Final expense insurance, also mentioned in some of the capabilities as funeral insurance, is designed to help cover expenses resulting families of the death of a loved one.

Funeral costs can only be as high as $ 25,000 or more likely, and incidental expenses such as medical expenses not covered by health insurance, as well as federal and state taxes and / or other bills the deceased's name can be added, having a number of families in what is already an extremely difficult and challenging time emotionally.

 By choosing to purchase final expense insurance, you can save your family most of these expenses, and, moreover, this policy also lets you specify the details of funeral and burial, including the type of service and casket you prefer.According to the Funeral Directors Association national consumer interest in pre-planning of funerals has been increasing steadily over the past 30 years, but recently, perhaps as many baby boomers who are near the retirement age, the industry has focused on the pre funding of such ceremonies. Traditionally, funerals were funded trusts, which are especially complicated fix, but not lead to tax liabilities and may be complicated if the purchaser of a trust decides to move out of state.To combat these problems, some consumers create what is called final expense insurance policies of expenditure, ie, complementary policies beyond its basic policies of life insurance with coverage limits of small, sometimes known as the face amounts usually about $ 10,000 to cover funeral expenses.

 The American Association of Retired Persons AARP reports that funerals and burials of high rank among the most expensive purchases that older Americans do. For an adult burial, the average cost of $ 4,000 to $ 5,000, not including overtime or funeral expenses.On land the funeral can cost an additional $ 3,500 or more, depending on the state in which the burial takes place, and other factors.What all this means is that the traditional amount reserved $ 10,000 in trust for funeral and burial expenses is simply not enough, and pay a typical funeral may require funds of the deceased life insurance. Unfortunately, this trend is becoming too frequent.

 Final expense insurance policies are individualized expenses, which usually means that anything can be included in them, unless your policy is subject to a specific dollar amount, the highest of which are typically $ 25,000.The types of services and products that can be selected vary according to the policy, as well as by the state, but generally, you can expect to be able to pre purchase and pre-payment of the following: cremation, casket or urn, tombstone , flowers, fabric, hearses and other funeral vehicles, embalming is not required by law unless a public exhibition, but many people opt for it, in any case or covering burial marker from the grave, and digging and filling the grave.

The insurance industry topped a trillion dollars in 2009. The industry employed over 2.247 million Americans.

Insurance is a staple in our lives. Insurance coverage is an essential element of any sound financial plan. It is a way to balance financial risk. Insurance provides financial protection in case an event threatens your financial stability in the future.

Insurance, in one form or another, has been around for thousands of years. At its core, insurance is a way to manage or share risk. As primitive people started forming societies, they found ways to share risk.

The assignment of financial risk and the resulting insurance protections and products evolved through the ages. Individuals now typically seek the following types of insurance protection.

• Life insurance       Health insurance, Final Expense insurance
  

• Property and casualty insurance, Mortgage Protection Insurance
  

• Automobile insurance  Rental insurance Long-term care insurance

• Disability income protection Pet insurance  , Travel insurance
  

In addition, there are a number of insurance coverages available for businesses and business owners. Some business-related insurances are product liability, professional liability, commercial property, and workers compensation.

As the industry evolved, professionals with unique qualifications, such as actuaries, statisticians, and lawyers, were drawn to companies to help manufacture profitable insurance contracts. The companies issuing insurance hired general office workers and administrative staff to issue contracts, process claims, and answer questions. In addition, salespeople were instrumental (and remain so) at explaining why insurance protection is needed and how it works. Those positions morphed into modern day professions such as actuaries, underwriters, claims examiners, insurance agents, and account representatives.

Insurance careers are appealing because they pay well, offer job security, and opportunities for advancement. The majority of professionals in insurance work for insurance carriers; however, a number are also employed by insurance agencies and brokerages and other insurance service-related companies.

