This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: What If I need to borrow from my 401(k) plan in an emergency?

A: The maximum you can borrow from your 401(k) plan is 50% of the amount vested, up to a maximum of $50,000 in any rolling 12 month period.

Your employer may place additional restrictions on your ability to borrow from your 401(k).

Whether or not you are permitted to take a 401(k) loan, it's generally a bad idea.

During the repayment period, there is less money in your account. If the market increases in value, your returns will be diminished.

If you leave your job, you will have to pay back the full amount of the loan. If you cannot repay the loan as required by IRS guidelines, then the loan will be treated as taxable income and a 10% penalty will be accessed.

If you have no other options, you should consider a loan from your 401(k). But it should be a last resort.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: Should I invest in annuities in my retirement plan?

A: Annuities within a retirement plan are a poor choice.

The big selling point of annuities is that they provide for a tax deferral. However, all investments within retirement plans are already tax deferred. You are paying a premium for a benefit you already have.

Annuities are high commission, high cost, investments, laden with excessive fees and expenses. They usually have stiff penalties for early withdrawals. These issues make annuities an unsuitable investment for most investors even outside of a retirement plan.

The much hyped "death benefit" does not change my opinion. It only kicks in if the value of your investments is less that the amount invested. How likely is it that this will be the case over any extended period of time?

Remember, an annuity within or outside a retirement plan will subject you to tax at ordinary income rates when you withdraw funds from it.

Giving up the historically more favorable capital gains rate is not something that should be done lightly. For the majority of investors, annuities make no sense.

You would be far better off in a globally diversified portfolio of low cost index funds or in a Target Retirement Fund.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: Should I invest my 401(k) funds in company stock?

A: No.

A recent study revealed a very troublesome trend.

Most of the cash in the the retirement plans of some of the nation's biggest blue chip firms was sunk into company stock.

Since the Enron fiasco, employees are painfully aware of the dangers of investing their 401(k) funds in company stock. But it shouldn't take a meltdown like Enron to dissuade employees from making this mistake.

Don't be fooled into believing that, because you work at a company, you have some special insight into how that company's stock will perform.

Your paycheck depends on the economic health of your employer. Don't make the same bet with your retirement money.

You want a portfolio that has the right asset allocation for you and is globally diversified. If you invest in company stock, you are violating basic rules of investing by concentrating assets in one stock. This gives you much more risk, without a commensurate increase in expected returns.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: How do I choose between a 401(k) plan and an IRA?

A: You don't necessarily have to make a choice, since you are permitted to invest in both an 401(k) and an IRA, subject to limits on the amount of your contributions to each plan.

Most investors should contribute the minimum amount to their 401(k) required to trigger the maximum employer match.

Once you have maxed out your 401(k), consider a Roth IRA.

While contributions to a Roth IRA are not tax deductible, there is no penalty for early withdrawals up to the amount contributed, and no tax on investment earnings once you reach age 59 ½.

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: How can I find out what fees I'm paying in my 401(k) plan?

A: There is over $6 trillion invested in 401(k) plans.

It is a pot of gold that sends advisors, insurance companies and the mutual fund industry into a feeding frenzy of fee gouging.

Most 401(k) plans are polluted with unnecessary fees, some of which are disclosed and many of which are not.

It is a national disgrace that is imperiling a secure retirement for millions of hard working employees.

Ask your Human Resources Department or Plan Administrator for a breakdown of all fees in your plan. If they can't -- or won't -- give it to you, ask them to order a fee audit, where specially trained accountants can make this determination.

Remember, all costs in these plans directly affect your returns. You have a right to know what they are.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: What can I do if I have a lousy 401(k) plan?

A: Complain to your Human Resources Department or your Plan Administrator.

Here's how to get their attention.

Ask them why your plan is not as good as the one for members of Congress. You can view this plan at www.tsp.gov.

This $220 billion plan covers all federal employees, including the military. It has only index funds and Target Retirement Funds as investment options. It has extremely low costs.

This plan is geared to make it almost impossible for plan participants to make bad choices. Most 401(k) plans do exactly the opposite.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: How can I tell if I have a good 401k plan?

A: The best possible 401(k) plan would have no actively managed funds. It would have Target Retirement Funds, where the underlying funds are low cost index funds (like the Vanguard Target Retirement Funds).

It would also have a broad domestic stock index fund, a broad international stock index fund and a broad domestic bond index fund. All of these funds would have very low expense ratios.

This is the kind of excellent plan provided to the United States Congress and to other government employees, including the military.

Most 401(k) plans have brand name actively managed funds as investment options. My advice is to ignore them.

As long as you have at least three low cost, broadly diversified stock and bond index funds, and a selection of Target Retirement Funds, you have a decent plan.

A good plan would also have an independent advisor who agreed to be a "fiduciary" to the plan. This means that the advisor would have total allegiance to the plan participants and would not accept any compensation, directly or indirectly, from any fund that was included in the plan or from any other provider of services to the plan. Most 401(k) plans are not good plans -- at least not for the participants in the plan!

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: What investments should I select for my 401(k) plan?

A: For most employees with a 401(k) plan, the best investment option is a Target Retirement Fund. These funds allocate assets between stocks and bonds in amounts that are generally appropriate for most investors. Best of all, they automatically rebalance to become more conservative as retirement nears.

