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Money Focus Personal Finance Mutual Funds Insurance Mortgages Taxes Privacy Policy Contact the Editor Featured Personal Finance Title New Paul Petillo provides you with practical, proven advice on finding the right places to invest, weighing risk versus return, anticipating pitfalls in the market, and maintaining a diversified portfolio.  Investing for the Utterly Confused is on sale now! Paul's new book:
Retirement Planning for the Utterly Confused
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Tax Forms for Work and Retirement | 2007
Tax Forms | 2006 IRS Publications and Forms for Work and Retirement
Editor's Note: I receive numerous questions concerning the right retirement investment. In many cases, there is no right answer that works for everyone short of suggesting that if you don't currently save, begin now. But where?
If you have a 401(k) at work, begin with enrolling in it and setting aside as much pre-tax income as possible. Usually, a five to seven percent deduction has no effect on your take home pay. By all means, contribute at least what you company is matching -if they do so. Matching is a benefit many companies offer as an incentive for their employees. Often, they might put equal amounts in your plan up to a certain amount. This is free money. Take advantage of it.
But if your employer does not offer you a defined contribution plan such as a 401(k) or similar tax deferred plan, you will need to save using a Individual Retirement Account. These accounts are generally broken down into two distinct groups: traditional and Roth. For most folks, the Roth is the best choice.
Here are some basic reasons why, should you be faced with the choice, you should choose a Roth.
If you are currently in a low income tax bracket and assume that it will stay that way, a Roth might be better. (If you are in a high tax bracket now and anticipate a lower one when you retire, choose the traditional IRA over the Roth.)
If you are currently enrolled in an employer sponsored plan and the only option you have is a nondeductible IRA, choose a Roth for its flexibility and the ability to withdraw the contributed principle. (Earnings need to stay in the account for at least five years or until you are 59 1/2 years old.)
Distributions from a Roth generally do not effect your Social Security payments. Use the forms and guides below to help answer your AMT questions.
If you hold mutual funds outside of a retirement plan, this guide will help.
Forms
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