Given demographic and socioeconomic trends, the insurance industry as a whole is perceived as a growth industry. Throughout the economic downturn that began in 2007, insurance companies shed far fewer jobs than other industries. Some insurance segments even showed signs of slow growth. One of the biggest threats to any job security is automation. The good news for insurance professionals is that relatively few insurance jobs can be replaced by technology. This means job security.

Many insurance professions offer high degrees of job satisfaction. They provide meaningful work and allow individuals to protect what they care most about. Many insurance careers allow you to be a resource to people in their time of need. Sometimes it is because the person has lost their house to a fire, demolished their car, or is out of work due to an illness. Whatever the precipitating factor, they are in need of help.

The potential negatives about insurance careers are that they tend to be demanding jobs. They typically require someone who is high energy, well organized, and has good communication and analytical skills.

There are over one hundred colleges and institutes of higher education that offer specialized academic training in the field of insurance. Degrees can be obtained at the associate’s, bachelor’s, master’s, and doctorate levels.

In addition to accredited college programs, several societies and professional associations offer certification programs. Candidates must meet job experience requirements, participate in educational courses, and pass a series of exams to become certified. The associations publish extensive materials to help people prepare for the examinations. In addition, there are a variety of independent third-party vendors that offer study preparation courses, training tools, and software.

Increase required by law to adjust for inflationfrom: The Associated Press | October 21, 2011

WASHINGTON (AP) — The Internal Revenue Service is raising the maximum contribution that workers can make to their 401(k) pension plans without paying upfront taxes. The limit will rise by $500 to $17,000 next year.

The increase is required by law to adjust for inflation. The ceiling hadn't grown since 2009 because inflation had been too low to trigger an increase.

Companies that set up 401(k) plans for their employees are free to limit maximum contributions at levels below the legal ceiling, and many do.

Thirty-three percent of workers ages 21-64 used 401(k) plans in 2009, the most recent year for which figures are available, according to the Employee Benefit Research Institute, a nonpartisan research group that advocates strong employee benefit programs.

Only 9 percent of people with a 401(k) contributed the maximum dollar amount to their plans in 2005, the most recent year for which that data is available, the institute said.

The IRS also is making inflation adjustments to the personal exemption, tax brackets and other parts of the tax code for 2012.

The personal exemption and the dependent exemption will grow to $3,800 each, a $100 increase from 2011.

The standard deduction for married couples filing jointly will rise by $300 to $11,900, while the standard deduction for single people will increase by $150 to $5,950. The standard deduction is used by the almost two-thirds of taxpayers who do not itemize deductions for items such as mortgage interest.

Tax brackets will change, too. For married couples filing a joint return, the taxable income at which the rate grows from 15 percent to 25 percent will be $70,700, compared with $69,000 this year.

The changes are all for the 2012 tax year. Most people will file their returns for that year at the beginning of 2013.

Your credit report says a lot about you and your credit history. But is it saying the wrong things?

Credit bureaus keep your credit report on file for prospective lenders to view when making credit decisions about you. But since they don't check for accuracy, mistakes are common. Even a simple mistake can cause you to be denied credit, so it is very important to make sure that your credit report says the right things about you.

The Fair Credit Reporting Act gives you the right to dispute information on your credit report that is inaccurate or outdated. You do this by filing a dispute with the credit bureau reporting the information.

The credit bureau must contact the original creditor within five days of receiving your dispute and has 30 days to verify the disputed item. After completing its investigation, the credit bureau must notify you of the results and include an updated copy of your credit report.

If the credit bureau cannot verify the information within 30 days or if the disputed item is found to be inaccurate, it must be deleted from your credit report.

If the item is verified, you can request the name, address and phone number of the creditor that verified the item. If a deleted item is later verified, the credit bureau must notify you within five days that the information has been reinserted on your credit report.

Follow these 10 steps to file your dispute:

1. Send a letter to the credit bureau. Be very specific about your dispute. Send the letter "certified mail, return receipt requested."

2. Mark your calendar for 30 days. When you get the return receipt, mark your calendar 30 days from the date the credit bureau signed for your letter.

