Retirement Strategies - Credit Cards

Having a credit card is often a necessity for most senior citizens – from paying for medicine and emergencies to booking a vacation. But for seniors living on a fixed income, there are concerns about carrying a large balance from month to month and running up significant interest charges. In the worst cases, the debt becomes unmanageable and a major source of stress for the account holder and the family.

Another problem for seniors is having too many credit cards. That's because the more cards you have, the more opportunities you have to get into debt. And that possibility could make it tougher for you to get the best deal the next time you apply for a loan, insurance, a mortgage or an apartment. Having a lot of cards also can make it harder to keep track of when your monthly payments are due or to even realize that a thief may have stolen one of your cards.

More information regarding credit cards may be found in the Federal Trade Commission (FTC) publication Choosing and Using Credit Cards at www.ftc.gov/bcp/conline/pubs/credit/choose. You can also call the FTC toll-free at 1-877-382-4357.

Retirement Strategies - A "To Do" List For All Ages

A successful retirement depends largely on the steps you take during different stages of your life. Here are some moves to consider. Note: Investment portfolios shown are illustrations only. You must decide what percentages and investments are right for you.

Your 20s and 30s (Early Career)
Contribute as much as you can to IRAs, 401(k)s, Keoghs and other retirement savings while meeting other goals, such as buying a home or starting a family.

Keep your debt from credit cards and other sources manageable.

If you don't already own a home, consider if this is a good option for you. While a home purchase can be expensive, it also can be an excellent investment and source of tax breaks.

Given your years until retirement, you probably can afford to be fairly aggressive with your investments. Possible portfolio: 60 to 80 percent in stocks or stock mutual funds and most of the rest in certificates of deposit (CDs), bonds, bond funds or money market accounts.

Your 40s and 50s (Mid-Career)
Continue putting as much as you can into IRAs, 401(k)s, Keoghs and other retirement savings accounts. Once you reach age 50, you can make "catch-up" (extra) contributions to IRAs, 401(k)s and other retirement savings accounts.

If you haven't bought a house already, consider doing so as a source of equity and a place to live in retirement. If you have a mortgage, periodically compare your interest rate to current market rates. If current rates are better, consider refinancing.

As you get closer to retirement, consider reducing stock investments and adding more conservative, income-producing investments. Possible portfolio: 50 to 70 percent in stocks or stock mutual funds and most of the rest in CDs, bonds, bond funds or money market accounts.


Your Early 60s (Late Career)
Ask the Social Security Administration, your accountant or your employer's personnel office to help you determine how much Social Security and pension income you'd get if you "retire early" – and how much you'd lose compared to holding off on retirement.

Discuss with a financial advisor when to withdraw money from your tax-deferred retirement accounts, such as employer-sponsored retirement plans and traditional IRAs. After age 59 ½, you can withdraw your money without penalty but subject to income taxes. Under IRS rules, you must withdraw a minimum amount from 401(k)s, traditional IRAs and certain other retirement savings plans by April 1 of the year after you reach age 70 ½ and each year after that. There is an exception to the rules for someone still working for the employer who sponsors the plan.

Consult with your legal or financial advisors about estate planning – organizing your financial affairs so that your money, property and other assets can go to your heirs with a minimum of costs, taxes and hassles.

You may need or want to buy health insurance or long-term care (including nursing home) insurance. Consider the need for disability (wage replacement) or life insurance coverage.
Reduce your consumer debt as much as possible and consider the pros and cons of paying off your mortgage early. But if you think you'll need to borrow money during retirement, determine whether you want to refinance your mortgage, take out a home-equity loan, apply for a credit card or otherwise take out a loan before you retire. You might have more options for getting a loan when you still have employment income. No matter what loans you have or how old you are, it's important to keep your debts manageable.

Consider reducing your stock ownership and increasing your conservative investments. Possible portfolio: 30 to 60 percent in stocks or stock mutual funds and most of the rest in CDs, bonds, bond funds or money market accounts.

Your Retirement
The rules governing retirement can be complicated. So, about a year before you plan to retire, discuss your situation with a Social Security Administration claims representative. After you decide on a retirement date, apply for your Social Security benefits and other pensions about three months in advance. If you plan to work part-time, find out how this will affect your Social Security income or taxes.

