An old stock market dictum says that spring is for profit-taking, or at least a time to reduce your exposure to equities.

In the classic market psychology, you “sell in May and go away” with the belief that stock prices will plateau or retreat in spring and summer, and then you return to stocks in the fall, taking advantage of bargains and factors that will encourage a hot fourth quarter.

In the last several years, we have seen all kinds of stock market behavior, some of it extraordinary. So is there any credence to this approach now?

The argument for “going away”. Over the last 12 months, investors who held to this belief made out pretty well. From May 1-November 1, 2011, the Dow lost 6.7%. From November 2011 through April 27, 2012, it gained 10.7%.

If we open a historical window – specifically, The Stock Trader’s Almanac – back to 1926, we see the S&P 500 rising 4.3% on average during May-October and gaining an average of 7.1% from November-April.

Unsurprisingly, STA editor-in-chief Jeff Hirsch is an advocate of the “sell in May” approach. So is Sam Stovall, who is of course the chief equity strategist at S&P Capital IQ. As Stovall just noted to Forbes, since 1945 the S&P 500 has gained just 1.2% during the average May-October run yet advanced 6.9% during the average November-April period.

While these numbers are pretty compelling, you know what they say about statistics.

Is the argument principally flawed? If you do sell in May, where do you put your money after dumping those stocks? The strategy assumes you know of a better place – an alternative to equities offering greater yield and less risk.

Larry Swedroe, director of research for Buckingham Asset Management, recently told CBS MoneyWatch that the “sell in May” approach amounted to “pure randomness”. He made his claim by running numbers in calendar years from 1950-2007 with the hypothesis of reinvesting money pulled out of equities into 30-year Treasuries during the assumed 6-month market lull. According to his research, the “buy and hold” crowd would have outperformed the “sell in May” crowd in the time frames 1950-2007, 1980-2007 and 1990-2007, with the “sell in May” adherents triumphing in the time frames of 1960-2007, 1970-2007 and 2000-2007.

The case for staying in the market. Even if the performance numbers mentioned in the fourth, fifth and sixth paragraphs of this article were absolutely predictable annually, what would the compelling argument be for ditching stocks? Gains would still occur in spring and summer; they would just be lesser gains.

Let’s go from hypothesis to reality, specifically what is occurring right now. An investor wanting a divorce from risk for the next six months could decide to bail from stocks and put the assets into short-term Treasuries and money market accounts. Would it be worth it? Maybe not. According to Bankrate.com, 6-month Treasuries were yielding 0.14% as of April 27 and money market accounts were yielding 0.46%. Throw in brokerage charges and taxes you might incur from selling, and getting in and out of equities may look less attractive.

Once you’re out, when do you get back in? What if mid-October brings a rally? Do you jump in and buy? What if the bears show up at the start of November? How long do you wait for what might be the market low?

Moreover … who’s to say that U.S. economic indicators (or even global ones) might be better than expected this summer? What if the EU arranges a manageable fix for Spain’s debt dilemma? What if the real estate market shows signs of heating up in the coming quarters? What if the Fed opts for more easing?

If the “sell in May” strategy sounds more like market timing to you than anything else, it does have some history supporting it – history worth considering. The fact remains, however, that history is no barometer of future stock market performance.

Is a tax refund coming your way? If you have already received your refund for 2012 or are about to receive it, you might want to think about the destiny of that money. Here are some possibilities.

• Start (or add to) an emergency fund. Many people don’t have a dedicated rainy day fund, only the presumption that they might have enough cash in case of a financial tight spot.

• Invest in yourself. You could put the money toward education, career training, personal improvement, or some sort of personal experience with the potential to enhance your life.

• Put it into an IRA or workplace retirement account. If you haven’t maxed out your IRA this year or have a chance to get an employer match, why not?

• Help your child open up a Roth IRA. Has your under-18 son or daughter worked and earned money this year? He or she can open a Roth IRA. Your child’s contribution limit is $5,000 or the amount of his or her earned income for 2012 (whichever is lower). You can actually make this Roth IRA contribution with your own money if your child has spent his or her earnings.

• Pay down debt. Always a smart choice.

• Establish a financial strategy. Some financial advisors work on a fee-only basis. They can perform a review of your current financial situation and give you pointers for the future for roughly $1,000 with no further obligation.