3. Send a demand letter. If the credit bureau does not verify the disputed item within 30 days, send the credit bureau a letter asking to remove the item from your credit report. Tell the credit bureau that it has exceeded the 30-day investigation period. Include a copy of your original dispute letter and a copy of the return receipt.

4. Mark your calendar for 15 days. Give the credit bureau time to respond to your demand letter.

5. Send a second demand letter. If the credit bureau fails to respond, send another demand letter. Say that 45 days have passed since you filed your original dispute and demand that the disputed item be removed from your credit report. Include copies of the original dispute letter, return receipt and first demand letter.

6. File your dispute directly with the original creditor. The Fair Credit Reporting Act requires the creditor to verify disputed information within 30 days. Ask for written proof, including account statements, of the negative information. Ask the creditor to remove the item from your credit report if it cannot verify the information.

7. Mark your calendar for 30 days. (See step 2.)

8. Send a demand letter to the original creditor. (See step 3.)

9. Add a 100-word statement to your credit file. If a disputed item is verified and the negative information remains on your credit report, you can add a 100-word statement explaining the item.

10. Seek legal advice. You have the right to sue a credit bureau or creditor that violates the Fair Credit Reporting Act. Filing a lawsuit is time consuming and expensive, so it should be a last resort.

Follow these helpful tips for filing a dispute:

Put everything in writing.Dispute each item in a separate letter.Always include your name, address and Social Security number for verification.Send all letters certified mail, return receipt requested.Make copies for your files.Be persistent. Several demand letters may be necessary.Credit bureaus are required to show disputed items as "Disputed" on your credit report.Always provide enough information for the credit bureau to conduct its investigation. A credit bureau may terminate an investigation if a dispute is frivolous or irrelevant.Once negative items are removed, you can request the credit bureau to send correction notices to anyone who has received your credit report in the past six months (two years for employment purposes).Here's what to dispute first:

Incorrect personal information. Include a copy of your driver's license, LES statement, or phone bill to correct this information.Incorrect or obsolete public record information (i.e., bankruptcies or judgments). Send a copy of your discharge papers or canceled checks to show that the information should no longer be reported.Accounts that are not yours or accounts that have been paid, closed or discharged in bankruptcy.Incorrect or outdated negative statements or late payment information.Credit inquiries more than two years old.Don't ignore mistakes, thinking that they will be automatically removed. It is up to you to dispute incorrect or outdated information. Following these suggestions will help ensure that your credit report dispute is handled properly and that your credit report remains error-free.

What is an Annuity?

 An annuity is long-term retirement product that can help protect you against the risk of outliving your assets. It is a contract between you and an insurance company: you receive future income in return for your contributions.Any earnings on contributions are tax-deferred until they are withdrawn, usually at retirement. You may receive income in a number of ways, including payments that will last for as long as you live. Annuities can be a valuable addition to your retirement plan.

Annuities may help you receive retirement income payments for as long as you liveProtect beneficiaries with a death benefitDiversify your investmentsProvide an opportunity for growth on a tax-deferred basisAvoid outliving your assetsFixed AnnuitiesSafety, Stability and GuaranteesChoose a fixed annuity for defined growth of principal and interest, free from taxes until your money is withdrawn. Fixed annuities generally guarantee a fixed amount of interest for several years; others guarantee rates from one to three years, and renew at the option of the insurance company.

Product Features

Tax-Deferred Growth: Taxes are deferred on the interest you earn until it is withdrawn.Guaranteed Interest RateGuaranteed Principal: Assets are not subject to market fluctuations.

Your principal can never decline in value.Guaranteed Renewal RateBenefits to Heirs: Death benefits paid directly to a named beneficiary are not subject to probate.Fixed Indexed Annuities

Now you can have the best of both worlds:

guarantee of principal and the potential of market-linked growth with no risk of loss of principal due to market downturns. Enter the fixed index annuity concept, a concept designed to help you reach your retirement goals.

