Outlook for the Stock Market

Extracted from Morningstar's September 2011 Quarter-End Insight

Uncertainty and equity market volatility will continue into the fourth quarter as European states struggle to balance the economic imperatives of their polities with their commitment to currency union. If uncertainty regarding the viability of the European Union deepens or if a determined and credible solution to the eurozone's structural weaknesses is not found soon, the impacts to global trade will likely be material over the short- to medium-term.

Companies in the U.S. are generally well-positioned to survive a downturn, having greatly improved the condition of their balance sheets and taken steps to increase profitability since the 2008-2009 downturn.

The European debt and fiscal crises have continued and deepened over the past three months to the extent that more and more observers are beginning to openly question the political viability of the European Union. The Greeks long for the ability to devalue their way to export prosperity that an independent Drachma would grant them while chafing at EU-imposed austerity measures; German voters grumble about picking up the tab for Greek profligacy.

In the U.S., what had long been considered a procedural matter of voting an increase in the debt ceiling limit to fund spending already approved by Congress turned into a full-blown political battle. The showdown ended up nearly halting government services and prompted the first agency downgrade of U.S. sovereign debt in history. The ugly political wrangling, combined with high levels of unemployment and an overall tepid recovery contributed to a drop in consumer confidence to 2009 crisis levels and set the ball rolling on what is feeling more and more like an equity bear market.

The one bright spot amid the gloom and concern has been falling energy prices. Gasoline prices have fallen for three consecutive months.

The two greatest contributors to U.S. GDP growth since the 2008-2009 downturn were the consumer and exports. We believe that consumer spending is likely to come under pressure for the prospects of higher taxes and lingering high unemployment levels, and also fear that a breakup or partial breakup of the eurozone or a dragging on of uncertainty over viable solutions to its structural problems could well crimp U.S. exports.

While these may sound like gloomy pronouncements, we must also note that thanks to steps taken during the recent downturn and an increased economic exposure to more rapidly expanding developing economies, many U.S. companies find themselves in enviable positions in terms of profitability and balance sheet strength. Profit margins are running at all-time highs, and the aggregate amount of cash on U.S. corporate balance sheets amounts to over $2 trillion--a record amount.

Women Face Extra Retirement Challenges

Women who take charge, do the math, plan for contingencies and work with their partners and/or financial advisors have a better chance of securing their finances in retirement than those who shrink from the process, according to a new study.

The MetLife Study of Women, Retirement, and the Extra-Long Life: Implications for Planning shows women face a number of unique financial risks—including outliving retirement funds, aging single, lower retirement incomes, greater health care costs and added care-giving responsibilities—and have not planned adequately to address these concerns.

The study examines the thinking and practices of mature women, ages 50 to 70, in the context of the "extra" challenges they may experience in retirement. According to the report, women expect to live until age 85, some until age 90, and are more concerned than men about the costs of health care and long-term care and outliving their assets.

Slightly more than half of the women surveyed know the likely amount of their retirement income/assets and only 44% have calculated the amount of their essential expenses, according to the study. Approximately one-in-six (16%) reported that they have or plan to delay retirement, on average, four years.

The data suggests that women who work collaboratively with spouses, partners, financial advisors and even knowledgeable friends, report higher confidence in their retirement security. Among men and women, men are more likely, by a margin of 65% to 55%, to calculate retirement income.

"The combination of risks for women and their relatively inadequate retirement planning has become known as the ‘perilous paradox,' but the message is clear that women are able to avoid that," said Sandra Timmermann, director of the MetLife Mature Market Institute. "The risks and costs of ‘living long and living female' call for an ‘affirmative action' plan. We find that those who plan for a steady stream of income, along with some flexibility for the unexpected, are best prepared for what can be an extended future."

Longer life spans for American women—who live longer than men, on average—creates additional costs and financial constraints that can lead to greater financial challenges in retirement, according to the study. As of 2009, women aged 65 years or older had significantly lower annual retirement incomes than men—an average of $21,500 vs. $37,500. American women are more likely to experience retirement alone since many never marry or are widowed or divorced.

More than half of the women, 54% compared to 44% of men, report that they are very or somewhat concerned about outliving their retirement resources, according to the study. Of women who were at least somewhat confident about their ability to live comfortably in retirement, 66% attributed this to having a guaranteed stream of income. Of those not confident, 61% said they lacked sufficient savings to last their anticipated lifetime.

From: Financial Advisor Magazine, 27 September 2011

401k Hardship Withdrawal & 401k Loans

It may be possible for you to access 401k money if the following four conditions are met (note that employers are not required to provide 401k hardship withdrawals, so check with your plan administrator):

• The withdrawal is necessary due to an immediate and severe financial need
• The withdrawal is necessary to satisfy that need (i.e., you can’t get the money elsewhere)
• The amount of the loan does not exceed the amount of the need
• You have already obtained all distributable or non-taxable loans available under your 401k plan

If these conditions are met, the funds can be withdrawn and used for one of the following six purposes:

• A primary home purchase
• Higher education tuition, room and board and fees for the next twelve months for you, your spouse, your dependents or children (even if they are no longer dependent upon you)
• To prevent eviction from your home or foreclosure on your primary residence
• Severe financial hardship
• Tax-deductible medical expenses that are not reimbursed for you, your spouse or your dependents
• Funeral expenses

All 401k hardship withdrawals are subject to taxes and the ten-percent penalty. This means that a $10,000 withdrawal can result in not only significantly less cash in your pocket (possibly as little as $6,500 or $7,500), but causes you to forgo forever the tax-deferred growth that could have been generated by those assets. 401k hardship withdrawal proceeds cannot be returned to the account once the disbursement has been made.

Non-Financial Hardship 401k Withdrawal

Although the investor must still pay taxes on non-financial hardship withdrawals, the ten-percent penalty fee is waived. There are five ways to qualify:

• You become totally and permanently disabled
• Your medical debts exceed 7.5 percent of your adjusted gross income
• A court of law has ordered you to give the funds to your divorced spouse, a child, or a dependent
• You are permanently laid off, terminated, quit, or retire early in the same year you turn 55 or later
• You are permanently laid off, terminated, quit, or retired and have established a payment schedule of regular withdrawals in equal amounts of the rest of your expected natural life. Once the first withdrawal has been made, the investor is required to continue taking them for five years or until he/she reaches the age of 59 1/2, whichever is longer.

Loan Alternative

Remember, once you take the money out of your plan using a hardship withdrawal, you can't put it back in and you lose for life the tax advantage on those funds.

