Last week, I wrote about 401(k) plans and taxes.

This week, let's attack another 401(k) question, this one from a reader named Michael.

Michael wrote in an e-mail that he and his wife are trying to plan for retirement.

"We started late, but at least we started," Michael wrote. "We did not want to cause ourselves hardship, so we are only (investing) a very small amount. I don't understand stocks and things, so I choose the very safe, very low-interest plan.

"Could you possibly advise me a better way to invest, yet stay safe? I am trying to get my wife to invest in her 401(k) at work. If she were to lose her job, could her 401(k) be rolled over into mine and vice versa?"

For help with Michael's questions, I turned once again to Jeff Salisbury, principal at Independent 401(k) Advisors, a fee-only advisory firm with offices in Cache and Davis counties.

Jeff likes the old saying that the most important dollar you save is the dollar you save today, meaning it's good that Michael started saving now instead of waiting another 10 years.

That's because studies show that the average American worker needs to save 12 percent to 17 percent of his or her gross salary during working years in order to be ready for the "golden years," Jeff says.

"That is a breathtaking amount to most people," he says.

To make it a little less daunting, Jeff suggests that you first sock away at least as much in your 401(k) as necessary to get all of your company's matching funds. If you don't, he says, "that's just walking away from a virtual handout."

Every year, when you get a raise, add at least half of it to your 401(k). "In four or five years, you'll be a lot closer to that 12 or 17 percent," he says.

Regarding Michael's question about stocks, Jeff says no clever investment plan will make up for not saving enough money. Once Michael is saving enough, then it's time to think about stocks.

"The thing Michael needs to understand is that stock offerings in a 401(k) plan are the only offerings in a plan that have a chance to outpace taxes and inflation," Jeff says. "If he stays away from stocks during his career, in the end, he will probably end up behind after you factor in taxes and inflation. ... Michael needs to overcome his fear of stocks."

That may be hard to do when the market is bouncing around like it has for the last few months. But we're thinking long-term here.

"One significant risk of stocks goes away if you invest in broadly diversified mutual funds," Jeff says. "So if Michael stays away from his own company's stock in his 401(k) and looks for a broadly diversified equity stock mutual fund, he's going to do just fine."

On a scale of one to 10, with 10 indicating the riskiest investments, a diversified mutual fund would rank as a five or a six, Jeff says. And 401(k) plans usually are designed to protect their participants.

That means Michael's wife should sign up for her 401(k), at least to get the company match.

But she should not expect to roll her 401(k) into Michael's if she loses her job. Jeff says 401(k)s cannot be held jointly or swapped between people until the owner dies. That's just not how they roll.

"If (people) do leave work, their own contributions can be rolled into the new company's 401(k), or they can roll it into an (individual retirement account)," Jeff says. "Their own contributions are always there. They'll never be forfeited because they leave a job."

The bottom line, Michael, is that both you and your wife should take advantage of your company 401(k)s, increase your savings as much as possible and try to overcome your fear of stocks. Drop me a line to let me know how it works out.

And if you have a financial question or want to tell me how you're planning to spend your government tax rebate, contact me at [email protected] or at the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.

E-mail: [email protected]