• Pay for that trip in advance. Instead of racking up a bigger credit card bill, consider pre-paying some costs or taking an all-inclusive trip (some are not as pricey as you might think).

• Get your home ready for the market. A four-figure refund may give you the cash to spruce up the yard and/or exterior of your residence. Or, it could help you pay a professional who can assist you with staging it.

• Improve your home with energy-saving appliances. Or windows, or weatherstripping, or solar panels – just to name a few options.

• Create your own food bank. What if a hurricane or an earthquake hits? Where would your food and water come from? Worth thinking about.

• Write a proper will. Your refund could pay the attorney fee, and the will you create might end up more ironclad.

• See a doctor, optometrist, dentist or physical therapist. If you haven’t been able to see these professionals due to your insurance situation or your personal cash flow, the refund might provide a way.

• Give yourself a de facto raise. Adjust your withholding to boost your take-home pay.

• Pick up some more insurance coverage for cheap. The typical flood insurance policy in a low-to-medium risk area costs less than $1,000 (and sometimes less than $500). A $1 million personal liability umbrella policy can usually be bought for $400 or less.

• Pay it forward. Your refund could turn into a charitable contribution (deductible on your 2012 federal tax return if you itemize deductions).

In the past two years, federal tax refunds have averaged about $3,000. That’s a nice chunk of change – and it could be used to bring some positive change to your financial life and the lives of others.

By March 16, retail gas prices were up 16.94% YTD. This major climb is leading some economists to wonder if the leap in gas prices is powerful enough to stall our economic momentum.

In February, energy costs rose 6% for the American consumer. Gasoline prices accounted for 100% of that gain. In fact, gasoline prices were behind 80% of the overall 0.4% rise in the Consumer Price Index for February, meaning that last month brought the most consumer inflation of any month since April.

Weve seen $4 gas. What if $5 gas becomes common? If that happens during the summer driving season, the Federal Reserve may find itself weighing which move to make. Higher energy costs could hurt the broad economy, and if that happened, you would almost certainly hear clamor for some kind of stimulus. On the other hand, if Wall Street and Main Street both fret that inflation is rising, the Fed would hardly want to ease.

How does these price hikes affect consumer psychology? One possible consequence of all this is that Main Street may be projecting greater inflationary pressures than really exist. In the University of Michigans mid-March consumer sentiment survey, the consensus one-year inflation expectation among respondents was 4.0%. Yet in February, actual yearly consumer inflation was just 2.9%.

Consumer expectations can have powerful influence. If consumers think inflation is rising, they may be inclined to ask employers for raises. The stores where they shop may try to take advantage of their perception by subtly raising prices. The assumption of inflation can actually have the power to foster inflation.

The Fed thinks the increase is temporary. If prices get too high, a point will come when demand for gas will lessen and correspondingly, prices could decrease. On March 16, a gallon of regular unleaded was averaging $3.83 nationally prices had risen $.08 in a week and about 9% in a month. Still, the Federal Reserve sees this wave of $4 retail gas as another short-term price fluctuation, ultimately unsustainable when drivers throw in the towel regardless of lingering worries over Irans budding nuclear program and oil supply concerns.

What is enough? What is not enough? If you’re considering retiring in the near future, you’ve probably heard or read that you need about 70% of your end salary to live comfortably in retirement. This estimate is frequently repeated, but that doesn’t mean it’s true for everyone; it might not be true for you.

You won’t learn how much retirement income you’ll need by reading this article. You’ll want to meet with a qualified retirement planner who can help you plan to estimate your lifestyle needs and short-term and long-term expenses.

With that in mind, there are some factors which affect retirement income needs; too often, they go unconsidered.

Health. Most of us will face a major health problem at some point in our lives; perhaps even multiple or chronic health problems. We don’t want to think about that reality. But if you’re a new retiree, think for a moment about the costs of prescription medicines, and recurring treatment for chronic ailments. These minor and major costs can really take a bite out of retirement income, even with a great health care plan. While generics have demonstrably slowed the advance of prescription drug costs in the past, one estimate found that 65-year-old couple who retired in 2011 would pay $230,000 for health care costs, excluding insurance and Medicare, as well as the costs for nursing home care.

Heredity. If you come from a family where people frequently live into their 80s and 90s, you may live as long or longer. Imagine retiring at 55 and living to 95 or 100. You would need 40-45 years of steady retirement income.