Safety and Guarantee of Principal

A fixed index annuity (also referred to as an equity indexed annuity) provides you with the best features of a traditional fixed annuity - a guarantee of principal. Unlike most securities or mutual funds where your account balance can fluctuate due to market performance, premium deposited into a fixed index annuity is guaranteed to never go down due to market downturns. A contract owner of a fixed index annuity participates in market-indexed interest without market-type loss.

The Power of Tax Deferral

All annuity values accumulate on a tax deferred basis until withdrawn. Therefore, your money can grow faster because you earn interest on dollars that would otherwise be paid as taxes. Your principal earns interest and the interest compounds allowing you to accumulate more money over a shorter period of time, thereby earning a greater return on your money.

Fixed index annuity contracts generally allow for some form of penalty-free withdrawals, up to 10% of the full accumulation value, once each contract year after the first contract anniversary.

Guaranteed Lifetime Income

Fixed index annuities can provide you with a guaranteed income stream with the purchase of a fixed index annuity. You have the ability to choose from several different annuity payment options. With nonqualified plans, a portion of each annuity payment represents a return of premium that is not taxed, which reduces the income tax on your annuity payments.

Potential of Stock Market-Linked Growth

While the index annuity concept offers many features of a traditional fixed annuity, it has a rather unique feature that allows a potential of stock market-linked interest credits without the potential of any market-type loss. In contrast to a securities-type product or mutual fund where the investor bears the market risk, the fixed index annuity concept insulates the contract owner from any risk of loss of principal due to market downturns.

What is Indexing?

Earnings on a fixed index annuity are based on stock market-like performance from certain indices. But what is indexing? Indexing is simply an investment strategy that follows the performance of select securities, such as the Standard & Poor’s 500® Index. The S&P 500® is a collection of 500 select industry leaders and thus a benchmark for U.S. Stock Market performance. A fixed index annuity is linked to the performance of this type of market index, without the risk of directly participating in stock or equity investments. With indexing, you can participate in a diversified passive investment strategy: a link to the market and its potential gains without subjecting yourself to the potential downfalls of the market.

Expectations for the Fixed Index Annuity

Fixed index annuities have the potential for market-linked interest without exposure to the market risk. Contract owners enjoy the guarantees and safety of principal even while being linked to market growth. However, they should not expect fixed index annuities to mirror the exact performance of any stock market indices.Since a fixed index annuity uses a passive investment strategy, it will not mirror the exact return of the stock market index. The fixed index annuity is a powerful financial tool designed to meet your long-term retirement needs.

Does it sound like a Fixed Indexed Annuity might be right for you?  

 Immediate Annuities

Regular Income Now And For Life With an immediate annuity you can turn your assets into regular payments beginning now and lasting for the rest of your life or for a specified period of time. At retirement, you can use distributions from defined contribution plans, 401(k)s or IRAs to fund an immediate annuity and create a personal pension. By definition, immediate annuities are single-payment annuities. Any large sum of cash – from an inheritance, legal settlement, sale of a business or home – can be converted into an income stream for the duration you specify. Immediate Annuities are not intended to offer liquidity or growth potential. 

Immediate Annuities feature:Regular Payments: Can be received on a monthly, quarterly, semiannual or annual basis.Distribution Options: Depending on your particular needs, you can choose from distribution options: your lifetime, lifetime for you and your spouse, for a specified time (with your beneficiary receiving payments if you die during that period).Choice of Contract Types: Fixed immediate annuities guarantee level payments regardless of market performance.

Variable immediate annuities provide regular fluctuating payments reflecting the performance of the equities in which they are invested.

Tax Benefits: For immediate annuities funded with non-qualified assets, the payment of principal is tax-free; only interest is taxable.

