WATCH YOUR 401(K) PLAN
Over 10 million workers have a 401(k) plan as their only company-sponsored retirement plan. Many of those workers have funds with several different firms (both current and former employers.) Most of these plans are well run and do not experience problems. But some plans may show symptoms of more serious problems, especially with smaller companies.

According to the Department of Labor and the Pension and Welfare Benefit Administration, these are the signs you should look for to protect your 401(k) assets:

*Your 401(k) or individual account statement is consistently late or comes at irregular intervals.
*Your account balance does not appear to be accurate. A simple administrative error should be corrected easily.
*Your employer failed to transmit your contribution to the plan in a timely manner.
*A significant drop in account balance that cannot be explained by normal market fluctuations.
*Your 401(k) or individual account statement shows your payroll contribution was not made.
*Investments listed on your statement are not what you authorized.
*Former employees have trouble getting their benefits paid on time or in the correct amount.
*Unusual transactions crop up, such as a loan to the employer, a corporate officer, or a plan trustee.
*Frequent and unexplained changes in investment managers or consultants. *Your employer has recently experienced severe financial difficulty.

Please contact your plan's administrator if you have any questions or concerns regarding your 401(k) or other retirement plan.


ESTATE PLANNING
Your home doesn't have to be a castle for you to need estate planning. Most people underestimate the size of their estates.

Your estate includes the value of life insurance policies you own, the net equity in your home(s), assets in your brokerage accounts and\or retirement plans, the value of your personal property and\or private collections, your car(s), individually owned stock certificates and any assets in your savings and checking accounts.

Mr. John G. Moore, an attorney with Madden, Jiganti, Moore and Sinars, recently presented a lunchhour workshop on estate planning. According to Mr. Moore, everyone has a will; it's either a document you have created or one your state of residence creates for you at the time of your death.

But estate planning is more than just having a will, which is merely one piece of a puzzle. He says that the U.S. government is your partner in death. Since Federal estate taxes can run as high as 55%, proper estate planning is vital if you want your estate to be left to your family according to your wishes.

Time, cost and the hassle of handling someone's estate can be overwhelming. It would take up to 2 years or more to process an estate. Mr. Moore says that proper estate planning creates a partnership between you and your adviser (or attorney) to preserve as much of your estate as possible for your heirs.

Did you know that estate taxes (at both the federal and state levels) and income taxes are not the same? There is the potential to pay both, although money left to charities is exempt from both taxes. Estate taxes are based on the total value of your estate, including nonprobate assets, minus any expenses (funeral and burial costs, assessment of your home or business, etc.) or debts. In addition, income tax is due on tax-deferred retirement, such as your IRA and 401(k) accounts.

You don't need to be wealthy to benefit from a properly planned estate. After the important first step of defining your goals, an estate plan will help you reach these goals.

To begin the estate planning process, check with your friends for a referral. If they can't help you, contact your financial adviser or stock broker, or the local Bar Association or CPA Society.


DEBT MANAGEMENT
Addressing credit problems as early as possible is the key to a sound financial future. If you have no problems yet, build good credit by sticking to your budget and paying bills on time. Then when you are ready to buy a home or are faced with a financial emergency, banks and creditors will be happy to help you. By managing your money responsibly now, you'll be able to reach your financial goals. Which include, of course, contributing as much as you can afford to your employer's 401(k)\savings plan or an IRA.
Merrill Lynch recently presented a lunchhour workshop on Credit Management. Although they primarily discussed various mortgage and financial products available through Merrill Lynch, there are many other important elements to debt management.

Your credit record is permanent. When you skip a payment or pay a bill late, that information is passed to a credit company to be added to your credit report. This credit report is provided to anyone to whom you apply for credit.

According to information provided by MetLife, there are two key factors to building and preserving a good credit file:

Develop a Plan
*Create a budget so you know exactly where all of your money is going. *Plan for large purchases such appliances or a new roof.
*Pay yourself first, into a savings or retirement account.

Cut Up Debt
*Put the brakes on spending.
*Get rid of most of your credit cards.
*Consider transferring the balances from multiple cards to one new, low-interest card.
*Consult your bank about taking out a home equity loan to pay off the balances on your credit cards.

If you're in over your head and can't afford to keep up payments on your debts, MetLife suggests several strategies you can use to make things more manageable:

1. While your first inclination may be to pretend the debt isn't there, the best option is to take action yourself, before delinquencies ruin your credit rating. First, call your credit card company and ask them to lower your finance charge and annual fee. This may seem like a long shot, but there is a great deal of competition between credit card companies and they may agree to your request just to keep you as a customer.

