In fact, 43% of the 401(k) assets owned by workers who left their jobs in the first quarter of 2008 were still with their former employers a year later, according to a recent Charles Schwab study.

But there are some very good reasons to move that money into an Individual Retirement Account (IRA) or the 401(k) at a new employer.

If you have the choice between an employer plan and an IRA, how do you know which is right for you? Ask yourself the following questions:

When do I want to retire? You can start making regular withdrawals from a 401(k) earlier than an IRA without incurring a penalty. You need to be 59½ to start drawing down your IRA; but you’re allowed to access your 401(k) savings if you leave your job at 55. .

Will I need emergency access to my savings? You can make penalty-free withdrawals from IRAs for several reasons, including medical bills that are more than 7.5% of your adjusted gross income; or to pay college expenses for you, your spouse, children or grandchildren.

How much do I plan to contribute? In 2009, the cap for what you can contribute to your 401(k) is $16,500, or $22,000 if you’re age 50 or older. IRAs allow you to contribute $5,000; if you’re over 50, you’re allowed to contribute $6,000. So if you’re in a position to stash a substantial sum away for your retirement this year that argues for a 401(k).

What kind of investments do I want to make? IRAs typically offer more investment options, including mutual funds, stocks, bonds and certificates of deposit. 401(k) plans usually have a more limited number of options. If you’re not comfortable with the choices your employer offers, that argues for an IRA.

This is one of the few, small advantages we can think of to the big decline in stock and mutual fund prices.

Since you contributed pre-tax dollars to a traditional IRA, you must pay ordinary income taxes on your contributions and any earnings when you convert to a Roth IRA (because Roth IRAs require contributions of after-tax dollars).

Converting when your IRA is worth less means you owe less tax.

Let’s say you’re in the 28% tax bracket and converted your traditional IRA back when it was worth $45,000. You’d owe $12,600 in taxes. But if your IRA is only worth $30,000 now, the tax bill would be only $8,400.

This year, you can convert a traditional IRA if your adjusted gross income (gross income minus income tax deductions) is less than $100,000 whether filing singly or married filing jointly.

The full amount you owe in taxes is due with your 2009 return.

If you wait until 2010 the rules get a little better.

The income limitation disappears and you can pay the taxes on the conversion in two equal installments in 2011 and 2012.

But if the stock market rebounds over the next year, you’ll pay more in taxes.

Are you feeling lucky?

The Center for Economic and Policy Research recently looked at how much wealth boomers lost from 2004 to 2009.

It found that many baby boomers have little, if any, equity in their homes, thanks to declining home prices (and, we suspect, some disastrous decisions to yank cash from their properties during the housing boom).

Nearly 30% of late boomers — that’s those 45- to 54-year-olds — and 15% of early boomers — the 55- to 64-year olds — now owe more on their homes than they are worth.

Boomer retirement accounts and other investments have been seriously depleted by the bear market that’s driven the major stock indexes down more than 40% from their peak in October 2007.

By the end of the year, the median household in the 45 to 54 age range will have seen its net worth fall by more than 45% since 2004 to just over $80,000. (That’s including home equity.)

Early baby boomers, those closest to retirement, will have lost 38% of their net worth and see their median wealth fall to $140,000.

1. This process is completely open to the public. Anyone who wishes to find out everything about your estate once you’re gone will have complete freedom to do so. Thanks to modern technology, a complete listing of your assets will probably be available online for the world to see.
2. As stated before, this process is totally beyond your control-and the control of your spouse or other prospective heirs. You may assume that all assets will simply go to your spouse, but this is usually not the case. Most states will automatically divide your assets equally between your spouse and your children, regardless of whether your children are ready to take ownership of their share.
3. Probate also offers anyone wishing to contest your will an opportunity to do so. This, of course, can lead to expensive legal proceedings that drag on for months. The costs involved in this will also be borne by your heirs.
4. There are many possible expenses that can be incurred in the probate process, including court costs, appraisal costs, executor’s fees, legal and accounting fees, and even surety bond fees in some cases. The typical cost of probate can often run between 3 to 7 percent of the value of the estate (and much more in some cases.)

