Question:

I am a 47-year-old self-employed day-care provider and have no retirement savings. While my husband has a 401(k) plan through his employer, it has lost a great deal of value due to recent economic events. I would like to begin my own retirement savings account, but I need advice on what to buy. Any thoughts? –Clinton

Answer:

You've waited a long time to start saving for retirement. But it’s better late than never. To hedge against market meltdowns like this one, you need a diversified portfolio that has stocks, bonds and perhaps some alternative investments like real estate, advises Charles L. Failla, a financial planner at Sovereign Financial Group in New York. You can invest in low-cost, no-load mutual funds directly with fund families like Vanguard, Fidelity and T. Rowe Price. The right mix of investments depends on a number of factors, including your age and risk tolerance. To rough out an idea for how your portfolio should look, click here.

As for how to save: Since you’re self-employed, you can establish a simplified employee pension (SEP), which allows you to contribute and deduct up to 20% of your self-employment income. The maximum dollar contribution for 2009 is $49,000. Not only is this type of account easier and less expensive to set up than a Solo 401(k) plan, it has no income phase-out limits, plan documents or even annual filing requirements with the Internal Revenue Service, says Failla. (For our story on small-business retirement plans click here.)