When you look at the balance in your 401k account, do you start to get depressed?  Do you panic and worry that you’ll never have enough saved to retire and enjoy the finer things in life?  If so, you’d better start whipping your retirement savings into shape!  Here are some tips to help you make the most of your 401k.

1. Participate.  I know it sounds like common sense but millions of people who have access to a 401k plan are not taking advantage of it.  If you don’t put anything in then you can’t act surprised when there is nothing there to take out.  And the sooner you start contributing the more time your money will have to grow.  If you know anything about compound interest, you’ll know that even a few years of procrastination can have a huge impact on your savings.

2. Take the Company Match.  Many companies will match a certain percentage of your contributions.  For example, let’s say they match 50% of your contributions up to 6% of your salary.  That means that while you’re contributing only 6% of your salary, a full 9% is being deposited into your account.  That’s free money and you’d be a fool not to take advantage of it.

3. Leave it Alone!  Your 401k is meant to be used for retirement savings, not as an ATM machine.  Yes, there are loans and hardship withdrawals that allow you to take some funds out, but you should only do so after exhausting all other avenues.  Anytime you take money out of your 401k, you’ll miss out on all the earnings those funds could have accrued.

4. Diversify.  Your 401k plan probably has a dozen or more investment funds to choose from and I don’t blame you if you can’t make heads or tails out of the selections.  But you need to take the time to learn about them so you can diversify your funds to maximize growth potential while minimizing risk.

For example, if you invest everything in a money market fund your returns will be minimal and you’ll never have enough to retire.  But if you invest everything in risky company stock you could lose it all.  You have to find the right balance to meet your individual needs, which is easier said than done.  Fortunately many 401k plans include age-based funds which will automatically adjust their allocations as you get closer to retirement age.

5.  Take it With You.  Far too many people cash out there 401ks when they change jobs and that’s just a bad idea.  Not only will you pay taxes on your distribution, but if you cash it out early then you’ll have nothing left when you need it.  401ks are portable, which means you can take them with you when you leave a job.  You can either roll them into a 401k with your new employer, or into an IRA.  Either way your money will continue to grow until you are ready to retire.

If you’re looking for a list of the best dividend paying stocks to invest in, you’ve found it.

The S&P 500 Dividend Aristocrats list is monitored closely by investors who prefer stocks that pay dividends. Each of the companies on the list has demonstrated a consistent and long term policy of dividend growth.

In order to be included on the Dividend Aristocrats list, a company must be a member of the S&P 500, have a market capitalization of $3 billion, and an average trading volume of $5 million.  Most importantly, they must have increased dividends every year for at least 25 consecutive years.

It should be noted that even though these companies have all demonstrated a commitment to dividend growth, there is no guarantee they won’t freeze or eliminate their dividend in the future.  Companies are occasionally dropped from the list if they fail to increase dividends or if they are delisted from the S&P 500 index due to a merger or to make room for other stocks to join the index.

Current Dividend Aristocrats List

This list is current for 2013.  We’ll update it whenever a company is dropped from the list or when new dividend companies are added.