Portfolio. Many people retire with investment portfolios they haven’t reviewed in years, with asset allocations that may no longer be appropriate. New retirees sometimes carry too much risk in their portfolios, with the result being that the retirement income from their investments fluctuates wildly with the vagaries of the market. Other retirees are super-conservative investors: their portfolios are so risk-averse that they can’t earn enough to keep up with even moderate inflation, and over time, they find they have less and less purchasing power.

Spending habits. Do you only spend 70% of your salary? Probably not. If you’re like many Americans, you may spend as much as 90% or 95% of it. Will your spending habits change drastically once you retire? Again, probably not. Most people only change spending habits in response to economic necessity or in pursuit of new financial goals. People don’t want to “live on less” once they have had “more”.

Social Security (or lack thereof). Will Social Security even exist by the time you’ve retired? A study from the Government Accounting Office brings this into sharp focus, stating that the long-lived program may start to run out of money by 2036 and may be broke by the end of that decade. Furthermore, the GAO suggests a 20% cut in benefits, due to increased longevity and lower employment. Even if SSI is still a going concern in 2040, it may be very slim pickings.

So will you have enough? When it comes to retirement income, a casual assumption may prove to be woefully inaccurate. Meet with a qualified retirement planner while you are still working to discuss these factors and estimate how much you will really need.

Anticipation is high. Facebook filed an S-1 form with the Securities and Exchange Commission on February 1, taking its first big step toward going public. It aims to raise $5 billion through its upcoming IPO. Some of the details from the S-1 form:

• Facebook’s revenue climbed from $777 million in 2009 to $3.71 billion in 2011.
• Its annual profits went from $229 million (2009) to $1 billion (2011).
• Its profits grew by 65% last year alone.
• Its top source of revenue is advertising. (12% of Facebook’s 2011 revenues came from Zynga, a social network gaming company.)

The Google IPO raised $1.9 billion, and this IPO could potentially dwarf that.

Will this IPO live up to all the hype? It might; it might not. Let’s examine some other key tech IPOs and see how those shares have done since.

• Google. The IPO set the share price at $85. Here in early February 2012, the share price is now around $580. A home run by any definition.
• LinkedIn. On the day of the IPO, the share price climbed from $45 to a peak of $122.70 and settled at $94.25. At the start of February, LinkedIn was trading for about $72.
• Pandora. Shares were offered at $16 in June 2011; eight months later, they were trading at $13.
• Zillow. Shares were offered at $20 in July 2011 and ended at $35.77 on the day of the IPO; in early February, Zillow traded at around $30.

All in all, these numbers look pretty good, right? Sure they do, to institutional investors. Keep in mind that the little guy gets there second. It is the institutional investor – not the small investor – who gets first dibs on the stock and who frequently realizes the terrific upside. The individual investors get to get in after the shares take off; sometimes they pay a price.

Lessons from the dot-com (and dot-bomb) years. The 1990s may seem like ancient history, yet there are examples from the past worth noting when it comes to IPOs.

• University of Florida finance professor Jay Ritter has maintained a huge database on IPOs for decades. He did a study of 1,006 IPOs from 1988-1993 (these were all IPOs that raised $20 million or more) and found that the median IPO underperformed the Russell 3000 by 30% in the first three years after going public, and that 46% of the IPOs produced negative returns.
• In 1999, 555 firms went public and the median share price gain for these issues on the day of the IPO was 30%. But what if you bought after the first day? If you did, the median gain after three months averaged 0%. Additionally, almost 75% of all U.S. Internet-related IPOs from mid-1995 to 1999 traded underneath their offering price at the moment of publication.

Should Mom & Pop dive in? As MarketWatch columnist Mark Hulbert pointed out, Facebook’s IPO will be three times as expensive as Google’s and about 40 times as expensive as the average large IPO since 1975. As Hulbert found in the wake of a chat with Professor Ritter, Facebook’s price-to-sales ratio (PSR) looks to be about 26, with 2011 revenues of $3.71 billion and a reported IPO valuation of circa $100 billion. Google’s PSR was 8.7 at the time of its IPO.

Looking back, Ritter found 76 companies since 1975 with trailing 12-month sales from the date of their IPOs of $3 billion or more (in 2011 dollars), firms with more or less reliable revenue streams. Their average PSR: 1.0. AT&T Wireless was the highest of them at 8.9, and that was a 2000 IPO.