A hardship withdrawal is not a loan. You can't repay it. You should see if your plan offers a 401k loan as an alternative to taking a financial hardship withdrawal. Plan loans are not subject to taxes or penalties, and you can continue to contribute to the plan while you repay the loan. (Some plans will even require you to exhaust your possibilities for a loan before taking a hardship withdrawal.)

However, if you leave your employer before the loan is repaid, you must pay back the remaining balance otherwise it will be considered a withdrawal and subject to applicable taxes and penalties.

As always, consult with your financial and tax professional for advice specific to your situation.

The REIT Way

The abundance of investment vehicles out there creates a challenge for the average investor trying to grasp what they're all about. Stocks are the mainstay of investing, bonds have always been the safe place to park your money, options have increased leverage for speculators, and mutual funds are considered one of the easiest vehicles for investors. One type of investment that doesn't quite fall into these categories and is often overlooked is the real estate investment trust, or REIT.

What Is a REIT?
A REIT trust company that accumulates a pool of money, through an initial public offering (IPO), which is then used to buy, develop, manage and sell assets in real estate. The IPO is identical to any other security offering with many of the same rules regarding prospectuses, reporting requirements and regulations; however, instead of purchasing stock in a single company, the owner of one REIT unit is buying a portion of a managed pool of real estate. This pool of real estate then generates income through renting, leasing and selling of property and distributes it directly to the REIT holder on a regular basis.

Advantages
When you buy a share of a REIT, you are essentially buying a physical asset with a long expected life span and potential for income through rent and property appreciation. This contrasts with common stocks where investors are buying the right to participate in the profitability of the company through ownership. When purchasing a REIT, one is not only taking a real stake in the ownership of property via increases and decreases in value, but one is also participating in the income generated by the property. This creates a bit of a safety net for investors as they will always have rights to the property underlying the trust while enjoying the benefits of their income.

Another advantage that this product provides to the average investor is the ability to invest in real estate without the normally associated large capital and labor requirements. Furthermore, as the funds of this trust are pooled together, a greater amount of diversification is generated as the trust companies are able to buy numerous properties and reduce the negative effects of problems with a single asset. Individual investors trying to mimic a REIT would need to buy and maintain a large number of investment properties, and this generally entails a substantial amount of time and money in an investment that is not easily liquidated. When buying a REIT, the capital investment is limited to the price of the unit, the amount of labor invested is constrained to the amount of research needed to make the right investment, and the shares are liquid on regular stock exchanges.

The final, and probably the most important, advantage that REITs provide is their requirement to distribute nearly 90% of their yearly taxable income, created by income producing real estate, to their shareholders. This amount is deductible on a corporate level and generally taxed at the personal level. So, unlike with dividends, there is only one level of taxation for the distributions paid to investors. This high rate of distribution means that the holder of a REIT is greatly participating in the profitability of management and property within the trust, unlike in common stock ownership where the corporation and its board decide whether or not excess cash is distributed to the shareholder.

Read more: http://www.investopedia.com/articles/03/013103.asp#ixzz1Yc81ZueF

5 Common Mistakes Young Investors Make

When learning any skill, it is best to start young. Investing is no different. Missteps are common when learning something new, but when dealing with money, they can have serious consequences. Investors who start young generally have the flexibility and time frame to take on risk and recover from their money-losing errors, but sidestepping the following common mistakes can help improve the odds of success.

1. Procrastinating
Procrastination is never good, but it can be especially detrimental while investing because the markets move so quickly. Good investment ideas are not always easy to find. If, after doing research, a good investment idea arises, it is important to act on it before the rest of the market takes note and beats you to it. Young investors can be prone to not acting on a good idea out of fear or inexperience. Missing out on a good idea can lead a young investor to two very bad scenarios:

1. The investor will revise his opinion upward and still purchase an asset when it is not warranted. Perhaps the investor rightly develops an opinion that an asset priced at $25 should be worth $50. If it moves up to $50 before he or she buys it, the investor may artificially revise the price target to $60 in order to rationalize the purchase.

2. The young investor will look for a replacement. In the previous example, the investor who failed to buy the asset that rose from $25 to $50 may quickly try to identify the next asset that will double. As a result, the investor might purchase another asset quickly, without doing the proper work and research, in order to try to make up for the previous "missed opportunity."

2. Speculating Instead of Investing
A young investor is at an advantage in his or her investing life. Holding the level of wealth constant, an investor's age affects how much risk an he or she can take on. So, a young investor can seek out bigger returns by taking bigger risks. This is because if a young investor loses money, he or she has time to recover the losses through income generation. This may seem like an argument for a young investor to speculate, but it is not.

Any young or novice investor will have an inclination to speculate if they do not fully understand the investment process. Speculation is often the equivalent of gambling, as the speculator does not necessarily have a reason for a purchase except that there is a chance that it may go up in value. This can be dangerous, as there are many experienced professionals waiting to take advantage of their less-experienced counterparts.

Instead of speculating and gambling, a young investor should look to invest in companies that have higher risk but greater upside potential over the long term. So, while a diversified portfolio of small-cap growth stocks would not be appropriate for an investor nearing retirement, a young investor is better equipped to take on that risk and can take advantage accordingly.

A final risk of speculation is that a large loss can scar a young investor and affect his or her future investment choices. This can lead to a tendency to shun investing altogether or to move to lower or risk-free assets at an age when it may not be appropriate.

3. Using Too Much Leverage
Leverage has its benefits and its pitfalls. If there is ever a time when investors have the ability to add leverage to their portfolios, it is when they are young. As mentioned earlier, young investors have a greater ability to recover from losses through future income generation. However, similar to speculation, leverage can shatter even a good portfolio.

If a young investor is able to stomach a 20-25% drop in his or her portfolio without getting discouraged, the 40-50% drop that would result at two times leverage may be too much to handle. The consequences of such a drop are similar to those resulting from a loss due to speculation: the young investor may become discouraged and overly risk adverse for the rest of his investing life.

4. Not Asking Enough Questions
If a stock drops a lot, a young investor might expect it to bounce right back, but more often than not, it is down for good reason. One of the most important factors in forming investment decisions is asking why. If an asset is trading at half of an investor's perceived value, there is a reason and it is the investor's responsibility to find it. Young investors who have not experienced the pitfalls of investing can be particularly susceptible to making decisions without locating all the pertinent information.

