The current crisis and your retirement

Part 1: If you’re already retired...

Hang tight. As many of us have learned through costly and painful experience, acting in haste can often turn a bad financial situation into a really bad one.

But do check your bank balances. Make sure your CDs and other accounts fall within the limits for full FDIC coverage. If you’re over the limits, either move the excess money to another bank or restructure your accounts within your current bank. If your money is in a credit union, click here.

Once things calm down a bit:
1. Check your investment portfolio and rebalance if your asset allocation is out of whack. Here’s some of our previous advice on rebalancing that may be helpful.

2. Make sure you have an adequate cash reserve (at least a few months worth of expenses) and that it’s in a safe place. If you can’t scrape up the cash to meet any emergency needs, here are some other places to turn.

3. Consider cutting back on expenses, at least temporarily. Easier said than done, I know, but if your investments aren’t producing enough income at the moment, that may be your best alternative. Borrowing is likely to be difficult (and probably not a good idea anyway). Drawing down your assets at a faster pace, at a time when their value may be depressed, is also a losing proposition. Most financial planners say you can safely take out about 4 percent a year, but anything beyond that begins to set off alarm bells. This link will take you to a list of money-saving articles.

4. Beware of crooks, who are always with us but often seem to thrive in economic environments like these. Here’s some cautionary advice on that score.

Finally, if you’re concerned about the solvency of any defined benefit pension you may have, this site  explains how Pension Benefit Guaranty Corp. coverage works, what the limits are, etc. —Greg Daugherty

Tomorrow, Part 2: If you’re planning for retirement

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.

Comments

[Lawrence Jenson]

No one is telling me what to do about a substantial, fully vested and mature, 401k that is well over any FDIC guarantee. This account is with Pru and, at this point, in a fixed return fund. What is the FDIC insurance status of 401k's generally? What is the safety factor of such a fund well into the six figure range? How about my fund with Pru? Should I be doing something to protect it beyond faith? The tax implications of a big draw down are daunting. I am at a loss about any method to roll it over without tax implications to any insured entity. I am 69, with a reasonable defined benefit pension plan, and use the 401k interest to supplement this pension and SS. I am holding the 401k as my hedge against inflation as the pension plan has no COLA. I suspect my situation is not unique.