Yesterday evening, I had the courage to do something I have not done in a long time. I opened my 401(k) statement. It was a brave, bold move that made me ponder doubling up on my blood-pressure medicine before ripping the seal off the envelope.

In the end, my ticker was fluttering with beats of joy: up 33% so far this year.

My decision to overweight the small-cap sector in March paid off.

Even with those strong gains, the long-term trend line shows my heart is going to have to keep pumping for a couple extra years before my wife and I are going to retire in paradise. Most retirement accounts, mine included, are nowhere close to where they were 24 months ago.

As the recipient of a defined-contribution plan, my retirement savings are in my hands. That is not the case for the folks still holding defined-benefit plans. These pensions, once considered a low-risk path towards a reliable retirement income, are becoming far riskier than many workers ever imagined.

As corporate balance sheets crumble under the weight of massive debt loads and reduced revenues, many companies are having a tough time coming up with their required pension payments.

Read through the financial rags and you will see companies are unleashing new shares of stock just to cover their obligations, skipping payments and backing out of pension obligations all together. It is not good news for the folks that depend on the funds to put food on their table.

It is also equally not good for those of us that rely on the equities markets.

More trouble ahead

Look at it this way. Institutional investors are responsible for about 20% of total equity assets. Out of that $20 trillion or so, pension funds are responsible for 40% of the trades. That is a lot of cash.

Unfortunately, many corporate and government plans are underfunded, meaning they have some major catching up to do.

A recent study shows over 20% of funds have “significantly higher” required contributions coming up. In many of those cases, the obligations add up to an increase of 50% or more.

That’s a big problem when many of those companies and governments are fighting just to make their weekly payroll.

There is no doubt we will see a wave of payment defaults in the near future. That means less money – much less money – will flow into the nation’s equity markets.

It is still too early to tell just how badly this will impact the markets, but there is no question it will be significant.

Dow 14,000 once again? Not anytime soon if corporation pensions fall apart.

Source: Ready to Retire? Think Again

In a few minutes, I’m going to show you five of my favorite penny stocks that offer something I call a “Retirement: Plan B”. Before I get into that, let me touch on a very important topic few think about when investing…

When you put money into a stock, what’s the number one thing you always think? If you answered, “I hope this one goes up,” then you think like 99% of the investors. That’s fine. Most investors will always think that way.

Today, I’d like to introduce you to the other 1%. The few that fall into this group have one thing in common: they demand their gains. For them, hoping isn’t always good enough.

Into the Psyche of a “One Percenter”

If you’re like me, you have strict demands for your hard earned money.

If your cable goes out, you call the company to make certain the problem is fixed. You wouldn’t pay the bill if your service weren’t working. The same goes for the other expenses in your life. If your cell phone bill showed a strange $200 charge, you would call your provider and have it removed.

And as much as you shouldn’t pay for problems beyond your control, you should also be compensated for your foresight. Let’s say your best friend asked you for $5,000 to start a business. If you see that his business is booming a few months down the road, wouldn’t you say: “Hey, I deserve some of that?”

If this sounds like you, you might have the perfect “one percenter” attitude. And if you care about your money and what you receive in return for it, you are definitely a “one percenter.”

So why don’t you invest like one?

Introducing “Retirement: Plan B”

When buying a stock, a “one percenter” never thinks, “I hope this one goes up.” It’s simply not his first concern…

No, a “one percenter” is not asking too many questions. He already knows what his return on investment is, how long it’ll take, and how he can spend that money. He’s an income investor.

By income, I mean real investment plans that actually pay you. Most investors aren’t even aware you can invest like this.

These plans are very similar to classic pension plans… except, you don’t have to work for these companies. That’s why I call plans like this: “Retirement: Plan B”.

There’s a lot more to it than just sneaking onto a company’s pension plan. You can actually choose how many you want to pay you. You can start and stop them at any time without early withdraw fees. And, a few of these Plan B companies even match your investment as if you worked for the companies.

Now, you might think only a mega corporation could afford to do something like this. While the list of 987 Plan Bs does include the likes of ExxonMobile (NYSE:XOM), Microsoft (NASDAQ:MSFT), and Wal-Mart (NYSE:WMT), the majority of Plan B companies are small caps (under $1.5 billion market cap). And many of these trade for less than $10 a share, which makes them true penny stocks.