5. Not Investing
As mentioned earlier, an investor has the best ability to seek a higher return and take on higher risk when they have a long-term time horizon. Investors have their longest time horizons, and therefore a high tolerance for risk, when they are young. Young people also tend to be less experienced with having money. As a result, they are often tempted to focus on how money can benefit them in the present, without focusing on any long-term goals (such as retirement). Spending money now instead of saving and investing can create bad habits and contribute to a lack of savings and retirement funds.

The Bottom Line
Young investors should take advantage of their age and their increased ability to take on risk. Applying investing fundamentals early can help lead to a bigger portfolio later in life. There are also many risks that a young/less-experienced investor will face when making decisions. Hopefully, avoiding some of the common mistakes above will help young people learn investing early and embark on a fruitful investing career.

Read more: http://www.investopedia.com/articles/younginvestors/09/common-mistakes-young-investors.asp#ixzz1Yc65T31t

Fact Check: Tax Rates (not the rhetoric)

An analysis by the nonpartisan Tax Policy Center projects that for 2011, households with more than $1 million in income will have an average federal tax rate of 29.1%, compared to a rate of about 12.4% for households with income of $40,000 to $50,000. The center counts all federal taxes, including income, payroll and estate taxes.

Internal Revenue Service data suggest a similar pattern for individual income tax, according to an analysis by the Tax Foundation, a nonpartisan research group. It found that households with income between $40,000 and $50,000 have an average tax rate of about 6.8%, while households with income over $1 million have an average rate of 24.6%.

Source: Wall Street Journal

Term or permanent life insurance?

Few people who have bought insurance -- or even window-shopped for quotes -- have escaped the debate over term versus permanent insurance.

And the wrong kind of life insurance can do more damage to your financial plans than just about any other financial product today. So, the first and most important decision you must make when buying life insurance is: term, permanent or a combination of both? Let's look at each.

Term life policies offer death benefits only, so if you die, you win (so to speak). If you live past the length of the policy, you (or, more specifically, your family members) get no money back.

Permanent life policies offer death benefits and a "savings account" (also called "cash value") so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.

Permanent life insurance is more expensive

As you might expect, permanent life insurance premiums are more expensive than term premiums because some of the money is put into a savings program. The longer the policy has been in force, the higher the cash value, because more money has been paid in and the cash value has earned interest, dividends or both.

The debate is all about that cash value. If you buy a policy today, your first annual premium is likely to be much higher for a permanent life policy than for term.

However, the premiums for permanent life stay the same over the years, while the premiums for term life increase. That extra premium paid in the early years of the permanent policy gets invested and grows, minus the amount your agent takes as a sales commission. The gain is tax-deferred if the policy is cashed in during your life. (If you die, the proceeds are usually tax-free to your beneficiary.)

The saying you always hear is, "Buy term and invest the difference." The fact is, it depends on how long you keep your policy. If you keep the permanent life policy long enough (and the market ever fully rebounds), that's the best deal. But "long enough" varies, depending on your age, health, insurance company, the types of policies chosen, interest and dividend rates, and more. The reality is that there is not a simple answer, because life insurance is not a simple product.

Guidelines to live by when buying

Even with all of these variables, there are some guidelines you can follow. The key is how long you plan to keep the policy. If the answer is less than 10 years, term is clearly the solution.

If it is more than 20 years, permanent life is probably the way to go. The big gray area is in between. Here is where you need an expert to run the term vs. permanent analysis for you. Of course, this assumes you keep the policy in force. Most people drop their policies within the first 10 years, but if you do your homework now, that shouldn't be the case for you.

How to choose

Categorize your insurance needs by their use. If you need $60,000 for college and your youngest child will graduate in three years, you need $60,000 of term insurance as a short-term hedge against your death, thus insuring that your child can finish his or her education. Meanwhile, if your estate will owe $200,000 in taxes at your death, you probably need permanent insurance, because you're not likely to die in the next 20 years (you hope). You also may want to re-evaluate your estate plan, but that's a different issue.

Once you figure out your needs, it's time to choose the type of policy that makes most sense for you.

Term insurance

Term insurance is relatively easy. You can buy term insurance that stops after 10 or 20 years, or that can be continued beyond age 70. You can choose for your premium to increase each year (annual renewal term) or to remain at the same amount for a fixed number of years.

Most term policies offer both a current payment schedule and a maximum rate for each year. With some policies, the company reserves the right to increase premiums if company costs increase. With others, your health may be a factor in determining rates. At certain "re-entry" ages, you may have to prove your good health in order to keep the lower premium.

Most term policies are convertible to permanent ones without evidence of good health.

Types of permanent life

The real wild card in terms of price is permanent insurance, because most policies have guaranteed and nonguaranteed portions. There are three main types of permanent insurance.

Traditional whole life: This type offers the most guarantees. The annual premium is guaranteed, and there are minimum guaranteed cash values and death benefits. Most whole life policies these days are "participating," meaning that the dividends they earn can be used to increase the cash value and/or death benefits, decrease the premiums or be refunded in cash.

If you are a conservative investor and also have trouble saving, traditional whole life makes sense.

Universal life: If you need premium flexibility, especially in the early years of the policy, universal life is for you. Universal life insurance was developed in the 1970s, when insurance-industry regulations changed to allow insurers to be more competitive with other financial-services providers.

Universal life insurance is more flexible than traditional whole life, because premiums can vary from year to year and sometimes can even be skipped. Universal life has maximum guaranteed premiums and minimum guaranteed cash values and death benefits. Instead of dividends, universal life policies earn interest at the credited interest rate determined each year.

Variable life: If you consider yourself a knowledgeable and risk-accepting investor, check out variable life. Variable life insurance has the fewest guarantees and therefore offers the greatest potential for cash-value increases.

There are required guaranteed annual premiums and a guaranteed minimum death benefit. However, there is no guaranteed cash value, and you have to select the investments for your policy.

Buyers typically are offered a variety of mutual fund accounts, ranging from money market funds to aggressive growth funds.

Not an investment tool

Life insurance should never be purchased solely as an investment. After all, some of your premiums are being used to buy death-benefit coverage and to cover other expenses (including sales commissions). Life insurance should not be purchased on children as a way to save for college, and make sure you (and your spouse) have all the coverage you need on yourselves before you buy any coverage on a child.

When you make your purchase, avoid all of the fancy riders, but do consider the waiver of premium, which suspends your premium payments but keeps the policy in place if you become disabled.

http://money.msn.com/life-insurance/term-or-permanent-life-insurance.aspx

Does Life Insurance Make Sense When You Retire?