2. If you really can't pay the bills, call or write the credit card company and explain the problem. They may offer to lower or even freeze payments if you are having a temporary cash flow problem. If you call them before they call you, they usually will not report you to the credit agencies.

3. Often, just talking through your credit problems with a professional can relieve stress and help you find a solution. Many employers have an employee assistance program to help you get back on your financial feet. Or try the Consumer Credit Counseling Services, a national nonprofit organization that provides free or low-cost counseling. Call 1-800-388-CCCS for the location nearest you.

If you are denied credit, credit bureaus are required to provide a free copy of your credit report. Some credit bureaus also provide a free copy once a year. Be prepared to provide relevant information, including your Social Security and your addresses over the past five years. When you receive your credit report, look it over carefully. Are your name, address and Social Security number correct? Do the lines of credit listed belong to you? If you find errors, notify the credit bureau in writing and include any backup materials such as canceled checks. Although they are supposed to share information, it's a good idea to send a copy of your letter to all the credit agencies.


NON U.S. CITIZENS & TAXES
As more and more people work or retire in countries where they do not hold citizenship, the tax issue becomes more complicated. The following information is from material provided by MetLife. This information is not legal advice and should be discussed with an attorney or estate planner.

Estate Taxes
Many countries, including the U.S., tax the transfer of assets upon death. In particular, the U.S. estate tax system can impose significant taxes on the heirs of individuals who have accumulated substantial assets.

Residence and citizenship status play an important role in determining your estate tax. In particular, your residence and citizenship status could affect the kinds of property subject to estate tax and your unified credit amount. The citizenship of your surviving spouse could affect the availability of the unlimited marital deduction.

The U.S. estate tax system applies to you whether you are a U.S. citizen or resident, or merely have property located here. However, if you are a U.S. resident (a person who resides in the U.S.), you are taxed for estate tax purposes in the same way as a U.S. citizen. Your estate is composed of all of your worldwide property, including your home, personal property, business, retirement plans and life insurance. It is the dollar value of everything you've built in a lifetime of working & saving.

Estate Planning
One planning tool that many married couples take advantage of is the unlimited marital deduction. This deduction allows one spouse to pass an unlimited amount of property to the other, while deferring taxation until the death of the second spouse. However, the law denies this unlimited marital deduction when assets are being passed to a spouse who is not a U.S. citizen (In certain cases, treaties with other countries may affect the availability of the unlimited marital deduction.) This means that, unlike a citizen couple who can defer their taxes until the death of the second spouse, taxes may be due on your estate after the death of the first spouse if your surviving spouse is not a U.S. citizen.

Gift Taxes
The law also denies unlimited tax-free transfers by gift to a non-U.S. citizen spouse. However, there is a $100,000 annual exclusion from gift tax that is available for gifts made to a non-U.S. citizen spouse. This provision is effective for lifetime gifts to non-U.S. citizen spouses made on or after July 14, 1988. A non-U.S. citizen who is a U.S. resident is generally subject to gift tax only on gifts of tangible property situated in the U.S., except for certain gifts of intangible property made by persons who terminate their U.S. citizenship or residence for tax avoidance purposes.

Qualified Domestic Trust (QDOT)
Congress has tried to prevent the loss of tax revenue caused by non-U.S. citizens who try to "take the money and run" back to a foreign country and beyond the reach of the IRS, following the death of a spouse. Therefore, the law denies the estate tax marital deduction for property passing to non-U.S. citizen spouses, subject to the Qualified Domestic Trust (QDOT) exemption.

A QDOT is a trust qualifying for the marital deduction. The trust provided the non-U.S. citizen surviving spouse with annual, or more frequent, distributions of income from the trust assets or accumulates the income and pays it to the spouse's estate. Its purpose is to allow spouses to pass property to the non-U.S. citizen spouse while taking advantage of the unlimited marital deduction. A QDOT must have at least one trustee that is U.S. citizen or domestic corporation. A QDOT is subject to special provision, ensuring that federal estate tax will be paid on the estate of the deceased spouse. The estate tax must be paid on distributions (other than income or hardship) made during the surviving spouse's lifetime, as well as on the balance of the trust assets upon his or her death.

Spouses Who Are U.S. Citizens
The tax lawS allow a non-U.S. citizen spouse to make unlimited lifetime gifts and to make bequests by will to his or her U.S. citizen spouse without the need to establish a QDOT. This is because all property transferred by a non-U.S. spouse to a U.S. citizen spouse will be included in the gross estate of the U.S. citizen spouse upon his or her death (unless the property was consumed or given away during his or her lifetime) and will be subject to the federal estate tax laws at the time.