As promised, here are five of my favorite penny stocks that offer the Plan B:

• Kelly Services Inc. (NASDAQ: KELYA) – temporary staffing company, which provides over 750,000 people with jobs annually.
• Myers Industries Inc. (NYSE: MYE) – plastic moldings and rubber parts manufacturer.
• Insteel Industries Inc. (NASDAQ: IIIN) – steel wire reinforcing products for infrastructure projects.
• Alumina Limited (NYSE: AWC) – international alumina and bauxite miner, with limited smelting operations.
• World Wrestling Entertainment Inc. (NYSE: WWE) – a leader in wrestling media.

Unfortunately, it’s not as easy as buying shares of these companies. Instead, you have to set up the plan. It should only take three minutes, but you have to know what to ask for.

Source: Penny Stock Income Investing

And that’s precisely the wrong decision to make at the wrong time. No matter how poorly the financial markets are performing, saving for retirement has to remain a top priority.

“It’s not a time for people to stop contributing,” Diane Young, director of retirement and goal planning at TD Ameritrade Holding Corp. (AMTD), the Omaha, Neb.-based brokerage firm that conducted the retirement study, said in an interview with Bloomberg News. “Because time is money, it’s important to stay on track.”

According to the Ameritrade study – released yesterday (Tuesday) – 63% of Americans have completely stopped contributing to their retirement plan. Financial strain due to the economic downturn was cited by half (50%) of those who say they have reduced or stopped contributing to their retirement plan. Unemployment (32%) and healthcare costs (25%) also were cited as key factors affecting their ability to contribute to their retirement plan.

Only 54% of survey respondents, which included senior citizens, indicated they had a retirement account. Of that number, one out of three had less than $50,000 in investment assets.

But slacking off on retirement savings now is only going to hurt you more down the road.
Chipping Away at Retirement Assets

Giving up the power of compounding can be the most costly mistake an investor can make when it comes to investing for retirement, but unfortunately that’s just what many are doing in light of the dismal market performance.

And those dismal returns aren’t the only factor hammering the bottom line of retirement accounts these days. Retirees and those close to retirement are feeling as if they are under attack from all sides due to the factors that threaten a comfortable retirement.

The main source of income for many retirees continues to be the Social Security Administration. But the Social Security program has been at risk for years as life expectancies continue to grow and the number of retirees advances in kind. The program will only come under more pressure as the baby boomer generation edges closer to retirement.

“Social Security’s current annual surpluses of tax income over expenditures will begin to decline in 2011 and then turn into rapidly growing deficits as the baby boom generation retires,” the most recent trustees’ report said.

Many retirees depend on dividend payments from investments to supplement income. But with a growing number of companies reducing or eliminating dividend payments in the face of poor earnings or a changing business landscape, that income stream is dwindling.

Even companies with long track records of dividend growth, such as General Electric Co. (GE) and Bank of America Corp. (BAC), have been paring back.

Given the current market conditions, selling a stock that has eliminated its dividend is no longer as likely to make up for that lost income.

“If I’m down 25% in dividend income, but the stock is down 35%, if I sell the stock, can I afford to lose another 10 to 15% by selling?” Howard Silverblatt, a senior index analyst with Standard & Poor’s, told The Associated Press. “Younger investors can wait the market out and sell the stock when it bounces back. But older people are really stuck in a bad spot.”

Companies with poor earnings are also cutting back on company contributions to 401(k) plans, which can downright wreck your expected retirement calculations. General Motors Corp. (GM) recently announced that it would discontinue company-matching contributions for non-union employees until economic conditions improve.

According to a recent survey by Watson Wyatt Worldwide Inc. (WW), 2% of companies surveyed have already decreased 401(k) contributions, while another 4% are planning to do so in the 2009.

Retirees with defined benefit or pension plans aren’t in much better shape.

According to Adrian Hartshorn, an actuary with Mercer, a business consultant subsidiary of Marsh & McLennan Companies Inc. (MMC), the pension account assets of companies in the S&P 1500 are shrinking. At the end of 2007, the companies Hartshorn tracks had a collective surplus of $60 billion. But stock-market losses have transformed that $60 billion surplus into a $35 billion deficit.
Protecting Your Retirement

If you find yourself the victim of a cutback in company contributions or a loss of dividend income, make sure you take the initiative to safeguard your retirement.

“Redo your financial planning and figure out if you need to save more now,” Robyn Credico, Watson Wyatt’s national director of defined-benefit consulting, told The Washington Post.

Here are some more steps you can take to help protect your retirement account, even during difficult market conditions:

* Be Aware: AARP’s website has a number of interactive financial calculators that will help you estimate everything from how much you need to save for retirement to how much income you can expect during retirement. While you want a long and healthy life, you don’t want to outlive your money, so be sure you don’t underestimate your time horizon.