When you first start your professional life and have no one depending on you and no real assets or debts, life insurance is often not on the radar screen. The purpose of life insurance is to pay your debts and put your dependents in at least, as solid a financial position as if you were alive. Once you are married and have children and a mortgage, life insurance becomes a critical part of protecting the biggest asset you have - you! By the time you're retired, though, it is likely that your children are grown and have left the nest. You may have more assets and have paid down your debt. There is a possibility that you no longer need to carry life insurance. Here's a rundown on factors to consider when deciding to either buy or drop life insurance.

Your Debts and Assets
If you own your own home, in retirement, you likely have paid down a significant portion (if not all) of your mortgage. Your net worth may have risen substantially above its level when you were working. If your net assets and future pension entitlements will be enough to leave your spouse comfortable if you were to die, you may not need life insurance to carry out your estate's wishes.

Estate Planning Issues
Life insurance is often used as an estate planning tool to ensure that both the estate and the beneficiaries have enough cash to pay the final income tax bill and any transfer or estate taxes. If real property is being transferred, this can be an issue for some executors or beneficiaries who find themselves having to sell the property to pay the taxes.

Charitable Giving
Life insurance can also be used to create a legacy gift. If you want to provide a substantial financial gift on your death to an organization or foundation, you can make them the beneficiaries of your policy. In certain situations, the premiums paid on the policy can be deducted as charitable contributions.

Your Existing Insurance
Life insurance premiums rise the older you are when you first take it out. Term Life allows you to be insured for a set length of time (usually between five and 20 years), and then a new premium is set to renew the policy. If you have to renew after you are 60, the premiums are likely to be astronomical. A whole life policy, on the other hand, insures you until you die. Often, the premiums do not change over the course of the policy and it builds an investment portion that you can withdraw or borrow against in later years. The premiums are often much higher than term life. The type of insurance you already have makes a difference because, if you have to purchase new insurance in your retirement, the premiums may not be affordable. However, if you still have several years left on your term policy or, if you have an existing whole life policy, keeping up with the premiums can pay benefits down the road.

Your Health
Premiums for life insurance are high when you are in retirement, but you may not even be able to get a new policy if you are ill or have ongoing health problems. If you did not obtain life insurance while you were still healthy, it may be too late when you are sick. In that situation, it is important to use your income to ensure that you can pay for health care and that any extra goes to pay down debt.

The Bottom Line
Whether you need life insurance in your retirement depends on your existing insurance and your goals for passing on your net wealth to your beneficiaries. Many retirees no longer have a need for life insurance.

Read more: http://financialedge.investopedia.com/financial-edge/0911/Does-Life-Insurance-Make-Sense-When-You-Retire.aspx#ixzz1YRiHgubr

5 Things You Didn't Know About Life Insurance

Everyone knows what a life insurance policy is - it's an insurance contract in which an insurance company promises to pay out a monetary benefit to policy beneficiaries after the insured passes away, as long as premium payments are paid consistently and no misrepresentations are made on the application. Based on that definition, you can tell that life insurance is a pretty straight-forward policy, but that doesn't mean it can't be used as a sophisticated financial planning instrument.

There may be some things that you don't know about life insurance that could help to fortify your financial plan against certain risks and give you access to additional cash when you need it. There are many benefits to owning a life insurance policy - if you get the right one for you.

Cash Value Loans
If you need money for almost anything - paying taxes, supplementing retirement or college savings, funding a medical treatment or paying for a dream vacation, you can take a loan out of your life insurance policy's cash values in order to satisfy that need. Cash value loans are tax free, since they aren't considered gains but loans that you need to pay back, and interest is paid back to your policy rather than a lender. Just remember that if you don't pay back the loans before the death benefit is paid out, it will reduce the proceeds that your heirs receive.

Accelerated Benefit Rider
If you should be diagnosed with a terminal illness, you can access a percentage of the death benefits of your policy before you pass away if you have the Accelerated Benefit (sometimes called the Terminal Illness) rider. This can help defray some medical expenses and living expenses when you are no longer able to work, and can help you and your family stay comfortable financially during this difficult time. It is important to note that using this rider will greatly decrease the death benefit your heirs receive since it is accelerating a portion of the benefit to be received prior to the insured's death.

Decreasing Premiums/ Death Benefits
Term insurance policies offer a death benefit for a limited period of time. They are often used to cover temporary, large debts like mortgages because the term of the policy's benefit can be chosen for the number of years that the debt will be outstanding. But term policies are even more flexible than that. You can design yours so that the death benefit decreases over the years, much as your mortgage balance will, or you can design it to have decreasing premiums.

Variable Sub-accounts
When you invest in a variable life insurance policy , there are sub-accounts that you can pick from to invest your cash values in. These sub-accounts are created from underlying investments like stocks, bonds and money markets. They can vary in risk, volatility, and growth depending on how the underlying assets perform. If you become unhappy with the performance of one of your sub-accounts and you wish to make adjustments, you can. Additionally, you can allocate a percentage of your cash values to multiple sub-accounts.

Probate-free Death Benefit
Unless your assets are in a trust, your estate will need to go through probate after your death. Even if you have a will and no one who can contest it, your heirs will be forced to wait until after probate to receive your estate. Life insurance proceeds, however, do not need to go through probate unless the estate is named as the beneficiary.

The Bottom Line
Your life insurance policy can be as simple as you want it to be, or it can be a complex product designed to complement your overall financial plan and hedge against losses, terminal illness expenses and probate. It's up to you to design a policy that works the way you need it to, either as a simple death benefit or a sophisticated planning tool.

Read more: http://financialedge.investopedia.com/financial-edge/0811/5-Things-You-Didnt-Know-About-Life-Insurance.aspx?partner=msnmoney#ixzz1YRfQXSRG

What It Takes to Become a Millionaire

In most cases, the road to financial security in retirement comes with steady savings, strategic investing, and probably a later retirement date than you may have envisioned at the start of your career. Keep these three rules in mind: First, you need to live within your means. Next, you have to commit to saving a certain amount every month and stick to that goal. Then, you have to make sure your investments are in a diversified portfolio—a mix of stocks, bonds, and alternative investments (commodities and real estate) and rebalance that mix to attain your goals for growth.

So how long will it take until you're a millionaire?

If you start with an initial $10,000 investment and your portfolio grows by 5 percent every year, here's how much you need to save each month to reach your $1 million goal by age 70.

