Expert: Paul Henneman - 4/12/2009

Question
My husband and I are diligent savers.  We both max out our retirement funds at 15,500 (and have increased this amount for this year), we contribute approximately $20,000 total per year to four different mutual funds.  I am 38, hubby is 46 we would like to retire in five years if the market makes a good turn around.  My questions:

1.  Should we continue to max out our retirement plans when we can not gain access to them for another 15 to 20 years?

2.  If we should continue to max out our retirement plans should and can we start an IRA when we contribute the max already to the retirement plans we already have?

What I would like to do is continue to max out my husbands contributions to his retirement plan since he will reach the IRA's retirement age 8 years before I do and lower what I put into my Thrift Savings Plan.  We would continue to invest the same amount of money but instead of putting it into my Thrift Savings Plan we would put it in either an IRA for him or some other Mutual Fund.


Answer
Thank you Cassy for your question.
   Every investor is different regarding the amount of risk they are willing to take, and returns they are looking for. However, some general suggestions I have for you.
   Look into Life Insurance. Many investors do not realize the power of investment grade life insurance, in that it functions as an investment and if structured properly can provide a low risk return on your investments, and can offer a completely tax free income stream when you retire. That means you can focus on lower return investments since you don't lose anything to income taxes when you withdraw. If done properly, it is better in my opinion than funding a standard IRA.
   Roth IRA's are different in that you can withdraw those funds tax free. That should be funded to the maximum if you qualify for one, there are income limits in that if you make to much, you currently cannot open a ROTH IRA.  But if you are below the cut off, you could have a ROTH IRA for you, and one for your husband.
   401k's are attractive if your company matches. But if there is no match, they become much less attractive due primarily to the limited number of investments available in most plans, and the funds are taxed as income when you retire and begin to withdraw. You are also limited as to when you can withdraw.
   Overall, look into investment grade life insurance (whole life or Variable Universal Life Insurance) and funding ROTH IRA's to the max.
   I hope that this helps, please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com