Of course, your retirement assets are probably the last source of assets that you want to draw on in the event of a financial hardship, but at times you may have no choice. At all costs you would like to avoid the 10% early withdrawal penalty inherent in any kind of premature distribution. However, the IRS has allowed for several exceptions to this rule over time, although the rules for traditional and Roth IRAs versus qualified plans differ somewhat. These exceptions can be broken down as follows:

Traditional IRA:

• Death
• Total and permanent disability
• 72(t) distribution (a series of substantially equal and periodic payments)
• IRS levy of the plan
• Medical expenses
• Qualified higher education expenses
• First-time homebuyer expenses up to $10,000
• Health insurance premiums for the unemployed

Roth IRA:

• The same exceptions as for the Traditional IRA, except for the first-time homebuyer exception

Qualified Plans

• All of the exceptions that apply to Traditional IRAs
• Separation from service from your employer at age 55 or later
• Distributions made to your ex-spouse due to a qualified domestic relations order (QDRO)
• Dividend distributions from employee stock ownership plans (ESOPs)

The IRS has allowed these exceptions as both a means of relief and encouragement. The relief comes for the dead, divorced and disabled, while those who are trying to better themselves through education or trying to purchase a home can receive encouragement in the form of penalty-free distributions. Of course, these exceptions fall into a different category than other more common penalty-free transactions, such as rollovers or transfers between accounts or plans.

For example, assume that you invest $100,000 into a single premium immediate fixed annuity. A current contract from a major carrier would then pay out $658.59 per month, for a total of $7,903.08 for the year. The problem is, if the rate of inflation is 3%, then the purchasing power of these payments will decline from one year to the next. Obviously, $7,903 will not buy in a future year what it can now.

One way that annuity investors can deal with this problem is to purchase a cost-of-living rider on the contract. This rider is designed to ensure that the income from the annuity stays abreast of the rate of inflation over time. For example, the same SPIA contract with a 3% inflation protection rider will only pay $499.06 per month initially. But this amount will increase by 3% each year for the duration of the payout, thus providing some protection from inflation. Of course, it is plain to see that there is a cost to this rider, as the initial monthly payment is $159.53 less than the contract without the COLA rider. However, if the annuitant should live long enough to receive payments for the next 20 years, then the payment by year 20 would be $901.36 per month, or $242.77 per month more than the straight-life contract payout.

COLA riders can come in different forms, with some riders having a specific cost, while others (such as the one shown above) merely affecting the dollar amount of the monthly payout. Different rates of increase are also generally available, depending upon how much inflation protection the contractholder desires. For example, the contract shown above also has a 6% inflation protection rider option, which would result in the contractholder receiving a proportionately lower payment each month to begin with, and a higher payment at the end of the term.

An incentive trust resembles other types of trusts in many respects; it is established and funded by a grantor. In this case, the grantor is usually an older member of the family who wishes to pass on some or all of his or her wealth to younger family members-as long as certain goals are achieved. This type of trust can also make specific provisions regarding distribution of trust assets to beneficiaries.

As stated previously, the main advantage of an incentive trust is that it allows the grantor leverage to either financially reward or punish the behavior of the trust beneficiaries, within broad legal limits. Conditions such as age, education, lifestyle choices and employment are fair game in terms of criteria for this type of trust. For example, an incentive trust can restrict access to its assets to family members over age 25, or increase access for those who get a college degree. There could be a reward for carrying on a family business, or achieving some other personal or professional goal. Conversely, destructive behaviors, such as gambling or drug addiction can cut off trust assets as well.

However, if not written wisely, these trusts can also present your heirs with problems. Making unreasonable demands of your beneficiaries can lead to resentment and create other problems for them. For example, if the trust will only pay assets to an heir that is willing to continue the family business, then a beneficiary that happens to have other aspirations in life will be faced with what may be a rather substantial dilemma.