• 25-year-olds have to save $450 a month. That's just $15 a day for the rest of your working years.
• 35-year-olds have to save $850 a month.
• 45-year-olds have to save $1,700 a month.
• 55-year-olds have to save $4,000 a month. (Of course, with an average inflation rate of 3 percent, that $1,000,000 nest egg will only be worth $642,000 in today's dollars. So that means you'll likely wind up having to save even more.)

Extracted from: Sharon Epperson
http://www.cnbc.com/id/44559645

E.U. Debt Crisis Dominates World Markets

By John L. Caiazzo, Futures Magazine, 9/19/2011

The European debt crisis continues to be the dominant factor in global financial markets. The ongoing attempt by Germany, France and others to find a way to keep Greece from defaulting on its debt seems to me to be an exercise in futility. If Greece is unable to service its current debt, how can an extended loan and additional debt be supported? We are in favor of allowing whatever will be to be, and if it involves default, so be it.

Other countries are also problematic such as Spain and Italy. I cannot conceive of the countries who are experiencing financial difficulties due to the global recession coming to the aid of the weaker members of the E.U. just to save a currency that never made sense. Since the 17 countries in the euro all have different economies, I could not understand the one currency fits all concept anyway. My suggestion would be to let the chips fall where they may and not incur the wrath of the public in unwarranted spending during this time of crisis.

The latest report from Poland indicated that tens of thousands of trade union activists from around Europe marched to protest low wages and layoffs. They have no clue nor concern for their country in my opinion and do not realize nor care of the fragility of their economy. I think they should realize they are lucky to have jobs and take advice from President John F. Kennedy who said, "Ask not what your country can do for you, ask what you can do for your country."

In the U.S., a proposed "Buffett" tax calling for a tax rate hike for millionaires will actually only affect 0.3% of the American taxpayers and to me is a joke. The U.S. administration is playing on the concerns of the middle class where millionaires have supposedly been coddled to. Warren Buffett, obviously a friend to the President, proposed charging higher rates to millionaires which will have absolutely no effect, in my opinion, on the U.S. budget deficit since it only affect a small sector. The entire proposal is more of a psychological play on the feelings of the unemployed and middle-to-lower income families.

We continue to believe any tax increases to offset the rampant spending is not the answer. The answer is to cut spending and to create a tax program that benefits the businesses that hire people so that they know what their costs would be. The other situation I mentioned recently would be to impose duties on imports and entice corporations through competitive tax rates to return to the U.S. from the countries that provide such tax incentives. U.S. jobs were lost and the idea of creating a job from nothing makes no sense to me. We need to get those jobs back. We also point out that the government cannot create jobs. Only business can create jobs and the reluctance, under the confusing administration proposals does not provide confidence necessary for businesses to expand and hire.

http://www.futuresmag.com/News/2011/9/Pages/EU-debt-crisis-continues-to-dominate-world-markets.aspx

Increasingly, women are the ones paying alimony

There is strong Department of Labor data showing that an increasing number of women are earning more than their spouses, the main criteria for establishing alimony. From 1992, when Good Morning America anchor Joan Lunden got hit with an $18,000-a-month temporary alimony settlement, until 2009, 4 million more wives outearned their husbands. The biggest one-year jump occurred in 2009, the depths of the credit crisis, when the percentage of wives making more than husbands jumped to 37.7%, from 34.5% in 2008. Many Web sites now encourage men to seek alimony.

Women must also help non-custodial ex-husbands financially because of the 1984 Child Support Enforcement Amendment, which says that visiting children should enjoy the same standard of living with each parent as they do with the other.

While it’s true that men need money because of the poor economy, alimony and child support awards to men really are less a function of the poor economy and more a sign of women’s achievement in the workforce.

These imbalances bring up sensitive emotional issues.

It can also feel like a punishment for success. Self-employed women in particular, broke the glass ceiling—the mold—and blazed new trails to create their own businesses, and feel it’s all come back to bite them.

It’s a common complaint among women that their modest recent gains in the workplace are being snatched away too soon by alimony, excessive child support and college tuition. And even their workplace situation hasn’t improved. According to the Department of Labor, even though women made up 53.8% of the workforce in ’92, they had actually lost ground marginally eight years later, making up only 53.6% in 2010.

Source: Extracted from Maureen Devin Duffy in Financial Advisor Magazine
http://www.fa-mag.com/component/content/article/8311.html?issue=175&magazineID=1&Itemid=73

How to Manage Your Retirement Plans Right

Retirement Plans come in all shapes and sizes, and with varying options. It can be easy to brush your 401(k) statements aside, but it's a mistake to assume that your retirement is secure just because you have a plan in place. Whether you're in your 20s or 50s, it's important to consistently evaluate your plan and take steps to safeguard it for the future.

Contribute the right amount

How much participants contribute to their retirement plans depends on their age. Financial planners generally advocate saving as much as possible. Those in their 20s should shoot for contributing 10 percent of their income. The 30s age group should aim for 15 percent, while the 40s should contribute 20 percent. Those in their 50s who haven't saved anything should contribute the maximum amount. Including catch-up contributions, that maximum is $22,000 per year.

Regardless of your age, be sure to get the full match from your company for your 401(k), and count it toward your contribution amount. For example, if your company matches 3 percent of your income, then you should contribute 12 percent if you're in your 30s to make an even 15 percent when planning retirement.

Spread out your funds

It's not unusual to be perplexed by all the options in your 401(k) retirement plan. Don't make the mistake of picking funds without understanding them. Spread out your risk by choosing four or more fund options. Choose small, mid-size and large-cap funds, plus a bond fund for stability. Investing in a foreign stock fund also helps to diversify your portfolio. As a general rule, subtract your age from 100 to get the percentage amount that you should invest in stock funds.

Perform regular maintenance

Even though you may have spent a lot of time meticulously choosing your funds, you still need to check your plan quarterly. If you don't, the market could adjust your portfolio in an undesirable way. Check and tweak your portfolio as needed, at least on an annual basis.

Source: CNBC

http://www.cnbc.com/id/40642676

Saving Versus Investing and Why You Need Both

Saving, by definition, means reducing your consumption. Investing is a different concept. Investing involves risk in order to grow your capital. And you need to do both!

When you deposit money into a savings account, you know that money will be there (plus a little interest) until you need to make a withdrawal. Part of the reason interest rates are so low on savings accounts, money markets and certificate of deposit accounts is because the money is safe. If you think you may need the funds within five years, you want to put that money in an account that you can withdraw from without penalty.

