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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Spring 2008 – Special Edition: Money Tips for All Ages

Before You Retire:
Getting Your Finances Ready for Your Golden Years

A man reading

If you're seriously considering retirement, you also should be seriously thinking about how to ensure that your financial life is as comfortable and stress-free as possible. Here are a few tips.

Make the most of your remaining paychecks to save for retirement. How much money you'll need to set aside for retirement — which for many people could last 30 years or more — will depend on a variety of factors. Among them: When do you expect to quit working? Will you continue to earn some income part-time? How much money do you have in savings and pensions? And, what kinds of expenses will you incur for housing and health care?

Because the future is uncertain, it makes sense, while you're still working, to put as much money as possible — 10 to 20 percent of your annual income, if not more — into savings for your golden years. Also make use of employer-sponsored retirement plans (especially if you'll receive matching contributions) and tax-advantaged Individual Retirement Accounts (IRAs).

Try to reduce or eliminate debt. "Another way to save more money now for a more enjoyable retirement later is to cut back on unnecessary expenses," especially if you will need to go into debt to pay for them, said Luke W. Reynolds, Chief of the FDIC's Community Affairs Outreach Section. He said to try to pay off most or all of your credit card balances and other loans to save on interest charges and avoid being burdened with repayment during your retirement years.

Develop a plan to stretch your money through a long retirement. "The idea is to determine where your money will come from during retirement, so you won't have to live in fear of running out of money," said Susan Boenau, Chief of the FDIC's Consumer Affairs Section.

For example, consult with the Social Security Administration (call 1-800-772-1213 or go to www.socialsecurity.gov) or your accountant to learn how much Social Security and pension income you'd get each month if you "retire early" — any time between 62 and your "normal" retirement age — and how much more you would receive if you hold off on retirement. The penalty for starting to collect Social Security payments early can be substantial.

Discuss with a financial advisor how and when to withdraw money from your tax-deferred retirement accounts, such as employer-sponsored retirement plans and traditional IRAs. Also periodically review your retirement portfolio — your mix among stocks, mutual funds, CDs (certificates of deposit), bonds and so on — to be sure it's well-diversified. And as you get closer to retirement, consider a more conservative investment strategy than in the past so you can avoid losses to principal that could mean having to postpone retirement or struggle financially.

For additional guidance, see "Helping Your Money Last...After Your Last Paycheck" in the Fall 2005 FDIC Consumer News, online at www.fdic.gov/consumers/consumer/news/cnfall05/helpingPG2.html.

For more help or information for people nearing retirement: Read our tips for consumers of all ages, including those regarding annuities, which are investments commonly marketed to people in or near retirement. Also see our suggestions regarding "reverse mortgages" and "variable annuities", and our guidance for financial caregivers. For more information about retirement planning, see www.mymoney.gov/retirement.shtml.

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Last Updated 5/13/2008