Company Name	Stock Symbol
3M Co	MMM
AFLAC Inc	AFL
AT&T Inc	T
AbbVie Inc.	ABBV
Abbott Laboratories	ABT
Air Products & Chemicals Inc	APD
Archer-Daniels-Midland Co	ADM
Automatic Data Processing	ADP
Bard C.R. Inc	BCR
Becton Dickinson & Co	BDX
Bemis Co Inc	BMS
Brown-Forman Corp B	BF/B
Chubb Corp	CB
Cincinnati Financial Corp	CINF
Cintas Corp	CTAS
Clorox Co	CLX
Coca-Cola Co	KO
Colgate-Palmolive Co	CL
Consolidated Edison Inc	ED
Dover Corp	DOV
Ecolab Inc	ECL
Emerson Electric Co	EMR
Exxon Mobil Corp	XOM
Family Dollar Stores Inc	FDO
Franklin Resources Inc	BEN
Genuine Parts Co	GPC
Grainger W.W. Inc	GWW
HCP Inc	HCP
Hormel Foods Corp	HRL
Illinois Tool Works Inc	ITW
Johnson & Johnson	JNJ
Kimberly-Clark	KMB
Leggett & Platt	LEG
Lowe’s Cos Inc	LOW
McCormick & Co	MKC
McDonald’s Corp	MCD
McGraw-Hill Cos Inc	MHP
Medtronic Inc	MDT
Nucor Corp	NUE
PPG Industries Inc	PPG
PepsiCo Inc	PEP
Pitney Bowes Inc	PBI
Procter & Gamble	PG
Sherwin-Williams Co	SHW
Sigma-Aldrich Corp	SIAL
Stanley Black & Decker	SWK
Sysco Corp	SYY
T Rowe Price Group Inc	TROW
Target Corp	TGT
VF Corp	VFC
Wal-Mart Stores	WMT
Walgreen Co	WAG

Some people look at the Dividend Aristocrats and say “Wow, what a boring bunch of companies.”

While you may not get the same growth potential that you would out of a fast-paced tech stock, these companies have stood the test of time and most are protected by wide moats.  Their longevity and commitment to growth makes them some of the best dividend paying stocks you can find.

Many people wonder which IRA is best suited for them. Should you stick with the Traditional IRA or go ahead with Roth IRA? In certain cases, it’s easy to decide. For example, the Roth IRA becomes your obvious choice if you are ineligible for a Traditional IRA due to income levels or an employer-provided retirement plan. But how do you decide when you do have a choice?

Well, both IRA options offer significant tax advantages, but one might be more suitable than the other based on your income level, age, and needs. They differ primarily in the way your contributions are taxed. Let’s analyze both traditional and ROTH IRAs before you decide which one is right for you.

Traditional IRA

The contributions you make to a Traditional IRA are tax-deductible in that year. For example, if you contribute $5,000 to a Traditional IRA, you can deduct $5,000 from your current taxable income. However, the withdrawals you make after retirement will be taxed as part of your ordinary income. This is especially beneficial for people who are in higher tax brackets at present, but expect to be in a lower tax bracket after retirement.

A potential downside of the Traditional IRA is that it requires you to start taking minimum distributions at age 70 ½, even if you don’t need the money, and there are stiff penalties if you don’t withdraw at least the required minimum distribution every year. Additionally, if you need to withdraw money before the age of 59 ½, there will be an early withdrawal penalty along with the taxes.

If you have a high income and expect your income to drop in retirement, a Traditional IRA may be the right choice in saving money for retirement. Why? well it’s simple.. You’re putting money in at a high tax bracket and pulling money out at a lower tax bracket.  Also a Traditional IRA doesn’t have any income restrictions, and your contributions can be invested in almost anything.

Roth IRA

A Roth IRA is completely opposite of Traditional IRA in the way taxes are levied. With a Roth IRA, the contributions you make will not be tax-deductible in the same year, i.e., you have to pay taxes on the contributions you make in a particular year. However, when you start withdrawing money after retirement, the distributions will be tax free. This is advantageous especially for people who anticipate being in higher tax bracket after retirement.

To qualify for Roth IRA, your modified adjusted gross income (MAGI) should be less than $122,000 if you are single. The limit for married tax filers is $179,000.

It is not mandatory with a Roth IRA to start taking the required distributions upon reaching age 70 ½. If you already have a Traditional IRA, Pension Plan or employer-sponsored retirement plan such as a 401(k), you can still contribute to Roth IRA within certain income levels.

Besides these benefits, the Roth IRA has very simple rules for withdrawals. It allows you to withdraw the contributions (not gains) before 59 ½ without any penalty or taxes. You’re allowed to withdraw earnings federally tax-free after the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, death, disability, qualified first-time home purchase. In case you withdraw for any other purpose, you have to pay a 10 percent early withdrawal fee.