Consider what you might need money for in the next five years. Your first thought should be to establish an emergency fund. If your water heater breaks, if your car is damaged in an accident, if your child breaks a leg and has uninsured medical expenses or you lose your job-you need a liquid fund for these unforeseeable circumstances. Thinking about purchasing a home in the next five years? You should start putting money into a savings instrument now for the down payment. Want to remodel your home in the next few years? This should be money you put into a savings account, money market or CD.

Many people stop there and think they are doing pretty well because they see their savings account growing and feel comfortable. However, for long-term expenditures and retirement one wants to invest that money where it can grow. Your first investment goal should be to fund your retirement. If you have children, it is tempting to invest in a college fund but unless you have a sizable retirement portfolio that has to come second. Your children can take out loans and get scholarships to pay for college. Who will pay for your retirement?

So just how much do you need to save and how much should you be investing? Most experts agree that you want to have between three and six months of your living expenses saved for an emergency fund. The thought of trying to sock away that kind of money might be overwhelming but start with a smaller, manageable goal of putting away a month’s worth of expenses and building from there. Break that down even further to amounts per week you can have automatically deposited from your paycheck into a savings account until you reach that goal. Don’t get an ATM card for this account or if you do, lock it away somewhere so you aren’t tempted to spend this money for anything but an emergency! And if you are lucky enough not to need it, make sure to take a look from time to time at the amount you have saved and your current living expenses. Maybe five years ago you rented at $500 a month and now you are a homeowner with a $1000 a month mortgage. Your emergency fund needs to be adjusted for that change. Again, this money should be liquid so you can get to it quickly in an emergency and not pay a penalty when you do.

Once your emergency fund is established, you can begin to look at other goals for savings and investing. A major decision is how much to invest for retirement. Experts say you should be investing 10% of your gross annual income to be able to retire and live on 75-80% of what you earned pre-retirement. This is going to depend on how long you have until retirement, how you invest the money and what your standard of living is now and how that will change once you retire. You can use a retirement planning calculator such as this one from cnnmoney.com to help you get a sense of how much you will need for retirement. If you are employed full-time, chances are your company has a 401K or similar plan. If they have a matching program-do not pass up this free money! If you do nothing else, make sure you are contributing enough for the full company match.

Investing in stocks, IRAs, bonds etc. outside your company’s 401K plan can be intimidating. Now more than ever, there is real aversion to risk. However, over the long-term you need to be taking some risk to realize a return on your investment. Though you can buy stocks online these days with a click of your mouse, you really should spend some time reading and educating yourself first. Community colleges often offer courses on investing in the stock market for the novice at a fairly reasonable cost. If you don’t have a company 401K or are self-employed, you will want to look into an Individual Retirement Account or IRA. Knowing what type to invest in and how much you can contribute is key. If you are not comfortable with making these decisions alone, hire a professional.

Whether you are in your twenties and single or in your forties and married with children, it is not too late to take charge of your financial opportunities. Start by establishing an emergency fund and then any short term expenditures you need to save for. Establish a retirement plan before you try to pay for your children’s college and don’t forget to contribute to your company’s 401K plan!

Source: http://www.hotcouponworld.com/2011/02/saving-versus-investing-and-why-you-need-both/

Who's Buying Gold? Err, Everyone

Here's a shocker: according to the World Gold Council all the gold that has ever been mined still exists today in one form or another.

Oh sure, there is stuff that is lost in the ground, or under the sea, but it's still there, waiting to be recovered.

How much gold are we talking about? About 165,600 metric tons (a metric ton is 1,000 kilos, or about 2,200 pounds), or 5.3 billion ounces.

To understand it visually, imagine two or three Olympic-sized pools. All the gold ever mined would only fill them. (An Olympic swimming pool is 50 meters long, 25 meters wide, and two meters deep, which is 2,500 cubic meters.)

What form does all this gold take?

Mostly, it's in the form of jewelery. Here's a breakdown.

According to the World Gold Council, gold sales in 2010 reached a ten-year high of 3,812 metric tonnes — about 135 million ounces. Jewelry demand remains strong, demand for gold bars is increasing rapidly, while demand for gold held in exchange traded ETFs, after increasing rapidly for several years, appears to be leveling off.

Who's buying all this gold?

India is far and away the largest consumer of gold in the world. It accounts for about one-third of all gold purchased — that is, consumer demand, not from central banks or government agencies.

Demand in China is also increasing rapidly, accounting for about 20 percent of global demand. Demand for gold in the Middle East is also increasing.

Why are the Chinese and the Indians, so keen on gold? Some of it is cultural, but some of it is a lack of alternatives. Other investments have proven to be poor bets. Bank deposits are returning negative rates of return, and stocks were not stellar performers in China last year.

This is also partly because of India's sheer size — 1.2 billion people, second only to China's 1.3 billion (and third to the U.S.'s 313 million), but also because gold ownership is part of an ancient tradition there.

Gold in India is not just viewed as a decorative item, or a faddish hedge against inflation; it is viewed as a store of wealth.

"There are no social welfare nets in India. The social welfare net is the extended family and the gold that they contain to support a family member when they get in trouble," says Mark Cutifani, CEO of Anglogold Ashanti, whom I visited in Johannesburg, South Africa.

Cutifani also says that of the more than 200 million households in India, 40 million are active purchasers of gold; he estimates in the next ten years the number of households buying gold will more than double. Even with those relatively small numbers, about 7 percent of household savings in India are already in gold.

Gold Production

Of course, there is supply coming on all the time, from two sources — mine production, and gold that is recycled. Mine production, which is "new gold," added 2,586 metric tons in 2010, about a 1.5-percent increase to supply.

But that's not enough to satisfy recent demand. Indeed, the World Gold Council notes that "since 1984, the amount of new gold that is mined each year has been substantially lower than the level of physical demand."

That's where recycled gold comes in. With gold at $1,700 an ounce, and with many facing financial hardship in western countries, recycling gold — mostly from melting down jewelery — has become big business. About 1 percent of the global supply, 1,645 tons, was recycled last year.

Gold Prices

Why has gold risen so rapidly in the last few years? Several factors:

• Constrained supply: Gold production is increasing only modestly. It's getting harder to find, and is more expensive to mine. Total gold production — which included mine production plus recycled gold — in 2010 increased only 2 percent from 2009.
  
• Increasing demand: The economies of India and China are growing rapidly, and so is their demand for gold.
  