Postponement of Taxes: For immediate annuities funded with qualified assets (i.e., from IRA’s or other tax-deferred accounts), earnings you have accrued are fully taxable. However, taxation is postponed by being spread out through the entire length of the annuity distribution

.No Withdrawals: Once purchased, immediate annuities have no cash value, so no payments other than the scheduled payments guaranteed under the contract are available.

Variable Annuities

Variable annuities provide the opportunity for market appreciation—through a variety of investment options—with tax-deferred accumulation and future income.

Variable annuities are designed for people willing to take more risk with their money in exchange for greater growth potential. While there is more risk associated with a variable annuity, many variable annuities offer guarantees of principal and downside protection at an additional cost (depending on contract rider availability). However, these guarantees do not apply to the investment performance or safety of amounts held in the variable investment options.

Variable annuities offer:

Tax-deferred Growth Potential: Taxes are deferred on earnings until money is withdrawn.

The Opportunity for Market Appreciation: A variety of investment options are available. 

Access to Account Value: Most variable annuities allow withdrawal of a portion of your account value without penalty. Withdrawals may be subject to a contingent deferred sales charge within the first several years of any contribution, and if taken prior to age 59½, will be subject to a 10 percent IRS penalty.Benefits to Beneficiaries: Death benefits paid directly to a named beneficiary are not subject to probate.Benefits to Spouses: Spousal beneficiaries may continue the contract and its tax deferral, if this option is chosen.Variable annuity contracts have limitations, will fluctuate in value and are subject to market risk, including the possibility of loss of principal. Variable annuities generally impose withdrawal charges based on the withdrawal charge schedule. A combination of withdrawals and market declines could reduce a variable annuity’s account value to zero, in which case the contract would terminate.

Survivorship Life Insurance

 Survivorship Life Insurance, also known as Joint and Survivor Insurance or second to die life insurance, are insurance policies that insure the lives of two people, typically a husband and a wife.

It is ideal to protect assets and to help pay debt like Reverse Mortgages. 

Many Famlies have these types of policies and they are not right  type of coverage for Funeral Expenese because the death benefit is not paid to the beneficiary until the death of the second insured. These survivorship life insurance policies are generally available as either whole or universal life policies, and second to die life insurance often provides more affordable life insurance than two separate policies. 

The reason a survivorship life insurance policy doesn't pay until the second person dies is that it is designed to pay or assist paying for estate taxes. Estate taxes can be delayed until both spouses die thus the design of these special insurance policies.

Joint Survivorship life insurance policies are effective tools often used by wealthy individuals in estate planning. By removing the proceeds of a life insurance policy through the use of gifting and placing policies in third party ownership such as a trust or in the name of children, a joint and survivor policy can be used to pay for estate taxes. Careful planning by your tax and legal counsel, coupled with a properly structured second to die life insurance policy, can help you preserve your net worth for your heirs.

Insurance for Special Needs Children

 Many times, Parents and grand parents request survivorship life insurance to make sure funds are available for a child with special needs for their care and financial security after the death of both parents. It is also important if you use this planning methodology to get individual life insurance to insure each parent’s income as well.

Understanding Second to Die Policies

 Survivorship insurance can be a "discounted dollars" strategy. What that means is that one can use this policy to pay pennies on the dollar now in order to have 100 cent dollars when they're needed to help pay estate taxes. This is a good analogy for any permanent life policy. For example, if you deposited $10,000 per year in a survivorship life insurance policy for $1,000,000 of insurance you are in effect paying 1% a year for 100% later. If the premium is guaranteed and you and your spouse live for 30 years, you would have paid in 30 cents for every dollar. What makes this even more interesting as a strategy is that if you set it up with third party ownership in an insurance trust (or with children as owners) the $1,000,000 could be set up to be both income tax free and not subject to estate taxes. Your attorney can assist you with the trust and ownership part of the strategy.

Contact us for a free No Obligation Consultation with one of our Life Insurance Experts!

Borrowing from a 401(k) plan might seem like an easy way to access money for important short-term goals, but it could have significant negative effects on your ability to achieve and maintain long-term financial security. Before you convince yourself that borrowing is the best way to address your current financial priorities, make sure you understand the 401(k) rules and the risks that may apply to you.

