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Back-to-school 'To do' list
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September 6, 2000: 6:00 a.m. ET
Refresh your retirement portfolio during the fall season
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - It's a new season -- a new reason -- to review your retirement portfolio.
You've bought the kids new backpacks and notebooks, the air is crisp as the leaves start to fall and the stock market has that back-to-school rush. Advisers say it's a fine time to review your retirement portfolio and get your paperwork and financial house in order.
"Everyone is gearing up, checking their finances and insurance," said certified financial planner (CFP) Diane Rolfsmeyer. "Fall coincides with that back-to-school mentality. The summer vacations are over now and it's time to square up and roll up your sleeves."
Read your statement
You're sifting through the day's mail and notice a plain envelope from your 401(k) plan. It's a quarterly statement, which will probably end up in the trash or, at best, stuffed under some paperwork on your desk.
But planners say now is a great time to review your 401(k) statement even if you don't make any changes to your fund choices. Examine fluctuations in your funds this quarter and then file your statement in a safe place.
It's a great way to learn about the market, which for some investors is a daunting task. At the least, you should know as much as possible about the funds you own, said Rolfsmeyer, who advises clients in Lincoln, Neb.
"I hope people take [the statement] out of the envelope and put it in a three-ring binder," she said. "They should compare a current report to a previous report. Did Internet rates go up? Did housing starts go down? I ask them to do that to gain knowledge."
Are you maxing out your 401(k)?
So after you've studied your statement and put it in your filing cabinet with other investment information, it's time to review how much you're actually putting away into your retirement account.
Sure, it's tough making ends meet while thinking about that new house you want to buy, or even sending the kids to college in a few years, but you shouldn't put your retirement account on hold.
And planners are always pounding you over the head asking whether you're maxing out your 401(k) contributions. If you're not, consider increasing your contribution by one percentage point this quarter and then gradually each year.
Let's say your salary is $50,000 and you're contributing 6 percent of your pre-tax dollars, or $3,000, a year. If you increase your contribution to, say, 15 percent, or $7,500 a year, that may hurt your pocketbook. But if you upped your contribution just a notch to 7 percent, or $3,500, you might not feel the drain in your paycheck as much this quarter.
Continue increasing your allocation until you reach the maximum contribution limit, which is $10,500 a year, or typically 15 percent of your pre-tax dollars.
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"If you can increase your allocation by even a half percent, it won't leave a big hole," said CFP Judy Miller in San Francisco. "By the inch it's a cinch, by the yard it's hard. If you can go a quarter percent or a half percent, do it now."
Other options
Maybe you're among those investors who are maxing out their 401(k) plan and getting close to hitting that $10,500 IRS contribution ceiling. If your salary is around $100,000 a year and you're contributing 15 percent of your pre-tax dollars, then you're probably close to the limit at this time of year. You may notice that your paychecks are a little heftier because your plan isn't accepting any more of your pre-tax dollars, but you never asked why.
Financial planners say that if you have the money to contribute to a retirement account and you've maxed out your 401(k), consider opening a non-deductible IRA. Because you're already participating in your 401(k) plan, you won't be able to write off your IRA contributions, but sending those dollars to another retirement account is still a good idea.
"A lot of people are hitting the maximum in the last quarter of the year," said CFP Phillip Cook in Los Angeles. "That doesn't mean they shouldn't be saving that money, but maybe they should open a non-deductible IRA."
Learn more about the Roth IRA
So check on the eligibility rules to open either a Roth IRA or a non-deductible traditional IRA. If you're eligible, opening a plan and making contributions now gives you the advantage of three months of compounding that you would miss if you waited until the beginning of next year.
Remember, if you're single, you can open a Roth IRA if your adjusted gross income is less than $95,000. And if you're married, you can open a Roth if you file jointly with adjusted gross income of less than $150,000.
Down the road to retirement
That summer vacation to Cape Cod is a distant memory but the pressures of holiday shopping are still a few months off. So planners say now is a good time to review your portfolio and assess your risk level, since you've got the time.
Click here to learn how to allocate your portfolio whether you're 25 or 55
"The third quarter is a good time to do your reallocation," Miller said. "With the fourth quarter, you've got Christmas expenses; the first quarter you've got April 15 and taxes looming; and now, presumably you've paid for your vacation, so it's a good time."
For example, if you're just five years away from retirement, you'll want to consider buying long-term care insurance, which is less expensive when you are younger or reallocate your portfolio to more conservative investments to protect the principal as you get closer to retirement.
Or maybe you're just starting to build a retirement portfolio. You can be more aggressive in your investments because you have more time, so make sure your portfolio reflects that. But as your salary increases, continue to increase your contributions to a 401(k) plan.
Either way, you need to know how you envision spending your retirement days and what steps you can take now to reach that goal.
"I would rather give up a weekend in Cancun, Mexico when I'm 25 than wonder when I'm older: Do I want to take my heart pill, or do I want to eat?" Rolfsmeyer said about making trade-offs now so you'll have enough money during retirement. 
--Staff Writer Jennifer Karchmer covers news about retirement for CNNfn.com. Click here to send her e-mail.
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