I like them because of their simplicity: You invest in one fund and have no other choices to make.

However, these funds are not for everyone. If you determine the asset allocation in a Target Retirement Fund is not right for you, you can customize your fund choices using index funds in your plan.

First, determine the right asset allocation (the percent stock and percent bonds you want in your portfolio). If your plan has a broad "domestic stock" index fund, invest 70% of the amount you have allocated to stocks in that fund. Invest the remaining 30% of your stock allocation in a broad "international stock" index fund. Invest 100% of the bonds allocation in broad, "domestic bond" index fund.

If your plan does not have these categories of index funds, you will need to determine which of the available options is closest to them. The unfortunate reality is that, with few exceptions, fund options in 401(k) plans make it difficult for employees to achieve market returns.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: How much should I save for retirement?

A: I have bad news and worse news.

Most experts believe you will need 75% of your "pre-retirement" income in order to live with dignity in your later years. In order to reach that goal you need to save 15% of your income.

That's the bad news. Keep in mind, that number includes any corporate match your employer provides.

The really bad news is that you have to maintain this rate of savings for 40 years, with no borrowing or pre-retirement payout.

Here is the real kicker: This calculation also assumes that you will achieve market returns with your investments.

Unfortunately, the average investor only achieves one-third of market returns because of high costs, poor investment choices and lack of financial education.

If you have less than 40 years until retirement and haven't been saving 15% of your income, you may need to start socking away 20% or more to catch up.

Remember, you need to be sure you are investing in a properly allocated portfolio of low cost index funds so you can achieve market returns. Unless you dramatically change the way you invest, you may be in for a serious post-retirement shocker.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

This is the part of a series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

William Galvin, the Secretary of the Commonwealth of Massachusetts, has sued UBS, accusing it of misleading retail investors to buy auction rate securities when it knew that the market for them was crashing.

The Complaint has a familiar ring to it. It alleges that UBS favored its institutional clients over its retail clients (big surprise!), urging its retail clients to buy these securities when its institutional clients were selling them. UBS sold these securities by representing to its retail clients that they were safe, liquid and secure--the equivalent of cash.

Among the duped investors was a seventy-eight year old retiree who was told that these securities had a "7 day liquidity." He is still waiting.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Proposed legislation introduced by Senators Lieberman and Collins would ban large pension plans from investing in the commodities markets. It would be difficult to conceive of more wrong-headed regulation.

Pension funds are already subject to regulation that requires all investments to be prudent. There may be valid reasons why investing in commodities is entirely prudent for a small part of a pension portfolio, including the need to hedge against inflation. There is little evidence that the relatively small allocation of pension portfolios to the commodities sector has had any meaningful impact on the run up of oil prices.

Of far more importance to employees--and worthy of congressional intervention--is the shameful 401(k) and 403(b) system, which affects the retirement plans of 70 million Americans.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Question: I want to move my 401(k). My company was recently bought out and I don't feel secure. What options to I have?

Answer: As a general rule, you cannot rollover a 401(k) while you are still employed. There is a narrow exception to this rule. Check with your plan administrator to see if your plan permits an "in-service, non-hardship withdrawal distribution election." The rules permitting this distribution usually have certain requirements that must be met, like length of service or reaching a certain minimum age.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Question: When I started my teaching career in 1967, I began putting money into an Aetna Variable Annuity. After the market fall in 1973, I put my accumulated money into their fixed annuity. During the remaining years, I added to another variable annuity,(by then Aetna was ING) until I retired in 2004. While I haven't started taking any money from my annuities, is it possible, or should I even consider, taking all the money and putting it elsewhere?

Answer: I assume that you purchased some of these annuities within a 403(b) plan. This is the retirement plan for educators, hospital employees, charitable organizations and members of the clergy. You would think we would treat these valuable members of our community with special care. Think again.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Question: What are your thoughts on deferred annuities?

Answer: I think they are great...for insurance salesman (big commission items) and insurance companies (little risk; big reward).

For most investors they are an expensive and ill-suited product.

Let's disassemble the sales pitch and see what lies underneath these products:

The much-hyped "death benefit" really isn't much of a benefit. The guaranteed benefit is calculated as the value of your contributions, minus any withdrawals. You are funding your own "death benefit." There is little possibility of the guarantee coming into play. How likely is it that the value of your account at the time of death will be less than what you originally invested?

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Among those who study the financial markets, Eugene F. Fama, the Robert R. McCormick Distinguished Service Professor at the University of Chicago, Graduate School of Business, is an icon.

He is a major proponent of the "efficient markets" theory which holds the well documented view that stock prices are random and efficient.

Professor Fama believes that analysts are unlikely to find profitable anomalies in stock prices on any consistent basis and he rejects the notion that past performance is a predictor of future performance.

Based upon his exhaustive research, Professor Fama believes investors would be well advised simply to capture market returns, by investing in low cost index funds, rather than paying brokers and advisors to select stocks or actively managed mutual funds, in an effort to "beat the markets."

At the other end of the investing spectrum is Morgan Stanley (NYSE:MS), a purveyor of the daily Wall Street grist, which advises its clients to rely on the expertise of its analysts in making decisions about what stocks to buy or sell and which actively managed mutual fund---and fund manager----is likely to outperform the markets or other funds.