So in other words, Facebook would need staggeringly high revenues (or a consistently remarkable profit margin) for its shares to behave as well as Google shares did in those first few years out of the gate.

Could the tech sector see a “Facebook effect”? Yes, remember the “wealth effect” of the Google IPO? Some of the “best and the brightest” in the tech sector became overnight millionaires and went off and founded their own profitable firms. That sort of thing could happen again; there are tens of thousands of start-ups now generating revenues off of Facebook’s platform, so you have a whole ecosystem of smaller firms that are anticipating the IPO as much as institutional investors.

Caution might be in order for those awaiting Facebook’s IPO. Individual investors have swung for the fences many times in situations like this, only to strike out.

True or false? You may have heard this claim before (or something like it): Many Americans are being forced to retire later because their savings and investments took a hit in the Great Recession.

Recently, a big-name economist disputed that belief. In a commentary for Bloomberg, former White House budget director Peter Orszag wrote that some of the statistics dont seem to back up this conventional wisdom, but perhaps it all depends on which statistics you cite.

A fact that cant be ignored. In mid-January, a widely reprinted Washington Post article mentioned that since the start of the recession, the population of U.S. workers older than 55 has increased by 12% to 3.1million.

Examining this Labor Department finding, the Post feature referenced longevity and the loss of traditional pension plans as contributing factors. It presented stories of older workers who didnt think they could easily retire, and quoted respected commentators such as Alicia Munell, director of the Center for Retirement Research at Boston College, who remarked that some of these people are just clinging by their fingernails to jobs.

But is there more to the story? It turns out that Americans were trending toward staying in the workforce longer even before the recession. In 1994, Orszag notes, 43% of Americans aged 60-64 were working; in 2006, it was 51%. Nearly half of 62-year-olds went and claimed Social Security benefits in 1994, but 12 years later, less than 40% of 62-year-olds followed suit.

Orszag mentions another factor that may have kept older employees working during the recession: declining home equity. Put that alongside diminished IRA and 401(k) balances, and there was every reason to stay on the job these last few years.

However, just because older Americans wanted to keep working didnt mean that they could.

In the 2011 edition of its respected Retirement Confidence Survey, the Employee Benefit Research Institute found that 45% of retirees ended their careers earlier than they wanted to, in many cases due to layoffs and health issues.

The Post article noted that the jobless rate for workers older than 55 was just 3.2% in December 2007 when the downturn began. In December 2011, it was up to 6.2%.

The percentage of employed Americans aged 60-64, which had steadily risen during the 1990s and early 2000s, has remained at roughly 51% for the past five years.

That brings us to Orszags central point: The bottom line is that peoples retirement decisions arent always entirely voluntary.

How about your retirement decision? Do you think you will retire when you want to retire? Are you prepared for retirement financially? A new year is a good time for a new look at the state of your finances and your retirement readiness. With astute planning, you might be able to retire sooner than you think.

Mortgages are cheaper than ever. Economists and real estate analysts who predicted lower interest rates were not disappointed; the earliest numbers from 2012 have reached an all-time low, leading a number of homeowners to consider their options.

On January 12, interest rates on 30-year FRMs dropped to 3.89%. That was the third record-breaking week in a row, and the sixth week that rates were below 4.0

Interest rates are down across the board, as well: Freddie Mac is reporting 15-year FRMs are down to 3.16%, while 5/1-year ARMs and 1-year ARMs were down to 2.82% to 2.76%, respectively.

Lower rates could lead many to refinance. If youre considering it, you certainly wouldnt be alone in seizing the day; for the week of January 13, the Mortgage Bankers Association reported an increase of mortgage loan applications up 23% last week, with refinancing efforts up 26.4%.

Keep your eye on the big picture, though. While it might seem to your advantage to take your interest rate down a few percentage points, you need to know the answers to these three questions: 1) How much will you really save per month? 2) What are the lender points and fees? 3) How long will you be living in your current home?

For example: Knocking off a hundred dollars or more from your monthly payment might seem like a great idea, but how long are you planning to stay in your current home? As part of your agreement, your mortgage company could add a lender point (potentially thousands of dollars) and hundreds more in fees, making a refi short-sighted if theres a new house on your horizon.

