When Your 401(k) Isn’t Enough

Only one in 10 people are properly preparing for retirement. Here's how to make sure you're on track.

he’s taken matters into his own hands by investing in the Alger Capital Appreciation fund, the goal of which is-no surprise here-long-term growth. As of year-end 1999, the fund’s Class B shares had a three-year annualized return of 41.86%-and Boone’s initial investment of $575 has grown to over $1,800.

“I started contributing to outside investments [in 1996] while I was at my previous job,” says Boone, “because I couldn’t get into the 401(k) for a year and the choices were limited to company stock.” Besides his mutual fund, Boone’s other holdings include stock in the company G-III Apparel Group, which sells clothes over the Internet, a medium he’s quite comfortable with in his current position as an assistant editor with consumersdigest.com. He’s about to buy into the penny stock TeleServices Internet Group which provides telecommunications and Internet solutions to domestic and international companies. Boone is also planning to invest in the Janus Worldwide fund.

One thing Boone isn’t doing right now is making monthly contributions to his investments, which would give him the benefit of dollar-cost averaging. “I’m trying not to spread myself too thin until I have the right mix of blue chips, foreign stocks, precious metals and tech; I don’t want to start the $25 a month for Alger until I’m better diversified.”

It’s essential to answer the question of how to spread your money before you begin dumping funds into the market. Begin with this guideline: subtract your age from 100 and invest the resulting percentage in equities. If you’re 35 years old, for example, that means 65% of your money should be in equities, and the rest in bonds or cash investments. Tweak that to fit your personal situation and your risk tolerance. (For more on growth vehicles, including ones with low minimum investments, see “The Feminine Mystique” in this issue.)

In your equity fund mix, Bowser-Alexander recommends putting the most money in U.S.-based large companies, then adding some sector funds-”obviously, right now, tech as well as healthcare”-and international funds. (For a list of last year’s top-performing mutual funds, see “Charting Your Course,” April 2000, or log on to blackenterprise.com.) She also recommends paying attention to a fund’s inception date and the tenure of its manager. “I usually look for a fund to be around at least 15 years and a manager that’s been with it for 10.”

The bottom line is to remember that you’ll need to fund a retirement that may span 20 or 30 years. “Retirement investing has to be done with the long-term in mind, even in your 60s,” says Buccolo. “Nowadays, some people are retired longer than they’ve worked.”
-With additional reporting by Christine Verdi

Now, thousands of choices
Sometimes it pays to make some noise. Employees have been clamoring for more investment choices in their 401(k) plans-and companies are starting to listen. The newest twist in 401(k)s is the self-directed brokerage window, which allows account holders to invest not just in mutual funds but also in individual stocks. Although fewer than 10% of companies now offer the

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