The key to successful incentive trust planning is flexibility. Remember that your heirs have their own goals and desires, which may never match up with yours. Choose the criteria for rewards and punishments wisely, and be sure to allow for contingencies such as disability or other misfortunes that could affect your beneficiaries’ ability to achieve the goals prescribed in the trust.

By definition, an equity-indexed annuity is currently considered a cross between a fixed annuity and a variable contract. These vehicles allow investors to participate in a set percentage of the gains of the stock market without any downside risk. A minimum guaranteed rate is usually also included.

Of course, there are a great many competent, legitimate agents and advisors who work with equity indexed annuities and match them appropriately with their clients’ needs. Unfortunately, there has also been a growing trend among some insurance agents and brokers to aggressively market these contracts to senior citizens as the only viable investment alternative available to them in these uncertain times. There are also numerous crediting methods used by many different insurers to determine the return on capital for the investor. While this type of annuity can offer higher returns than traditional fixed annuities, it also often contains a number of provisions that investors can find very confusing. For example, many equity-indexed contracts have very long surrender periods, such as 12 or even 15 years. While many of these products contain an initial free-look period that may last up to two years, they can become substantially illiquid once this period has expired. Contractholders that need to liquidate their investment after the free-look period and before the end of the contract term can face early withdrawal penalties of up to a whopping 35%, plus forfeiture of all gains within the contract. However, many companies will now allow investors to withdraw up to 10 or 15% of their contract value each year without penalty.

Prospective investors should carefully consider both the benefits and drawbacks of these complex instruments. While indexed annuities can be an excellent vehicle for some investors, those who may need greater liquidity may want to consider other alternatives.

One situation where permanent, or cash value insurance may be best is when there is a real chance that the insured or potential insured may become uninsurable in his or her later years due to health conditions. This is particularly true for those with estate tax issues that generally require life insurance to recify. For example, high net-worth individuals or couples may need to establish life insurance trusts in order to provide needed liquidity and relief from estate taxes. But this strategy is, of course, predicated on the ability of the insured(s) to pass initial underwriting requirements. And this ability can diminish with age for many consumers, who may have family histories of health problems that have surfaced for other members in their later years. Because term insurance requires its insureds to submit to new underwriting requirements at the end of each term, those in this category may no longer qualify for adequate (or even any) protection that may be vitally necessary to preserve the estate.

Another somewhat similar situation involves business buy-sell agreements. These agreements generally require that each partner in a business to purchase life insurance coverage on each of the other partners, so that when one partner dies, the death benefit from the insurance will be sufficient to buy out the deceased partner’s share of the business for the surviving owners. But again, it is absolutely necessary that the coverage be in force upon death, which may not be possible with term insurance. Therefore, some form of permanent coverage is generally used for this purpose.

Options themselves are considered to be derivatives; that is, securities that derive their inherent value from another security (namely, the underlying stock.) Options always involve two parties, a buyer and a seller. The buyer of a “call” option on a stock believes that the price of the stock will rise, and therefore purchases a call option that will allow him or her to buy the stock at a given price for a given period of time. If the stock price does rise, then the buyer can exercise the option to buy the stock at the preset price of the call, instead of the current higher market price. Then the buyer can turn around and sell the stock at the higher market price and thus make a profit. However, if the stock price does not rise, then the call will eventually expire worthless-and the buyer is out the cost of the call premium that was paid.

Conversely, those who sell covered calls do not feel that the price of the stock will rise; they believe that it will either remain steady or drop. Therefore, they are willing to be paid a premium in order to risk having to deliver the stock for less (perhaps much less) than the current market price. However, since covered call writers already own the stock that they are getting paid a premium to risk delivering, they can simply deliver that stock instead of buying it on the open market at a higher price and then delivering it to the call buyer at the lower option price. Therefore this type of option strategy is considered to be “covered”, because there is no chance that the seller will have to come up with a large sum of money in order to cover his or sale.