On the other hand, if youre planning on staying in your home for several years, a refinance has the potential for big savings. If youre moving to a 15-year loan from your 30-year loan (or vice-versa) or from an Adjustable-Rate Mortgage into a Fixed-Rate, a long-term homeowner has a different scenario to consider.

Rates wont stay low forever. Theres no way to tell how long the trend will continue. An April 2010 headline in the New York Times proclaimed Interest Rates Have Nowhere to Go but Up. At that time, the average rate for a 30-year fixed mortgage was 5.31%. By January 2011, the rate had fallen to 4.71%.

Where advantageous rates are concerned, what comes down usually goes up. While you do have time to get on board with these low rates, nobody knows when they might take off again.

Consider your next move carefully. Refinancing may be an option, but its always a good idea to be fully informed before making such an important financial decision. Work with a qualified mortgage specialist to determine your options for refinancing, and then speak to your financial consultant for the big picture on how such a move might affect your financial future.

Every year brings some financial change, so here are some relevant changes relating to investment, tax and estate planning for 2012.

Retirement plans. 401(k), 403(b) and 457 plan annual contribution limits rise slightly to $17,000, and you can contribute an additional $5,500 to these accounts if you are 50 or older this year. IRA contribution levels are unchanged from 2011: the ceiling is $5,000, $6,000 if you will be 50 or older in 2012.

As you strive to contribute as much as you comfortably can to these accounts this year, you will probably notice some changes with the retirement plan at your workplace. In 2012, retirement plan sponsors (i.e., employers) will have to note all of the fees and expenses linked to the funds in the plan to plan participants. So if you have a 401(k) or 403(b), you may notice some differences in the disclosures on your statements and you will probably notice more information coming your way about fees. There is also a push in Washington, D.C. to have financial companies provide lifetime income illustrations on retirement plan account statements, projections of your expected monthly benefit at retirement age.

Income taxes. Wealthy Americans are set to face greater income tax burdens in 2013, so 2012 may be the last year to take advantage of certain factors. For example, the top tax bracket in 2013 is slated to be at 39.6% instead of the current 35%. This year, capital gains and dividends will be taxed at 15% or less for everyone, 0% for those in the 10% and 15% tax brackets. In 2013, the qualified capital gains tax rate is scheduled to rise to 20% and qualified dividends will be taxed as ordinary income. So taking a little more income in 2012 could be smart.

In 2013, the wealthiest Americans are supposed to be hit with new Medicare taxes: a new 3.8% levy on unearned income (such as capital gains, income from real estate, dividends and interest) and a new 0.9% tax or earned income. So next year, the truly wealthy could effectively face in the neighborhood of 45% federal taxes.

Additionally, the IRS is planning to limit itemized deductions for upper-income taxpayers in 2013. A phase-out will also apply for the personal exemption deduction.

Estate & gift taxes. At the end of 2012, some very nice estate tax breaks could sunset. Barring action by Congress, 2013 could see a 20% leap in the federal estate tax rate from 35% to 55%. The individual estate tax exclusion (currently $5.12 million) is scheduled to be reduced to $1 million.

As we have unified gift and estate tax rates, those numbers and percentages also apply to gift taxes. That is, from 2012 to 2013 top federal gift tax rate is set to go from 35% to 55% and the lifetime gift tax exemption amount is scheduled to fall $4,120,000 per individual to $1 million. The annual gift tax exemption is $13,000 per recipient in 2012; there is an exemption limit for qualifying educational and medical payments. If you want to gift relatives or friends, you may want to avoid procrastinating for another very good reason: when you make such a gift early in a year, the recipient will gain both the principal and any appreciation tied to the gifted asset in that year.

Speaking of gifts, we said goodbye to charitable IRA gifts in 2011. The IRA charitable rollover, a boon to non-profits and a handy tax deduction option for taxpayers older than age 70, was not extended into 2012, not even temporarily as a sweetener to the payroll tax extension bill. There is hope it will be back. Two bills have been introduced in Congress with that goal, one sponsored by Sen. Olympia Snowe (R-ME) and Sen. Charles Schumer (D-NY) and another by Rep. Wally Herger (R-CA) and Rep. Earl Blumenauer (D-OR). The proposed legislation would let IRA owners start making charitable IRA gifts at age 59 and remove the $100,000 limit on the rollovers.

