Retirement Accounts

The federal insurance limit for retirement accounts at banks will more than double to $250,000 this year - just in time for retiring baby boomers. The increased coverage will apply to accounts such as Keoghs, individual retirement accounts and individual 401(k)s. The new limit could kick in as early as next month, although it will be in place in November at the latest. "Our hope is to make it before the April 15 date because many banks really encourage additional contributions through IRAs and rollovers before the tax date," said Jim Chessen, chief economist at the American Bankers Association.

Peg Barton prepared for retirement, but that doesn't mean she's necessarily ready for it. Barton retired in 2004 - well short of age 65 - after 30 years as a social worker helping troubled youths and mentally challenged adults. "I really needed a break after being a social worker for most of my career," Barton wrote in a letter requesting a Money Makeover. Over her career, Barton managed to stash away about a quarter-million dollars in retirement and savings accounts. Invested and spent wisely, that money should be enough to outlive her, said Dan Danford, a Kansas City, Mo., financial adviser.

Victims of Hurricane Katrina would be able to tap into 401(k)s and individual retirement accounts without penalty under a tax-relief package proposed by a Senate committee yesterday. The Senate Committee on Finance unveiled a broad package of tax breaks for workers and their employers, as well as individuals who take victims displaced by Katrina into their homes. Congress is expected to move quickly on the package, said Sen. Chuck Grassley, the Iowa Republican who chairs the committee.

AMERICAN workers are changing the way they think about their retirement accounts, dipping into them for short-term spending in much the same way homeowners have tapped into equity. Nearly half of a group of 200,000 workers who left their jobs in 2004 cashed out a majority of their retirement plans rather than rolling them into other retirement accounts or leaving them parked with their former employers, according to Hewitt Associates, which provides record-keeping services for retirement plans covering about 5 million workers.

NEXT MONTH, the oldest of baby boomers will turn 59 1/2 , that magical age when they can tap tax-deferred retirement accounts without penalty. This means that after decades of accumulating assets - let's hope - boomers are nearing the time they'll retire and begin to spend down assets. The financial decisions at this juncture can be just as tough as when they were younger, but the consequences are far more serious. "There is a smaller margin for error," said Robert Nestor, principal of retiree services with the Vanguard Group in Malvern, Pa. Not saving at age 30 isn't good, but there are still years to catch up. Spend too freely as a 62-year-old retiree, and the chances of outliving assets jumps.

The Labor Department has issued an advisory opinion that banks, brokerage firms, and investment firms cannot accept payments from mutual fund companies in exchange for steering retirement account customers into those funds. The opinion may help eliminate some of the troubling conflicts of interest that exist in many individuals' retirement accounts. Financial institutions receive fees for providing administrative and other services to participants in individual retirement accounts and 401(k)

FIRST CAME the letter, then the call from one of my buddies. The fund firm that handles my Roth IRA was changing the custodian for its retirement accounts. The letter was a notice of the change, with a minor fee adjustment thrown in. The call was from a college friend who owns the same fund but had no clue what the letter was all about. "I assume everything is OK," he said, "but I'm not really sure that I understand what's going on here." Mutual funds often make back-office changes that require some sort of notice to investors, and the paperwork frequently elicits a shrug before being tossed out by its recipient.

WASHINGTON - Federal Reserve Chairman Alan Greenspan gave a qualified boost to President Bush's proposal for private Social Security retirement accounts yesterday but cautioned that implementing the plan could push interest rates higher. The accounts would do nothing to shore up Social Security, Greenspan told the Senate Banking Committee, as he urged lawmakers to fix the retirement program, even though that would require "many difficult choices." "It is risky," Greenspan said of establishing private accounts.

INVESTORS EXPECT a bull market for stocks in 2005 but are hoarding cash. They expect to retire as millionaires at age 61 and live comfortably, even as the U.S. personal savings rate stays low. Despite the disconnect between reality and expectations, more than half of investors also say they favor privatizing Social Security. To recap: Investors, who make notoriously bad decisions, are clamoring to control even more of their retirement dollars. So concludes a study of investor behaviors and attitudes released this month by Eaton Vance Corp.

THIS WEEK marks the third anniversary of Enron Corp.'s bankruptcy filing. As was mentioned at the first anniversary and at the second, the greatest scene of this tragedy stands behind the curtain, waiting to appall us again and again. Thousands of Enron employees lost more than $1 billion when Enron stock in their retirement accounts evaporated. Frantic discussions about the foolishness of employees owning stock in their employer ensued. Members of Congress threatened to outlaw the common practice of companies restricting the ability of employees to switch out of company stock awarded to 401(k)