* Be Proactive: If you think you’re going to come up short when it’s time for retirement, reconsider your options. Some workers are delaying retirement to give their assets more time to grow. Other retirees are supplementing their income with part-time work or curbing expenses by cutting back on unnecessary expenditures.

* Be Thrifty: Save as much as you can. Make sure you’re getting the most out of your company 401(k) plan by maximizing the company match. And try to save the maximum annual limit for your company’s 410(k) plan or your traditional IRA. Contributions to your retirement account often reduce your taxable income, so it might not be as much of a sacrifice as you think. Indeed, some investors do double damage to themselves by ending their retirement plan contributions, but forgetting to also adjust their tax withholding. That can make for an ugly surprise at tax time – either with a smaller-than-expected tax refund or a bigger-than-expected tax bill.

* Be Investment Savvy: Align your retirement investments with your time horizon and risk tolerance. Generally, younger investors can tolerate more risk, while those closer to retirement need to choose more stable options. Money Morning Investment Director Keith Fitz-Gerald recently recommended American Century Capital Preservation Fund (CPFXX) as a “safety-first” investment choice for investors close to retirement. And don’t be overly dependent on dividend income or a company pension fund, both of which could be affected by overall poor market conditions or weak company earnings.

Source: Four Ways to Protect Your Retirement From the Ongoing Financial Crisis

First, the average American is not saving enough for retirement, especially with inflation on the rise. Second, pension schemes are coming under increasing scrutiny from lawyers and IRS auditors.

Add the grim outlook for the US dollar into the equation, and it becomes a no-brainer: You should move your retirement plan to another country before its too late…

One way to beat the restrictive US retirement systems of IRAs, 401Ks and other plans is to move your retirement plan offshore.

It’s a little-known approach, but it can spew out huge profits. An offshore retirement plan also demands fewer taxes and plays a greater role in producing and managing your future income.

You’re probably scratching your head right now. I don’t blame you. I did that too in the beginning. I won’t bore you with the details of the Internal Revenue Code that can give your retirement plan some very attractive advantages. Rather, I’ll share with you the threats and challenges you potentially face as you approach retirement and the solutions open to you.

The harsh truth is there are two very real threats to your retirement account.

The Survey Says: “Don’t Even THINK of Retiring Now!”

The first is that you won’t have nearly enough income to sustain yourself in your post-career years.

Surveys repeatedly show that we are NOT financially ready to retire. In a country with a negative personal savings rate, millions of so-called future retirees are simply not planning for the future…especially when US$4 gas, rising food costs, and a flat-out credit crisis are eating away at their savings.

Second, your retirement assets are exposed to several types of risk. Over the past few years, all types of retirement plans have come under attack in the courts. Certain lawyers have made careers out of going after retirement plans just like yours.

In fact, one very well-known attorney in the asset protection field said, “The successful attack on retirement plans is one of the fastest-growing areas of the legal profession.”

Beware of Uncle Sam and His IRS Agents

And it’s not just lawyers you should be concerned with. The IRS continues to take more than their fair share out of retirement plans if you make a “mistake” in reporting.

Our friend and expert retirement professional, Larry Grossman told us a story about a small business owner he knows. This small business owner had the misfortune to have the IRS audit his retirement plan. The IRS agents looked at all his investments over the years and all his paperwork.

The IRS said in effect: “Congratulations. Your investments have been perfectly in line with the rules.” But then the IRS agent asked for a piece of paper dating back to 1981 – a plan amendment required by a 1981 law. The business owner had no idea what they were talking about. (Imagine if the IRS asked you for a paper that was over 25 years old!)

So because of a missing piece of paper, the IRS ruled the business owner’s plan was disqualified and was now fully taxable. The plan totaled US$145,000 and the IRS wanted to take US$60,000 penalty! The owner was forced to settle with the IRS for US$10,000 and got stuck with US$13,000 in legal fees.

As you can see, it’s sink or swim when it comes to planning your retirement.

And What About the U.S. Dollar?

You may think you have plenty stashed away for a post-career rainy day, but if your assets are denominated in U.S. dollars then your retirement plan is already in trouble. As I’m sure you know, the U.S. dollar’s long-term outlook is pretty grim. If the U.S. dollar continues to plummet, then the value of your retirement plan will plummet right along with it.

That only increases your chances of running out of retirement savings half way through your golden years.

Fortunately for you, there are ways to maximize the potential benefits of your retirement plan to ensure these threats don’t affect the quality of the rest of your life.

If you seek positive investment returns, financial privacy, and a secure and prosperous retirement, it’s time to move your retirement plan offshore.

Source: Your IRA is More Flexible Than You Ever Thought Possible