The limits on the generation-skipping transfer tax could change, too: assuming the Bush-era tax cuts do sunset, the GSTT rate would jump from 35% this year to 55% in 2013, with the GSTT exemption falling from $5,120,000 per person this year to roughly $1.3 million per person next year.

So given all these changes, it might be wise to meet with the financial professional you know and trust early in 2012 as you strive to start the year off on the right foot. You have until April 17th to file your 2011 federal return, but you can plan for 2012 and beyond now.

A last-minute gift to 160 million Americans. On December 23, Congress approved a 2-month extension of the payroll tax holiday that President Obama quickly signed into law. So we will not see shrunken paychecks come January. The new law also extends long-term unemployment benefits through February 29 and authorizes a 2-month reprieve on pay cuts to doctors by Medicare.

Prior to 2011, wage-earners were paying 6.2% in Social Security taxes. If Congress agrees to lengthen the payroll tax holiday across 2012, workers will merely pay 4.2% on the first $110,100 of wages next year.

The latest extension in jobless benefits means that about 1.8 million Americans out of the workforce will keep getting unemployment checks averaging about $296 per week.

Medicare payments to physicians will not diminish by 27% come January.

The stopgap measure is both a relief and a prelude to much more debate. In total, the new legislation is projected to cost the federal government about $33 billion.

Who will pay for these extensions? The direct answer: Fannie Mae and Freddie Mac. The indirect answer: American homeowners and homebuyers.

Title IV of the new law (Mortgage Fees and Premiums) notes that Fannie and Freddie will be boosting guarantee fees on new loans next year. If the payroll tax holiday is approved for all of 2012, anyone who buys or refinances next year will end up giving back about 20% of the approximately $1,000 tax break.

Instead of collecting from borrowers directly with a fee hike, the twin GSEs will increase fees for banks and other lending institutions starting in January. The Congressional Budget Office projects that this will raise $35.7 billion across 2012-2021, with the revenue going to the Treasury rather than to Fannie and Freddie.

Comparatively speaking, this means that mortgage costs will be about $17 a month higher for someone purchasing a $200,000 home next year.

What about that pipeline? Yes, the proposed 1,700-mile Keystone oil pipeline that would run from Alberta to the Gulf of Mexico. House Republicans had wanted it as a sweetener to the bill, contending that it would create tens of thousands of jobs.

The newly passed legislation requires President Obama to either approve or kill the controversial project by March 1. The State Department says it cant manage a required environmental review by March 1 and therefore wont be able to recommend the project; citing White House sources, the New York Times says the President will abide by the State Departments guidance. However, that doesnt prohibit TransCanada (the company behind the pipeline) or any other energy company from introducing a similar idea.

The new agreement is effectively a postponement. When Congress returns to Capitol Hill next month, the debate over the yearlong extension of the payroll tax reduction should intensify. There will be three points of contention:

How to pay for the full-year extension. Democrats wanted a new tax on millionaires, while House Republicans preferred a federal pay freeze. The projected cost of the yearlong payroll tax cut is $112 billion.

Rethinking long-term jobless benefits. House Republicans have talked about ending benefits at 59 weeks, something Democrats do not favor.

Consideration for the health of the Social Security trust fund. If Americans do end up paying 2% less in Social Security taxes for all of 2012, how does the trust fund make up the slack? Some legislators want the Treasury to take care of the shortfall; others worry that the payroll tax will be permanently set at the current level and open the door to reduced Social Security benefits in the future.

Payroll taxes are reduced through February; in terms of the drama surrounding his issue, its only an intermission.  Stay tuned.

If your loved ones have invested, saved or insured themselves to any degree, you may be named as a beneficiary to one or more of their accounts, policies or assets in the event of their deaths. While we all hope that day never comes, we do need to know what to do financially if and when it does.

Legally, just who is a beneficiary? IRAs, annuities, life insurance policies and qualified retirement plans such as 401(k)s and 403(b)s are set up so that the accounts, policies or assets are payable or transferrable on the death of the owner to a beneficiary, usually an individual named on a contractual document that is filled out when the account or policy is first created.

In addition to the primary beneficiary, the account or policy owner is asked to name a contingent (secondary) beneficiary. The contingent beneficiary will receive the asset if the primary beneficiary is deceased.

Some retirement accounts and policies may have multiple beneficiaries. Charities, schools and nonprofits are also occasionally named as beneficiaries. If you have individually listed one (or more) of your kids or grandkids as designated beneficiaries of your 401(k) or IRA, that designation should override a charitable bequest you have stated in a trust or will.

