Q: Is life insurance a rip off?   Glen in NY

A: Life insurance sometimes gets a bad name because unscupulous agents have sold inappropriate products to people. That being said, it is a wonderful product when used corretly. The benefits and the relative low cost of term insurance make it very attractive for protecting your goals for a specific amount of time. Most of life insurance's bad name came as a result of permanent insurance, universal life or other more complex policies. They are great in many circumstances, but too expensive or inappropriate for others. Make sure you understand how these products work. Make sure you understand how the cash value is determined, surrender fees and how the other features work. They vary by policy type and company so if you compare, make sure it's an apples to apples comparison. Also understand that they may pay dividends, there may be investment choices, the guarantees may be different and know what riders are available. Make sure the illustrations they provide show a realistic rate of return. I had an agent show me (years ago) how much cash value I would have if I had a 10% return for 30 years. Not very realistic. Also make sure they show you an illustration at the minimum interest rate.

Q: Is investing hard, it seems so complicated?  Confused in New Jersey

A: Investing can be complicated but I will try to make it easy. Meet with several investment advisors to find one you are comfortable with. In these meetings thoroughly discuss your goals, objectives, risk tolerance and be honest about your experience and knowledge to make sure the investments are appropriate for you. Have them develop an investment plan and discuss how you plan to fund your investments (lump sum, monthly deposits, quarterly, etc.). They should come up with an Asset Allocation plan which simply means how your money is divided among different types of investments. This includes Large Cap (large companies), Mid Cap (medium sized companies), small Cap (you get the idea), International, Bonds, Cash and possibly some other types of assets. The theory is that all of the asset classes perform differently so if several of the classes are performing poorly, the other portions of your investment portfolio will help to balance the results. History and logic has shown that this is a more prudent method than having all your eggs in one basket. After you decide, make sure to meet with your advisor at least annually to check how you are doing.

Q; How do I know I'm Saving enough?  Ron in Baltimore

A: There are many free financial calculators you can use online (try bankrate.com) to get an estimate of how much you can save over time. When you do these calculators you must assume a savings level and a return on investment so this method will never be exact, but if you are resonable in your assumptions, you should get a good idea. Use a realistic annual return, if you have the money in a savings account use a very small return (most savings accounts are about 1% or less), even with equities, I would not use over 8%.

Now to determine if it is enough, you must know what "enough" is. I'm assuming retirement is your goal since you didn't mention a specific goal, so what you need today will be higher by the time you retire because of inflation (again we must assume about 3-4%/ year). Figure out what you can expect from Social Security, Pensions, etc. and compare this to the amount you need for retirement. Then you can determine if the projected savings will make up the difference. The best advice I can give is that no one will know if your nest egg will be enough so you should do your best now to maximize what that final number will be. Live under your means, be prudent in your spending and save until it hurts in a variety of investments and you shouldn't be disappointed. Did I mention LIVE UNDER YOUR MEANS!  Here is an example;

If you are 45 years old and make $50K/year and plan to retire when you are 67 and you also expect the money to last until you are 100 years old, you will need $102,545 the first year you are retired. This assumes a 4% pay increase a year, a 7% annual return on your invested nest egg, an inflation rate of 3.1%/year and that you will need 90% of your last years salary to live comfortably. If you expect $42K/year from Social Security and pensions, your savings must make up the $60,545/year difference. Now lets assume you started at age 45 with $100K and you save 8% of your salary each year. You will then have saved $662,295 it sounds like quite a bit, but the money would run out at age 79-80 (assuming a 5% investment return after retirement). The good news is a small increase in savings will substantially make the money last longer.