Have a Combination of Both if Possible

No kidding. You don’t know what the tax rate would be after two or three decades, so it is safe to multiply your sources of retirement savings. If you diversify your tax liabilities, you will be better prepared for any major tax rate changes by the time you retire. Try to reach the maximum on both Traditional as well as Roth IRA contributions.

Diversification provides another benefit. This way you can prevent falling into higher tax bracket upon retirement. If the income from a Traditional IRA and other sources push you into higher tax bracket, you have the option to lower the Traditional IRA withdrawal rate and take out from the Roth IRA, which is tax-free in retirement.

What type of IRA do you have? Why did you pick that one? If you don’t have an IRA what are you doing to save for retirement?

One of the best ways to build wealth is to invest in stocks that pay dividends. 

Dividend stocks not only give you the opportunity to make money through capital appreciation, they also provide a steady source of income as long as you own the stock.

But what exactly is dividend investing and how do you get started?  This article aims to answer those questions in plain English that anyone can understand even if you don’t know the first thing about investing.

First, let’s answer the most common question people have:

What is a Dividend?

When a company earns profits they can use those funds in different ways.  They can use profits to pay down debt, put them toward future projects to grow the company even more, or return them to shareholders in the form of a dividend.

In other words, a dividend is an individual investor’s share of the company’s profits.

Of course not all companies pay dividends.  Generally speaking, companies that are young and still rapidly growing don’t pay dividends to shareholders because they need to keep funneling all of their profits back into the company to continue growing.  This is why most of the exciting new startups and tech stocks that you hear about on the news don’t offer dividend payments.

Older companies that are more mature and stable are more likely to pay shareholder dividends.  They still want to grow their business, but they have proven over time they can sustain a level of success and share their profits with investors.

Apple is one example of a company that went many years without paying dividends because they were always busy coming up with the next craze to take the world by storm.  But these days they can’t make the iPad and iPhone fast enough and they literally have more money than they know what to do with, which is why they are paying some of their cash reserves back to shareholders through dividends and stock buybacks.Advantages of Dividend Investing

Stocks that pay dividends have several advantages over non-dividend paying stocks…

Passive Income.  Once you purchase the shares, dividend income is almost entirely passive.  Just sit back and watch the dividends come in each quarter.  You can take them as cash to supplement your income or reinvest them to purchase more shares which will in turn generate their own dividends.

Stable Companies.  As we noted above, most companies that pay dividends have already proven they can stand the test of time.  Of course, there is no guarantee that a dividend company won’t run into trouble down the road.  A good way to guard yourself from troubled companies is to obtain a financial report on the company you are looking to invest in.

Profit without Selling Shares.  With non-dividend stocks, any increase in value is only paper profits unless you actually sell the shares.  But with dividend stocks you can take a portion of those profits as dividends and still keep your ownership stake intact.

My Dividend Investing Strategy

I’m a big fan of stocks that pay dividends.  I enjoy taking advantage of the power of compounding by reinvesting dividends to purchase more shares.

I have an account with Sharebuilder that I call my Dividend Machine.  I contribute to it every month and buy a handful of large company stocks that pay dividends.  I mostly focus on the Dividend Aristocrats, which is a group of companies that have increased their dividend payout each year for at least 25 years, but there are many other great dividend paying stocks that are not part of that group.  You can also purchase dividend ETFs which focus on purchasing dividend paying stocks.

Although the reinvested dividends start off small, they grow quickly if you continue making contributions.  Imagine rolling a small snow ball down a hill and watching it grow into a giant avalanche as it gathers more and more snow on its way down the hill.  Given enough time a small dividend investing account could turn into an unstoppable financial juggernaut.

What do you think about dividend investing?  Do prefer stocks that pay dividends or those that don’t?