The Pension Protection Act of 2006 encouraged many companies to automatically enroll their employees in their 401(k) plans. By many accounts, this was a positive development, since the default choice, that requiring no action on the part of an individual, often proves to be the most popular. On the other hand, the timing of this law could have been better in retrospect since its enactment was shortly followed by the biggest stock market correction in decades.

Nonetheless, it's a net win for employees who, on average, are now more likely to save for retirement through their 401(k) plans than previously. However, even if you or a loved one have been automatically enrolled in your plan, that's just step one. Other considerations for those who have been "opted-in" to their workplace retirement plans include:

The contribution level: is it high enough? Often it is set at a relatively low rate.


Are the investment selections appropriate? If you're particularly risk-averse and your default investment selection is a target date fund, you may need to scale back your equity allocation. Another possibility is that you've been placed in guaranteed income or stable value funds yet are young enough to benefit from and handle the corresponding risk of a stock-based investment selection.

Even if you've been fortunate enough to be participating without any previous action on your part, now is the time to make sure the detailed selections made on your behalf are truly appropriate for you.

You don't need me to tell you that times are tough. After all, between the nightly news, the remaining newspapers in circulation, and the myriad of web sites, it would be hard to miss the reality of the ever-increasing unemployment rate, the higher frequency of foreclosures, and the generally lower level of consumer confidence.

All this news might make you want to cut back on spending to ensure yourself of a greater emergency fund should you personally experience a financial setback. But be careful of cutting back on your 401(k) contributions. If you have one, a 401(k) plan is one of the most important long-term saving vehicles available. Not only does your contribution save you taxes the very day you save, but you can also benefit from decades of tax-deferred growth.

Should your employer also offer you a match on your contribution, your failure to fully capitalize means you are forgoing free money. No matter the circumstances, that's never the right move.

Broadly speaking, there are two kinds of mutual funds: actively managed funds and index funds. Actively managed funds are run by investors managers who make frequent buy and sell decisions with the specific intent of beating a certain market average. Index funds, on the other hand, are significantly more stable in terms of what they own: the index that they track. As such, index funds will always perform microscopically poorer than the relevant index, since they subtract some operating expenses. On the other hand, actively managed funds may beat or under-perform the return garnered by the benchmark index, in many cases by a significant margin. Over the long-term, very few professional managers consistently beat their index. Yet some still do. How do you prefer to invest?

With the unemployment rate rising throughout the country and, in some states exceeding 10%, many people are finding the need to dig into savings to pay monthly bills. Ideally, you'd have an emergency fund of three to six months of living expenses just for this purpose. But, even if you did have that kind of savings at the outset of the recession, you may now have burned through it. While it's never something I recommend, you may now find yourself starting at the possibility of taking money from your retirement accounts to pay for non-retirement expenses.

If you're unemployed, you can't take a 401(k) loan. But if your financial stresses have been caused by your spouse losing his/her job, then you may still have that option. In certain circumstances, you may also be able to tap your Roth IRA tax-free. Tapping any retirement account is not without peril. After all, you forever forgo the earnings and tax advantages of the money you spend today. As such, your first choice is to lower your expenses as far as possible. Nonetheless, if you must tap your accounts, be sure to do so minimally and intelligently.

Lifecycle funds, also known as target-date funds, have been growing in popularity. A relatively new financial invention, these funds allow for a comparable lower-maintenance opportunity for the individual investor. Instead of needing to rebalance your portfolio periodically on your own, lifecycle funds theoretically rebalance for you. Furthermore, they automatically become more conservative as the years go by since you eventually approach and enter retirement.

Recently, some target funds have been under scrutiny for having more aggressive stock allocations than might otherwise be expected based on the target year. Of course, this only became a widely discussed issue after the market correction exposed the downside potential that had always been there.

Like nearly any investment product, lifecycle funds have relative advantages and disadvantages.

What do you think of them now?

An estate plan is an important part of any financial plan, particularly so for those in or entering retirement. You've heard plenty about the importance of wills, trusts, and durable powers of attorney. Unfortunately, the most basic part of estate planning, beneficiary designations, is often ignored. On the positive side, it's the easiest and cheapest estate planning element to change.