• Central banks: Around the world they have become net purchasers of gold for the first time in 21 years.
  
• Decline of the dollar: Because gold is dollar-denominated, a decline in the dollar makes it cheaper to purchase gold in a currency that is appreciating against the dollar, and a weakening follar is inflationary.

You can see this most clearly in the case of India. Two-thousand and ten was a record year for Indian jewelery demand, according to the World Gold Council.

Source: Extracted from CNBC Special Report
http://www.cnbc.com/id/43974854

How Much Is Needed to Start Investing?

What is the minimum dollar amount needed to start investing? It is a question many ask and likely one that many others have, especially those who are new to investing.

Technically, you are only limited by the minimum amount required by a brokerage firm or mutual fund company to open an account. ShareBuilder, an online broker, has no required minimum account balance. More than 50 mutual funds included in the AAII annual mutual fund guide have minimum purchase requirements of $100 or less, including funds offered by Fidelity, AssetMark, USAA and Oakmark.

Pragmatically, you should weigh the dollar amount you have available to invest against the actual costs of creating a diversified portfolio. Brokerage commissions for buying and selling stocks and exchange-traded funds (ETFs) increase significantly on a percentage basis as the dollar amount invested decreases. Mutual funds, conversely, charge a flat percentage fee. Commission-free ETFs, which are offered by some brokerage firms (including Charles Schwab, Fidelity and TD Ameritrade) are even more advantageous from a cost standpoint.

Source: Extracted from Charles Rotblut, CFA, Editor, American Association of Individual Investors Journal

Stock market volatility: Extraordinary or ‘ordinary’?

The volatility experienced in the U.S. equity markets in August 2011 attracted widespread media and investor attention. Much of the media commentary focused on perceived causes for the volatility—such as the growth of hedge funds, high-frequency trading, and inverse exchange-traded funds. Little focus, meanwhile, was placed on the global macro environment, which faced a resurgence of the Eurozone debt crisis, the prospect of a slowing global economy, and political brinksmanship in Washington, D.C. And on August 5, Standard & Poor’s announced a formal downgrade of U.S. Treasury bonds from their AAA status, arguably creating even more uncertainty in a market already struggling.

Although the stock market volatility appears extraordinary relative to the calm of the last year, the levels of market variations today are, in fact, “ordinary” relative to the volatility of other recent periods characterized by major global macro events.

August’s volatility in equities, although high and painful to many investors, was not unexpected, given the market environment.

Going forward, it’s unknown whether the volatility will stay the same, increase, or decrease. What we do know is that previous periods of excess volatility have clustered around global macro events, and that, during those periods, portfolios that included allocations to less risky assets such as bonds and/or cash tended to ride out the storm much more smoothly.

Source: Extracted from Vanguard Research Commentary, September 2011; Authored by Francis M. Kinniry Jr., CFA; Todd Schlanger; and Christopher B. Philips, CFA

Don't Let Fear Disrupt Your Investing (Part 2)

The influence of high volatility on retirement investors and their portfolios

Given their longer-term horizons, retirement investors would seem to have the greatest motivation to resist short-term pressures and stick to a predetermined portfolio allocation amid event-driven market volatility. A recent Fidelity report on the investment behavior of participants in workplace retirement savings plans shows that most people did stay on track during the peak 2008–09 period of financial market instability. However, it also showed that there were costly implications for the fraction of people who did tinker with their portfolios based on the market turmoil.

Among the key findings: On average, participants who kept contributing to their retirement plans throughout the 18-month period (October 2008–March 2010) had higher account balances than those who stopped contributing;Participants who maintained a portion of their retirement plan asset in equities throughout the entire period ended up with higher account balances than those who reduced their equity exposure amid the peak period of market distress . Thus, retirement investors who kept contributing to their plan and who maintained some exposure to equities throughout the period were better off throughout the market's 18-month bust-boom period than those who moved in and out of the market in an attempt to avoid losses.

Retirement investors who kept exposure to equities amid the peak of the global financial crisis ended up with higher account balances on average than those who reduced their equity exposure to 0%.

Managing your portfolio as volatility (and fear) escalates

As the examples in this article illustrate, the influence of loss aversion can cause investors to liquidate their holdings in an asset class during periods of high volatility. Investors who let their emotions guide decision making during these periods of market turmoil tend to reduce their assets at the worst possible time and when it is the most costly to them—near a market bottom. Acknowledging our human propensity to allow fears of loss and other emotions to drive our investment decisions is the first step toward finding a preventive method to keep you from tearing apart a well-constructed portfolio the next time it appears the financial markets are imploding.

Periods of heightened market volatility offer a stress test of sorts for our risk tolerance. How did you respond to your portfolio's performance during the recent spike in volatility? Were you more or less risk tolerant than you had originally thought when you conceived your portfolio mix? Psychologists have documented that our species is particularly bad at predicting how we will react under difficult circumstances. While we tend to be optimists, believing we will make the right decisions under duress, in reality many of us don't always respond as we forecast.

Due to our inherent human biases, putting predetermined measures in place may be critical to keeping ourselves from being consumed by our emotions during periods of high volatility. While the stock market has demonstrated an ability to persevere through many tumultuous events, one thing you can count on is that new storms are bound to blow in and create instability. Simple steps to prepare yourself for the next threatening market storm include studying your own history of reaction during periods of high volatility, reevaluating your portfolio strategy, and ensuring your asset allocations provide a level of diversification that suits your risk tolerance. During periods of short-term volatility, such long-term discipline can provide a healthy counterweight against behavioral biases that may conspire to throw your investment strategy off track.

https://advisor.fidelity.com/advisor/portal/content?deeplink=yes&pageUniqueName=afc.content&itemCode=RD_13569_24138&pos=MP&renditionType=HTML&clientId=g3AnFD5OYhA%3D

Don't Let Fear Disrupt Your Investing (Part 1)

Key takeaways

• Emotional investment reactions to sudden market declines and increased volatility tend to be driven by human behavioral biases, such as loss aversion.
• Historical patterns of investor behavior show that surging equity market volatility can cause some investors to make hasty, emotionally charged investment decisions that often turn out to be regrettable.
• Recognizing innate biases may help prevent investors from tampering with a well-crafted portfolio strategy during periods of severe market turmoil.