The first thing to do if you're considering borrowing from your 401(k) is to find out if your plan allows you to do so. Even though the IRS allows 401(k) loans, it does not require retirement plans to make them available to participants. In some cases, you may not be able to access your 401(k) money unless you are retiring, leaving the company where you work or facing an extreme financial hardship, such as a home foreclosure.

Benefits of borrowing from your 401(k)

With the exception of matching contributions from your employer that have not yet vested, or become yours, the assets in your 401(k) plan belong to you. As a result, many people see no reason to leave that money untouched if they need to address important financial priorities prior to retirement, such as getting out of debt, buying a home or paying for a college education. Typically you can borrow 50% of your vested balance up to a limit of $50,000.

Because you're borrowing from yourself, you repay the principal and interest to yourself, not to a bank or other financial institution. You won't face a credit check, so you're guaranteed to get the loan. Depending on how you use the money you borrow, it could potentially produce better returns than the investments available within your 401(k).

Risks of borrowing from your 401(k)

The most obvious risk of borrowing from a 401(k) is the risk of reducing the amount of money that will be available to help you pay bills during retirement. After all, the money you remove from your 401(k) to spend now will lose the ability to generate any investment earnings in the future, until you've paid it back.

This leads to the risk of opportunity cost, or the chance that your money won't be in your 401(k) when your investments rise in value. Because your retirement plan assets compound annually, the opportunity cost can be very significant over time.

You'll also lose out on tax advantages. The loan isn't tax-deductible, and you'll be paying yourself back with taxable income instead of the pretax contributions you originally made. Fail to pay back the loan in its entirety, and the entire value of the loan becomes taxable as income. If you're under 59 ½ years old, you'll also face a 10% IRS penalty for an early withdrawal.

From a logistical point of view, borrowing from your 401(k) could also pose problems. For example, you may need to pay fees, file complicated paperwork on deadline and wait a significant amount of time before finally receiving your money. In other words, if you need money next week, borrowing from your 401(k) is probably not going to be an effective strategy.

Who should borrow from a 401(k)?

In general, financial advisors will tell you that borrowing from a 401(k) is a last resort. You've set this money aside for your retirement, and that's where it should stay. Even if you pay the loan back, you'll have lost out on potential growth and compounding while the loan was in effect.

If you need money to save your home from foreclosure or to pay unexpected medical bills, borrowing from your 401(k) may be your only choice. Depending on your asset mix, you can minimize the opportunity cost by paying the loan back at an interest rate that is equal to or higher than the historic interest rate for your plan. For example, if you're heavily invested in bonds that produce annual growth of 5%, you'll minimize the damage by paying an interest rate of 7% or 8%.

You can also borrow from your 401(k) to buy assets that are likely to appreciate in value, such as a vacation home or rental property. Don't borrow to cover everyday living expenses, to buy depreciable items, such as cars and boats, or to pay for short-lived splurges like big-screen TVs or cruises.

You also shouldn't borrow from a 401(k) to pay off credit-card debts or loans. Most 401(k) plans are shielded from creditors if you declare bankruptcy, so creditors can't touch them. This will let you weather a current financial storm knowing that you still have savings for retirement.

Borrowing alternatives

Considering the potential risks and inconveniences associated with borrowing from your 401(k), it's often a better idea to pursue alternative strategies for getting money. If you own your home, consider a home equity loan. The IRS will allow you to deduct interest-but not principal-on these loans from your taxes. If you're really in a financial jam, you may want to consider selling your home and using the proceeds to buy a more affordable home and pay off other bills.

