists.

Maintain the upkeep on your home. You could probably trim those trees that look to be troublesome in the next wind/rain/snow storm before they land in your yard or on your house.  Doing repairs when needed will also keep you from trying to use insurance to pay for damages that weren’t part of the problem.

Reexamine your insurance needs periodically. If you are able to bundle your insurance products, you will save.  But try to stay with one insurer longer. Bundling can be costly if you simply pick up all of your policies and switch.

Each cost you can contain puts you in a better position to keep your retirement plan on track.  And that is what we are all trying to do as we struggle with the day-to-day costs and finding some additional cash to invest towards the future.

What looks like a mutual fund, pays dividends like a mutual fund, is compared to a mutual fund and most recently, up against the S&P 500 index, actually has performed better, yet isn’t one?  REITs, which stands for real estate investment trust is often confused by investors as a mutual fund.  As as to the performance comparison, it was actually a sector of the REIT world, the commercial REITs that outperformed the S&P 500 in a year-to-date comparison (REITs, as of 08.26 were up 11.7% while the index of large cap stocks posted a 4.9% loss).

Before we get ahead of those who aren’t quite sure of what REITs are, let’s take a moment and break down.  REITs fall into five basic categories. Retail REITs focus on malls and free standing retail operations.  Residential REITs invest in multi-family dwellings such as apartment buildings. Healthcare REITs are involved with the hospital, healthcare facilities and retirement home operations. Office REITs are also self-explanatory while mortgage REITs, suggest that the REIT actually owns homes.  Instead the own mortgage backed securities.

When you buy a REIT, you are buying a stock in a trust that focuses their assets on the profitable purchase of real estate.  Aside from mortgage REITs, most of these trusts look at the need for buildings to house businesses or numerous families.  These trusts invest in these properties acting as a company rather than a fund holding numerous underlying securities.  because they are essentially a stock in that respect, investors should be aware of their record of good profits, strong balance sheets and as little debt as possible, especially the short-term kind.

There is no shortage of buying opportunities for well-positioned companies.  This doesn’t mean it is the next big thing and no analysts suggests more than 5% of your overall holdings should be focused here.  But it does provide for some intriguing diversification.

The bet with REITs is that there are still numerous properties that could face financing problems and with almost a billion dollars in refinancing obligations set to expire in the coming month, those who have been keeping their cash on hand may se a lot of low-cost opportunities.  The second bet here is that the economy will eventually recover.

REITs that own apartments have found their businesses to remain robust as people continue to sit on the sidelines despite lower mortgage rates and depressed housing prices.  Well financed healthcare REITs have been focused on consolidation and look to be invested consistent with projections of need in the future.

REITs aren’t real estate. They are companies that buy real estate and you are an investment partner.

Here are several articles concerning REITs from Bloomberg, David Shulman, a Distinguished Visiting Professor at Baruch College and former Lehman Brothers Managing Director and Head REIT analyst, REIT.com, and Janet Morrissey writing for Time