Arrange to have your periodic payments, such as Social Security benefits, directly deposited into your checking account. Ask your personnel department or financial advisor about whether to receive your 401(k) money in a lump sum or periodic payments.

Reduce your debts as much as possible. Be careful before taking on new debt, such as a home-equity loan or a reverse mortgage.

Lean toward conservative, income-producing investments, but don't rule out stocks or stock funds. Possible portfolio: 20 to 40 percent in stock or stock mutual funds and most of the rest in CDs, bonds, bond funds or money market accounts.

Retirement Strategies - Social Security and Pension Benefits

To begin:

Determine when the best time is to start tapping this money. For example, if you start receiving your Social Security benefits before your "full" retirement age (which could be anywhere from 65 to 67 under current laws), your benefits will be reduced permanently, and perhaps significantly, from what they would be at your full retirement age.

And if you receive Social Security benefits early, but you continue to work and your earnings exceed certain limits, your benefits will be reduced even more until you reach full retirement age. On the other hand, if you delay collecting Social Security until after your full retirement age, you can continue to work and still get your full retirement benefits, or even higher benefits, no matter how much you earn.

Here's basic guidance from the Social Security Administration (SSA): "As a general rule, early retirement will give you about the same total Social Security benefits over your lifetime, but in smaller amounts to take into account the longer period you will receive them. There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit is permanently reduced."

For help figuring out whether early retirement is better for you, check out Social Security's "Break-Even Age" calculator at www.socialsecurity.gov/OACT/quickcalc/when2retire.html.

Employer pension plans usually have options somewhat similar to those of Social Security. Contact your employer's personnel department for guidance.

No matter when you decide to start receiving your benefits, remember that it could take several weeks to receive your first payment. Also consider having your payments deposited directly into your bank account so you don't have to worry about a check getting lost or stolen in the mail.

Retirement Strategies - IRAs, 401(k) and Other Retirement Saviings Plans

As with your Social Security and pension benefits, you may want to delay tapping into your retirement accounts as long as possible so they can continue to grow to cover unexpected medical costs in the future or to protect the inheritance for your heirs. However, if you need to supplement your income, Individual Retirement Accounts (IRA) and other retirement savings can be a good source.

Before you start withdrawing money from your retirement accounts, most financial planners suggest setting a target annual withdrawal rate. Make it low enough to avoid depleting these funds too quickly. You can fine tune your withdrawal strategy each year, preferably with the guidance of your financial or tax advisor. For example, if your personal situation changes, you can adjust how much you should withdraw.

Also review your retirement portfolio — your mix among stocks, stock mutual funds, CDs (certificates of deposit), bonds and so on — to be sure it's well-diversified. (For ideas about how to rebalance your portfolio as you age, see the next post.

Another caveat: If you have retired, every year after age 70 ½ be sure to take out at least the minimum required distribution from your tax-deferred retirement savings plans (except Roth IRAs) to avoid large IRS tax penalties. (If you are still working at 70 ½ or later, you do not need to start taking minimum distributions from your employer's plan until April 1 of the year following the year you finally retire.)

"Remember, you only have to withdraw the money, you don't have to spend it," said Heather Gratton, an FDIC Senior Financial Analyst. "If you don't need the money you can reinvest it somewhere else, such as in a bank savings account." She added that, because each person's situation is different, it's best to discuss your strategy with your tax or other advisor.

Retirement Strategies - Helping Your Money Last... After Your Last Paycheck

This blog will help you take a look at different ways to afford retirement.

Today's people are living longer than their parents and that means more years in retirement. That means more years to finally do what you want to do, including travel and hobbies (not to mention spoiling the grandkids). But a longer retirement also means more years of money going out and no paycheck (or only a small one) coming in. That's why you need to be smart about how you pay for your retirement years.

"You really need to have a strategy to make sure your savings last," said Lee Bowman, National Coordinator of Community Affairs at the FDIC.

This blog will offers a look at some different sources of money, including some potential pitfalls to avoid. But first, remember that this is general guidance only. Your own need for retirement money will depend on factors such as your health-care costs or whether you plan to earn part-time income. As with any major financial decision, be sure to consult with financial advisors and loved ones to decide what strategies are best for you.