Other strategies to consider instead of borrowing from your 401(k) include:

Being a better budgeter. Many people facing a financial crisis have an eye-opening experience when they take a closer look at their spending habits and priorities. Quite often, they discover that their problems stem from irresponsible spending decisions, not a lack of sufficient income.Temporarily reducing 401(k) contributions. Instead of borrowing from your 401(k), you might be able to address your financial challenges by simply reducing the amount of money you set aside in your retirement account each payday. After you've used that extra money to help address your short-term goals, you can increase your contribution rate again.Using windfalls wisely. It may be tempting to spend an unexpected influx of cash on something fun, such as a vacation or digital television. But that may prove to be a short-sighted strategy. Make prudent choices about how to spend an unexpected tax return, workplace bonus, inheritance, etc.

5 reasons to roll a 401(k) to an IRA

Why would a 401(k) participant want to move his money out of a 401(k) and roll it into an IRA? Here are some thoughts on the issue:

1. Most 401(k) s and other company plans have limited investment options. They may offer 50 different mutual funds and other investments options, but most of the options are subject to market fluctuations. If we learned anything in 2008 and early 2009, it’s that what the market gives can be taken away with little to no warning. Many of these accounts lost as much as 40 percent in 2008 alone. Those who chose to play it safe and moved their 401(k) money into bond funds or funds invested in CDs and other short-term investments were rewarded with little or no growth while inflation and management fees ate away at their principal. IRAs have almost unlimited investment options including Annuities that guarantee the principal and offer a competitive rate of return.

2. Plan guidelines can restrict the owner’s access to his money. The plan document is essentially the 401(k) rulebook. If it’s not in the book, you can’t do it! With savings down and unemployment up, you never know when you may need access to your retirement accounts. IRAs offer greater flexibility, allowing the owners to make their own rules if they are willing to pay the tax on the distributions.

3. Direct rollovers avoid the 20 percent mandatory withholding. It’s critical that the funds are moved as a trustee-to-trustee transfer. If a check is written to the 401(k) owner, you can count on the custodian withholding 20 percent for the IRS. I have worked with several advisors who have encountered this problem, and they are still battling with the IRS to get the 20 percent withholding back where it belongs.

4. 401(k) s have limited distribution flexibility for the children and grandchildren who are likely to inherit when both the owner and spouse are gone. In 2002 when the multi-generational/“stretch” IRA was born, the children and grandchildren were given new valuable distribution options. They now have the right to spread the inherited IRA distributions over their individual life expectancies, according to Appendix C, Table 1 of IRS Publication 590. This means they are no longer forced into rapid distribution, causing rapid taxation. The 401(k) plan administrators didn’t get on board with this valuable income planning tool and are, in many cases, forcing these non-spousal beneficiaries to take full taxable distribution in just five years. Under the “Worker, Retiree and Employer Recovery Act” of 2008 (HR 7327), all employer plans will be required to allow non-spousal beneficiaries to do direct rollovers to properly titled inherited IRAs beginning Jan. 1, 2010. IRAs allow these beneficiaries to take control and choose between cashing out and receiving a lifetime of income.

5. Most 401(k) plans do not allow the Roth IRA conversion. Beginning this year IRA owners with adjusted gross incomes over $100,000 can for the first time convert their traditional IRAs to Roth IRAs. After the conversion tax is paid, the new Roth will grow tax-free and distributions after the five-year holding will also be income tax free. The Pension Protection Act simplified Roth conversions from 401(k) s and other company sponsored plans. Beginning in 2008, owners can convert company sponsored plan funds directly to a Roth IRA. They no longer need to convert to a traditional IRA first then convert the traditional IRA to a Roth IRA.

Courtesy of

Senior Market Advsiror

Retiree Robert Shively spends his days on the golf course. For many, that would be a dream come true, but not quite in the way Shively does it. The 68-year-old is the cart mechanic at the Niagara Falls Country Club.