Property Owned by Non-Resident Aliens
The gross estate of a non-resident alien consists of the same items as property that would be included in the gross estate of a resident decedent, but only property located within the United States is subject to tax.

However, certain types of property owned by a non-resident alien are treated as having a situs outside the United States, even though they are located within the U.S. For example, life insurance proceeds paid by United States insurance companies on the life of a non-resident alien are treated as property owned outside the United States.

Estates of non-resident alien decedents dying after November 10, 1988, are subject to the same federal estate tax rates that apply to U.S. citizens, but the unified credit is $13,000 (which exempts the first $60,000 of the estate from tax.)


INQUIRING MINDS WANT TO KNOW
Q. What is the difference between asset allocation and diversification?

A. Diversification is owning several different investments in the same asset class. You need to look at the companies in funds you own. If the same companies appear in each fund, you haven't achieved diversification.

Asset Allocation means investing your money in different "classes of assets: stocks, bonds and cash. According to the Financial Analysts Journal, 91% of investment performance is determined by how the assets in the portfolio are allocated, not the specific securities held.

Q. What is "dollar cost averaging"?

A. It's the method of investing your money on a regular basis (by month or by paycheck,) regardless of the market price of the investment. By deducting from every paycheck, you are already using the dollar cost average method. Ideally, you want to buy when the market is low so that you get "more bang for your buck". But because you don't know when these buying opportunities will occur, investing on a consistent basis will better help you purchase shares when the market is low. Because you are investing for the long term, not just for a year or two, you can look at those downturns in the market as buying opportunities.

Q. I make my loan payment by check each month. Can I add more to each payment, or pay two months at once?

A. No. The IRS stipulates that each loan payment be of equal value, except for the final amount. However, if you plan to be on vacation for a period of time, just send us separate checks for each month you'll be away.

Q. What is the difference between a defined benefit plan and a defined contribution plan?

A. In a defined benefit plan, such as the S&L Retirement Plan, the actual benefit you receive is defined by various factors: your age, wages and years of credited service at the time of retirement. Based on a formula used by a retirement plan, the amount of your benefit is "defined".

In a defined contribution plan, such as a 401(k) or thrift plan, it is your contribution that is defined. Within the limits set by the plan, you define the contribution amount (usually as a percentage of your wages).


DID YOU KNOW?
More money has been invested in stock mutual funds in the past 5 years than in the prior 66 years combined? (Chicago Trust Co.)

In 1984, 31% of retirees returned to work in some capacity? In 1997, 72% of all workers said they plan to work after they retire. (Fidelity)

Your former employers are not required by law, to find you to disburse pension benefits? Contact any former employers who may owe you a future pension benefit, to be sure they have your current address on file. (Fidelity)

During the break in the stock market in 1987, 80% of today's fund managers had not graduated from high school? (Fidelity)

37% of Americans have amassed a retirement nest egg of less than $50,000, and 10% have saved less that $10.000? (Fidelity)


SOCIAL SECURITY
Ms. Leslie Stensland, from the Chicago Social Security Administration office, recently provided an overview of the Social Security program and answered employees' questions during a lunch-hour workshop.

She began with a little history: The Social Security Act was passed in 1937 at a time when 50% of the elderly in the U.S. were living in poverty. It was credited as an "income replacement" program for workers who would receive the money they had paid into the fund, when they retire. Medicare, survivors and disability coverage were added later.

If you are in a high-income wage bracket, Social Security will replace 25% of your income. For the middle-income worker, 40% will be replaced. And the lower-income workers receive 60% as replaced income. The concept has not changed. The lower percentage for the high-income workers is based on the assumption that they are better able to save and invest for retirement than those earning a lower income.

Social Security was intended to provide a basic standard of living, not someone's sole income during the retirement years.

If you were born in 1928 or later you must have FICA wages for 10 years, or 40 work credits, to qualify for retirement benefits. In 1998, $700 of wages earns one credit. You can earn a maximum of four credits each year.

Your benefits at retirement are based on your total gross income for 35 years. Actually, it's the highest 35 years in a 40-year period. The total wages over this period are divided by 35, and then by 12, to calculate your "average monthly earnings." NOTE: This is different for many government employees, who do not pay FICA taxes.

According to Ms. Stensland, the average retirement benefit is $765 per month (up to a maximum of $1,342.) You can file for Social Security retirement benefits at age 62. But those benefits will be reduced from your normal monthly benefit at age 65, and stay permanently reduced (normally.) She recommends that everyone apply for benefits at the earliest age.