Some investors, including both individuals and professionals alike, have been prone to altering well-thought-out investment plans during such periods of heightened financial market turmoil. Decisions to move in and out of an asset class tend to be made hastily and out of fear and anxiety due to innate behavioral biases, as opposed to a disciplined portfolio review that considers how various assets should be allocated to suit one's investment objectives, risk tolerance, and time horizon.

Why your emotions can get the best of you

Our brains and behavior patterns have evolved under different types of living environments over hundreds of thousands of years. During the past decade, the study of the influence of psychology on the behavior patterns of investors and the subsequent effect on the markets—known as behavioral finance—has gained credibility among both academics and financial market participants.

As human beings, we generally have a stronger preference for avoiding losses than for making gains when evaluating the risks of an investment—a behavioral bias known as loss aversion. Because of this behavioral tendency, we generally respond and react more vigorously to the onset of negative events that could trigger painful losses in our portfolios than we do when faced with a similar likelihood that could lead to performance gains.

The strong influence of loss aversion helps explain why many investors disregard predetermined investment strategies when unforeseen, negative events occur. Such events fuel our fears of incurring losses, and cause an internal battle to break out between the logical side of our brains and the emotionally driven side, the latter of which often prevails. While rushing to sell our positions may serve to help quell our emotions, in hindsight the timing of such decisions also can turn out to be suboptimal.

Exiting near the peak of the 2008–09 global financial crisis

For example, near the peak of the 2008–09 global financial crisis, a record net amount of money flowed out of equity funds after the stock market plummeted. The Lehman Brothers bankruptcy filing in September 2008—the largest in history—triggered a stock market sell-off that led to record monthly equity fund outflows in October 2008. When the market hit new lows a few months later in February/March 2009, another large wave of outflows followed. As it turned out, many loss-averse investors reduced or liquidated their exposure to stocks near a market bottom, and when it actually turned out to be a pretty good time to be owning stocks . From the peak month of liquidations (October 2008) through the end of June 2010, the stock market rallied 16%, compared to near-0% returns on cash-equivalent investments. Further, because only a fraction of the massive outflows seen during the fourth quarter of 2008 and in early 2009 trickled back into equity funds throughout the subsequently robust 2009 rally, market-timing investors had either missed the market's abrupt turnaround or reentered the market at higher price levels.

Investors who stayed invested in stocks during the peaks in equity fund liquidations (Oct. 2008 and Feb./March 2009) and held on through May 2010 would have fared better than those who exited during the peaks in fund liquidations and missed some or all of the market's recovery.

In retrospect, the 2008–09 global financial crisis was arguably one of the most unnerving events facing investors since the Great Depression era. However, what these equity fund flow patterns show is that the timing of investors who get rattled by market volatility and choose to shift in and out of the stock market tends to be poor. The next time an unusual negative event creates a spike in market volatility, investors might recall that periods of turmoil are not unusual. Over the long run, the equity market has proven resilient throughout many crises.

https://advisor.fidelity.com/advisor/portal/content?deeplink=yes&pageUniqueName=afc.content&itemCode=RD_13569_24138&pos=MP&renditionType=HTML&clientId=g3AnFD5OYhA%3D

Divorced with a 401(k)? Read this...

Rule No. 1: With 401(k)s, your spouse is the presumed beneficiary of your account upon your death—regardless of who is listed on the beneficiary form—unless he or she previously consented to your naming someone else beneficiary. These plans are governed by the federal Employee Retirement Income Security Act, or ERISA. Under this law, plans can provide for those spousal rights to kick in immediately, or no later than a year after the marriage. This general rule cannot easily be circumvented with a prenuptial agreement. Only a spouse can waive the right to 401(k)-plan assets—those who are engaged cannot.

If you are contemplating remarrying and are concerned about providing for children from a prior marriage, consider rolling your 401(k) to an IRA, where you have more latitude to name beneficiaries of your choosing.

Rule No. 2: If you are single when you die, your 401(k) assets pass to the person designated on your beneficiary form—regardless of what your will says or what other agreements you made before your death. The U.S. Supreme Court has said so.

Example: William and Liv Kennedy called it quits after 20-plus years of marriage. As part of their divorce agreement, Liv waived her rights to any benefits under William's DuPont Co. retirement plan. William never remarried. He also never changed the beneficiary designation on his retirement account from Liv.

When William died, a dispute arose between Liv and the couple's daughter, Kari Kennedy, over who had the right to the funds in the DuPont plan.

After conflicting rulings in the lower courts, the Supreme Court agreed to hear the case and in a unanimous decision in 2009 held that the person named on the beneficiary form gets the money—even if that person happens to be the employee's ex-spouse, and even if that ex-spouse waived any right to the money in a divorce agreement. Kari Kennedy was disinherited.

The lesson: If you get divorced and your ex-spouse gives up any claim to your 401(k), update your account paperwork with the name of your new beneficiary.

Rule No. 3: With IRAs, which are subject to state law, you generally can name anyone you like as the beneficiary, with or without your spouse's consent. (Certain restrictions apply in community-property states.)

Example: Wayne Wilson married Katherine Chandler in 2000. Two years later he opened an IRA at Charles Schwab Corp. and named his four grown children from a prior marriage as beneficiaries. Three years after that, at the age of 65, he died.

His wife tried to claim the IRA assets, arguing they had originated from Wilson's Siemens AG 401(k) plan.

But last year the U.S. Court of Appeals for the Ninth Circuit awarded them to the children, ruling that spouses have no ERISA rights to IRA benefits.

What if you designate your spouse as your IRA beneficiary and later get divorced? Under most states laws, the designation would become null and void upon your death, unlike with 401(k)s. Your assets will pass according to the default plan laid out in the IRA document—typically to your estate if you are single, he says.

If you actually want your ex-spouse to inherit your IRA, you must fill out a new beneficiary form indicating so.

Rule No. 4: Workers generally don't need a spouse's consent to cash out a 401(k) or roll it to an IRA when they change jobs or retire. Although employers may impose such a rule, the vast majority do not, as there is no federal law requiring them to do so.

What it means, is that once you change jobs or retire, there is usually nothing preventing you from spending the money on a trip to Tahiti or rolling it to an IRA and leaving it to the gardener, rather than your spouse.

To be sure, most states have laws ensuring that a spouse cannot be totally disinherited. These rules might guarantee that your spouse will receive at least one-third to one-half of your estate. But, this is cold comfort to spouses who have little retirement savings of their own, perhaps because they interrupted a career to care for children.

http://www.marketwatch.com/story/family-feuds-who-inherits-401k-or-ira-2011-09-07?pagenumber=1