8 Important Retirement Issues

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Here are eight areas to focus on for a bright financial future:

1. Legal matters: See a lawyer and make a will. If you have a will, make sure it is current and valid in your home state. Make sure you and your spouse have reviewed each other's will -- ensuring both of your wishes will be carried out. Provide for guardianship of minor children, and education and maintenance trusts.

2. Debt: Pay off your credit cards. Forty percent of Americans carry an account balance. Create a systematic plan to pay down balances. Don't fall into the "0% balance transfer game," as it will hurt your FICO score. Credit scores matter not only to credit card companies, but to insurance companies as well; you can avoid an unpleasant increase in your insurance rates by managing your credit wisely.

3. Insurance: Buy term life insurance equal to six to eight times your annual income. Most consumers don't need a permanent policy (such as whole life or universal life). Also consider buying disability insurance; think of it as "paycheck insurance." Stay-at-home spouses need life insurance, too! Note: Each family's needs are different. Some families have a need for other kinds of life insurance, so you should review your situation carefully with an insurance professional or two before making decisions in this area.

4. Planning for lean times: Build a three- to six-month emergency fund. Establish a home equity line of credit before you need it -- this can take the place of part of your emergency fund, if necessary. In addition, continue learning throughout your life -- this will help you to be prepared if you are forced to make a career change.

5. Retirement savings: Fund your IRA each and every year. If you don't fund it annually, you lose the opportunity. Fund a Roth IRA over a traditional IRA if you qualify.

6. Employer benefits: If offered, contribute to your 401(k), 403(b) or other employer-sponsored saving plan. Use your company's flex spending plan to leverage tax advantages for health care and child care. If you don't use your flex plan or fund your retirement plan annually, you lose the opportunity -- and the tax advantages -- forever. You can't go back and re-do it.

7. Home ownership: Buy a home if you can afford it. Maintain it properly. Build equity in your property. You'll have much more to show for your money spent than a box full of rental receipts -- such as lifestyle improvements, tax benefits and sense of ownership.

8. Diversify and reduce investment costs: Use broad market stock index funds and direct-purchase government bonds to reduce risk, minimize costs and diversify your portfolio. If you have limited options, for example in your 401(k) plan, make sure you diversify across a broad spectrum of asset classes. Don't over-weight in any one security, especially your employer's stock -- remember Enron?

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