Beneficiary designations are so critical because they override your will. Here's the typical "big mistake" of beneficiary designations:

Let's say a man participates in his 401(k) account at his job. When he first started, he completed the required beneficiary designation form and selected his wife as his primary beneficiary. Many years later he divorces and, sometime later, remarries. He updates his will but doesn't think of that beneficiary designation form he completed a couple of decades ago. Then he dies. Who gets the 401(k) money? Not his wife, even though his will says everything should go to her. Instead, his ex-wife gets the loot because the beneficiary designation form is what rules the distribution of those proceeds..

Make sure you double-check your beneficiary designations on all your accounts from time to time to ensure they still work they way you'd want them to should you suddenly pass away. You'll sleep better knowing you've taken care of your loved ones.

When it comes to estate planning, many people think only of a will. They're seldom right. In addition to a will, a power of attorney, a living will, and a health care proxy are all important considerations. In addition, a will is just the tip of the iceberg for what will be necessary to ensure that assets pass smoothly and at minimal expense and trouble to the next generation.

A revocable living trust is one of the most common and flexible trusts available to those people who would like to lessen the impact of the probate process. Such trusts are also quite useful in the case of step-families. A revocable living trust can be arranged so that assets ultimately meant for the children of one spouse can be made available (in part or in whole) during the lifetime of the surviving spouse but then, upon the survivor's death, pass on to the children of the first spouse.

An irrevocable life insurance trust (ILIT) is a much more specific trust relevant to a much narrower group of people. Primarily meant to help avoid the estate tax, an ILIT is a useful vehicle to accomplish that goal. However, the rules governing ILITs and all trusts are complicated. Furthermore, since trusts are legal documents, counsel with a competent estate planning attorney is necessary.

As with your investments, your estate planning needs should be periodically reviewed. If not for you, then for your heirs: make sure the plans you have in place are those you feel most comfortable with.

With the market meltdown depleting retirement account balances virtually everywhere, saving for retirement is making a comeback. Recently negative, the national savings rate has pushed back into positive territory. That's good news. But to be most effective in saving for our golden years, it's important not only to save, but also in the best ways. More often that not, using tax-advantaged plans such as regular (or traditional) IRAs, Roth IRAs, or 401(k) plans is appropriate.

While non-working spouses cannot contribute to workplace retirement accounts like 401(k)s, IRAs are another story thanks to spousal IRAs. Indeed, both spouses can contribute to an IRA - even if only one spouse works. Furthermore, if one spouse earns more than $10,000, both spouses can contribute the maximum $5,000 to each of their IRAs. (If both spouses are 50 or older, than one spouse would need to make at least $12,000 so that each can contribute the maximum $6,000 per individual.) Either way, spousal IRAs great opportunities to garner some tax-deferred or tax-free growth.

When you dollar cost average (DCA), you invest a certain sum of money in a specific investment (or investments) on a pre-set schedule. For example, you might arrange to put $100 into mutual fund X on the first day of every month. The primary advantage of dollar cost averaging is that you will buy more shares when the price of the investment is low and fewer shares when it is comparably higher. You automatically use DCA when you sign up for your 401(k) plan.

So, when wouldn't DCA be a good idea?

Turns out, about two-thirds of the time. Since the stock market generally goes up (notwithstanding the nearly two years of current market pain), by waiting to invest a lump sum of money, you miss out on more of the long-term price appreciation. Still, if and when you have a lump sum to invest, you don't know if we're about to enter a period of time when you would be better off investing all at once (two-thirds of such situations) or doing so over several months or longer (one-third of similar occasions). Like everything else, using dollar cost averaging is a trade-off between risk and reward. What would you do? What do you actually do? What do you think about dollar cost averaging?

Forbes Magazine just released its 2009 "Best Places to Grow Old List." Placing special emphasis on "the percentage of those aged 65 and over, the median income of those 65 and over, and the number of hospitals, clinics and elder care facilities per 10,000 people in each county," some potentially surprising locations made the list. Here are the top 10 counties, according to Forbes:

• Montgomery County, Pennsylvania
• Nassau County, New York
• Pima County, Arizona
• Palm Beach County, Florida
• Honolulu County, Hawaii
• Brevard County, Florida
• Montgomery County, Maryland
• Ocean County, New Jersey
• Westchester County, New York
• Lancaster County, Pennsylvania

These seem like great places to remain if you currently live there. But I wonder how many people could truly afford to move to such high-priced locales upon retirement? For that matter, how many retireees could afford to stay?

What do you think about this list?