Two and a half decades ago, his then employer, Occidental Petroleum Corp., cut its traditional defined pension plan in favor of a 401(k)-type system. So instead of getting a guaranteed pension check of $1,308 a month for his 36 years as a full-time, salaried employee, the former chemical-factory worker receives $225 a month from his 13 years as an hourly employee, plus $180.16 a month from a profit-sharing plan Oxy had for salaried employees until 1994. He also has $70,000 left of the money he saved from his tax-deferred 401(k). On the days he works, Shively rises at 5 a.m. to get to the golf course. He mostly enjoys the job. But on tournament mornings, he has to be at the course at 4 a.m. A few years ago the country club switched from gas to electric carts, some of which have four 84-lb. batteries each. Every year, Shively and another worker have to lift out all the batteries and store them for winter. "Your body aches all over," he says. (See 10 perfect jobs for the recession — and after.)

This isn't how retirement was supposed to be.

If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk — one more way to dodge Uncle Sam — the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened.

The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves. In the past two years, that has become all too clear. From the end of 2007 to the end of March 2009, the average 401(k) balance fell 31%, according to Fidelity. The accounts have rebounded, along with the rest of the market, but that's little help for those who retired — or were forced to — during the recession. In a system in which one year's gains build on the next, the disaster of 2008 will dent retirement savings long after the recession ends.

In what must seem like a cruel joke to many, the accounts proved the most dangerous for those closest to retirement. During the market downturn, the 401(k)s of 55-to-65-year-olds lost a quarter more than those of their 35-to-45-year-old colleagues. That's because in your early years, your 401(k)'s growth is driven mostly by contributions. You control your own destiny. But the longer you hold a 401(k), the more market-exposed it becomes. It's a twist that breaks the most basic rule of financial planning. (See 10 ways Twitter will change American business.)

The Society of Professional Asset-Managers and Record Keepers says nearly 73 million Americans, or just under 50% of our working population, now have a 401(k). And collectively we pour more than $200 billion into these accounts each year. But retire rich? Don't bet on it. The average 401(k) has a balance of $45,519. That's not retirement. That's two years of college. Even worse, 46% of all 401(k) accounts have less than $10,000. Today, just 21% of all U.S. workers are covered by traditional pensions, and the number shrinks every year. "The time may have come to consider returning 401(k) plans to their original position as a third tier of retirement planning, behind pensions and Social Security," says Alicia Munnell, who heads the Center for Retirement Research at Boston College. "They should not be the thing we rely on for retirement security." And the government seems to agree. This summer, the Government Accountability Office concluded, "If no action is taken, a considerable number of Americans face the prospect of a reduced standard of living in retirement." That's what is known as an understatement.

The 401(k)'s defenders say bad markets don't make the accounts a bad idea — and that it's still too soon to tell whether they work. Many companies adopted them less than 20 years ago. Even then, most firms (including mine) still provided pension plans to their workers. So boomers retiring now were never focused on piling money into 401(k)s. In order for the plans to succeed, workers have to stash savings regularly for about 30 years. Most accounts haven't been around that long.

Read more: http://www.time.com/time/business/article/0,8599,1929119,00.html#ixzz0vZHi8Pk2

CBS) The effects of the current economic crisis have touched everyone. Even if you still have a good job and a paid up mortgage, chances are your monthly 401(k) statement will remind you that you've lost a good chunk of your savings. Trillions of dollars have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there's time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people. It was a gray, chilly morning in midtown Manhattan and a line of unemployed, mostly white-collar workers, stretched for blocks around the Radisson Hotel. More than 1,000 middle managers, stockbrokers, consultants, secretaries and receptionists had come hoping to find a job. It was called a career fair, but there was no merriment - only a whiff of desperation. Many of the people at the career fair have been out of work for months and burned through their liquid assets; their future, even bleaker than the present. Alan Weir, who turns 60 this month, showed 60 Minutes his latest 401(k) statement, which he hadn't had the courage to open up. "I'm afraid," he told correspondent Steve Kroft. There's good reason for his trepidation: nearly half of his life savings have vanished in a matter of months. "It went down again," Weir told Kroft, after opening the statement. Overall, he said he was down about $140,000.