A will is NOT a beneficiary form. When it comes to 401(k)s and IRAs, beneficiary designations are commonly considered first and wills second. If you willed your IRA assets to your son in 2008 but named the man who is now your ex-husband as the beneficiary of your IRA back in 1996, those IRA assets are set up to transfer to your ex-husband in the event of your death. Sometimes beneficiary forms are revised; often they are never revised.

If a retirement account owner passes away, what steps need to be taken? First, the beneficiary form must be found, either with the IRA or retirement plan custodian (the financial firm overseeing the account) or within the financial records of the person deceased. Beyond that, the financial institution holding the IRA or retirement plan assets should also ask you to supply:

• A certified copy of the account owner’s death certificate
• A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If the named beneficiary is a minor, a birth certificate for that person will be requested. If the beneficiary is a trust, the custodian will want to see a W-9 form and a copy of the trust agreement.

If you are named as the primary beneficiary, you usually have four options regardless of what kind of retirement savings account you have inherited:

1. Open an inherited IRA and transfer or roll over the funds into it.
2. Roll over or transfer the assets to your own, existing IRA.
3. Withdraw the assets as a lump sum (liquidate the account, get a check).
4. Disclaim as much as 100% of the assets, thereby permitting some or all of them to be inherited by a contingent beneficiary

However, these options may be influenced or limited by four factors:

1. The kind of retirement plan you have inherited.
2. Whether the named beneficiary is a spouse, non-spouse, trust or estate.
3. The age at which the account owner passed away.
4. The resulting tax consequences.

Before you make ANY choice, you should welcome the input of a tax advisor.

What if you are a spousal beneficiary? If that is the case, you may elect to:

• Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA or SIMPLE IRA into your own traditional or Roth IRA, or an inherited traditional or Roth IRA
• Withdraw the assets as a lump sum
• Roll over or transfer qualified retirement plan assets from a 401(k), 403(b), etc. into your own retirement account, or take them as a lump sum
• Disclaim up to 100% of the assets within 9 months of the original account owners death

What if you are a non-spousal beneficiary? If this is so, you may elect to:

• Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an Inherited IRA
• Withdraw the assets as a lump sum
• Disclaim up to 100% of the assets within 9 months of the original account owners death
• Leave the assets in the plan (sometimes permissible with qualified retirement plans)

What if a trust, estate or charity is named as the beneficiary? If that is the circumstance, there are three choices:

• Transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an Inherited IRA
• Withdraw the assets as a lump sum
• Disclaim up to 100% of the assets within 9 months of the original account owners death

The next calendar year will be very important. Inheritors of retirement accounts have until September 30 of the year following the original account owners death to review and remove beneficiaries, and until December 31 of that year to divide the IRA assets among multiple beneficiaries. Usually, December 31 of the year after the original retirement plan owners passing is the deadline for the first RMD (Required Minimum Distribution) from an inherited traditional or Roth IRA.

Now, how about U.S. Savings Bonds? If you are named as the primary beneficiary of a U.S. Treasury Bond, you have three options:

• Redeem it at a financial institution (you will need your personal I.D. for this).
• Get the security reissued in your name or the names of multiple beneficiaries. You do this via Treasury Department Form 4000, which you must sign before a certifying officer at a bank (not a notary). Then you send that signed form and a certified copy of the death certificate to a Savings Bond Processing Site.
• Do nothing at all, as the primary beneficiary automatically becomes the bond owner when the original bond owner passes away.

What about savings & checking accounts? Bank accounts are often payable-on-death (POD) assets or Totten trusts. All a beneficiary needs to claim the assets is his or her personal identification and a certified copy of the death certificate of the original account holder. There is no need for probate. (Some states limit charities and non-profits from being POD beneficiaries of bank accounts.)

How about real estate? Lastly, it is worth noting that about a dozen states use transfer-on-death (TOD) deeds for real property. If you live in such a state, you have to go to the county recorder or registrar, usually with a certified copy of the death certificate and a notarized affidavit which informs the recorder or registrar that ownership of the property has changed. If the deed names multiple beneficiaries and some are dead, the surviving beneficiaries must present the recorder or registrar with certified copies of the death certificates of the deceased beneficiaries.