If your really want to be succesful in retirement planning, its time to work on your expenses.  I know everybody hates to budget- but this article got me thinking.  Look at each of the mutual funds inside your IRA, 401k or 403b and determine the expense ratio.   Try to invest in funds that have lower fees.  You should be able to enter the trading symbol for each of the funds at websites like Morningstar or Yahoo Finance.  Remember, every mutual fund including no-load funds will have this ongoing fee.

The Hartford Courant guide to your "inner cheapskate".

If you are paying more than 0.93 percent for your funds, you probably are paying more than necessary. Several major mutual fund companies lately have reduced their fees, Morningstar mutual fund research director Russell Kinnel said. Some have cut them under pressure from regulators - a result of mutual fund scandal investigations over market timing and late trading in 2004.

We can expect changes to pension plan rules.  Congress is looking at relief for airlines and possibly allowing advice to be given in 401k plans.  They are trying to finalize legislation this week.  We'll keep you posted. 

ABC News has some details.

Under the proposed legislation, most companies will have seven years to make up pension underfunding. A point of contention has been how much extra relief to give struggling airlines.

Bankrupt carriers Delta Air Lines Inc. and Northwest Airlines Corp. want 20 additional years to pay off the underfunding in their pension plans. The airlines warned that, if they do not get such a provision by August, they may have to default on the pensions of thousands of their workers.

If a non-spouse inherits a IRA account, they will be able to retitle the account as a Beneficiary IRA account.  The beneficiary is required to take money out of the account each year.  This is known as the "stretch-out" provision.   As a general rule, after the IRA owner dies, the beneficiary can withdraw the monies over his or her remaining life expectancy. 

Any of your IRA accounts will have this feature as long as they have a designated beneficiary.  This is great way to continue tax deferral but is only available on IRA accounts- 401k's, 403b and other employer qualified plans don't provide this.  Normally if a non-spouse (brother, sister, son or daughter) inherits these employer plans, distributions will come out of the plan and be fully taxable.   It generally makes sense to rollover your company plans into the IRA and make sure your beneficiaries are updated to take advantage of the stretch-out.  Here's more information from Kiplingers.

Here's one magazine issue I really enjoy reading each year- the BusinessWeek Annual Retirement Issue.  It generally has a lot of helpful articles and worksheets.  Here's the online version.

I'll be reading it this week and sharing some of the highlights.

You'll be paying more for Medicare Part B next year.   The monthly premium is expected to increase from $88.50 to $99.50 in 2007.  In addition to this base rate, higher income seniors will have an additional surcharge ranging from 13.3% to 73.3% tacked on to their Part B premium.  

Kiplingers provides the details of the new  means test for Medicare.

Here's how it works: If you're single with a modified AGI between $80,000 and $100,000, your surcharge will be 13.3% of the base monthly premium of $99.50, which will add $13.20 to your monthly premium, for a total of $112.70. For those who are single with an income above $200,000, the surcharge will be 73.3% of $99.50, or $72.90 - for a total monthly premium of $172.40

In the last month I've mentioned several articles that discuss retirement income strategies.  One of the most common strategies is doing a systematic withdrawal plan (SWP).  A SWP allows you to take a regular series of payments from your IRA or  employer plan.  Most IRA custodians will let you designate the frequency-monthly or quarterly and also the amount.  This money is often sent to a bank account electronically or a regular investment account. 

Humberto Cruz explains some withdrawal rates for the SWP and some other methods for achieving income.

Systematic withdrawals give you the most liquidity and control -- but you risk running out of money if you withdraw too much. For a 30-year retirement, financial planners typically recommend withdrawing not much more than 4 percent of your portfolio the first year to be able to keep up with inflation.

Ben Stein always gives me a wake up call on retirement.   I'm an avid reader and he has me extremely concerned about our deficits and entitlement programs.  I know a lot of the news on retirement savings is pretty dismal- we just don't save enough.   However, Ben presents some suggestions and help on Yahoo Finance.

"Whatever we thought the government would do for us probably will not happen. We're on our own. So go to your financial advisor and make a serious plan to save until it hurts."

Do you own company stock in your 401k?

If so, when you change jobs or retire-that stock is generally eligible to be rolled over to an IRA account.  You'll probably have the option to roll over the cash or the stock in kind.  The plan administrator is typically tracking the cost basis of that stock (the original purchase price).  If the stock has a very low cost basis then taking advantage of NUA or net unrealized appreciation may be advantageous for you.  It allows you to move stock into a taxable account, pay taxes on the original basis and more favorable capital gains rates on the difference between that basis and the current value.  Remember, distributions from the IRA account are always taxed as ordinary income.  It's a complicated topic and you'll want to talk with your tax advisor.

Ed Slott explains some of the details.

Here are four features you're likely to see inside the 401k plan of the future.

• Automatic Enrollment
• Automatic Savings Increase
• Target-date Mutual Funds (commonly called lifecycle funds)
• Managed Accounts

Marshall Loeb of CBSMarketwatch explains some of new trends.

Alicia H. Munnell of the Center For Retirement Research at Boston College has written a number of research reports regarding retirement trends.  The Boston Globe provides a recent interview.

"Individuals can control two things: how long they work and how much they save. A couple more years of working makes a lot of difference. You're earning income, you're letting your 401(k) continue to grow, and you're shortening the period over which you have to support yourself. So at least get to 65. Then, in terms of saving, you always hear these days that people have to decide whether to pay for their children's education or put money into 401(k)s. Be selfish. In the end, your children will be happier with some student loans than with your living with them."

Remember the three legged stool analogy?  Here's some other retirement income streams to think about.

A Gallup survey recently identified ten sources of income that Americans are using to pay for retirement.  USNews provides the list.

In the working world, you tend to get most of your income from one place– your job. But in retirement, your income will probably be more like a patchwork quilt from various sources, Gallup found in a survey released this week.

Financial planners used to discuss a "three-legged stool" when discussing retirement savings. The legs were the foundation of retirement- pension, social security and your savings.  We all know now that pensions and social security will be big question marks. Traditonal retirement is changing and our savings will really be the foundation now.   That savings should be a 401k (or employer plan) and an IRA.  Use both!

Suze Orman explains.

PAIR YOUR 401(k) WITH A ROTH IRA: While it is hard to beat the company match on a 401(k), I don't think your 401(k) should be your only retirement account. If you are eligible to invest in a Roth IRA, it is a perfect companion to a plan with a match.

Let's review the Roth rules: If you are single and have adjusted gross income (AGI) under $110,000 or you are married and file a joint return with AGI below $160,000, you are eligible to invest in a Roth.

The maximum contribution this year is $4,000, or $5,000 if you are at least 50 years old.