Most people believe that Social Security benefits are simply paying back what any employee has paid into the system over the years. But the truth is that if you start benefits at age 65, you will have received everything you paid into the system by the end of 7 years. After that, your monthly payments are in addition to the taxes you actually paid. Of course, the time period varies depending on the number of years you worked and your income at the time.

There are four components to Social Security Benefits:

Retirement income. This is the most popular program sponsored by the U.S. government. Everyone who has paid into the program is eligible for benefits regardless of U.S. citizenship. If you retire overseas and are not a U.S. citizen, there may be a tax on those benefits, which varies by country. You can receive benefit checks in most foreign countries.

If you are married and have no history of wages, you are entitled to 1/2 of your spouse's monthly benefits. If you worked on an irregular basis and your monthly benefit is less than 1/2 of your spouse's benefit, you will receive your earned benefit plus a supplemental amount sufficient to equal 1/2 of your spouse's benefit.

Medicare and Medicaid. Medicare is the 2nd most popular government program and was created to supplement your health insurance at age 65. There are many items Medicare does not cover such as most prescription drugs, routine physical exams, eye glasses and hearing aids. Also, there is no coverage while you are living or traveling outside the U.S. (except Canada and Mexico if you reside near the border.) In addition, you need to have the same earned wages to qualify for Medicare, which is a retirement benefit. Or you can qualify as a widow or spouse.

Medicaid is a federal insurance program offered through Public Aid and is only available to those with lower income. Many of the elderly in nursing homes are there because all of their other money is gone and they are now eligible for Medicaid.

Disability. This is a monthly benefit paid to those who are disabled and cannot do any type of work, and their dependents. For those age 31 older, a determination of disability requires a current work history that shows wages for 5 of the 10 years before the disability occurred. Those younger than age 31 require less work.

Survivor's program. These payments are paid upon the death of a worker, to the surviving spouse and children under age 18. Eligibility requires less wages by the deceased than for a retirement benefit. Social Security benefits cannot be attached except for child support, alimony and unpaid taxes. They are exempt from lawsuits, bankruptcy, etc. Also, benefits are not paid to convicted felons, prisoners, or those who are not guilty of a crime by reason of insanity.

The amount of Benefits paid is based on your earnings, which are your total gross wages for the year. This does not include your pension, or rental\investment income. The 1998 earnings limits are:

Age 70 or older: No limit on earnings
Age 65-69: $14,500. For every $3 of wages over the limit, $1 withheld from benefits
Under age 65: $9,120. For every $2 of wages over the limit, $1 is withheld from benefits
Disabled: $500 per month

It is important that you periodically check your records on file with the Social Security office. If you find your wages have been reported incorrectly, there is no longer a time limit for making corrections. Just take the appropriate records to your local Social Security office and their records can be updated immediately. To request a "Personal Earnings Benefit Estimate," call 1-800-772-1213, or use their online service at "www.ssa.gov".


WORDS OF WISDOM.......
One of the hardest things to teach our children about money matters is that it does. (William Randolph Hearst)

A light purse is a heavy curse. (Benjamin Franklin)


THE KEY TO A SUCCESSFUL RETIREMENT
Most people spend more time planning a two-week vacation than a twenty-year retirement. As discussed at a recent retirement-planning workshop by Ms. Molly Stuart of Merrill Lynch, most people underestimate the amount they will need at retirement. There are several reasons: a longer life expectancy tends to encourage procrastination, an "ignorance is bliss" attitude, and fear of failure.

Planning is the key to a successful retirement. According to an article in the August 1, 1995 issue of USA Today, 51% of us look forward to traveling during our retirement and 25% look forward to a lot of free time to do all those things we never have time to do now.

However, traveling takes money. And filling up all of that free time could also be expensive. Even your favorite hobby could be costly. It's also very important to become involved with your neighborhood, church or community. While you are enjoying early retirement, many of your friends may still be working. That could affect your plans to play golf everyday. If your spouse decides to continue working another year or two, that would put a big crimp in your travel plans.

Don't forget climate. While many dream of palm trees and sunny skies everyday, according to the Bureau of Labor Statistics, 95% of older Americans choose to stay close to home. Which means money for traveling to warmer climates during those cold winter months. Or keeping active when your golf game is replaced by boredom and monotony. A lack of funds could even lead to depression.

According to the USA Today article, people's biggest fears in retirement are financial problems (38%) and health problems (29%). While these are serious concerns, proper planning can alleviate some of those fears.

According to Ms. Stuart, there are 7 steps to a successful retirement:

#1: Ask yourself the following questions...

At what age would I like to retire?
What do I want to do?
How do I want to spend my time?
Where do I want to live?

#2: Quantify your goals. How much will it cost?

What are my current expenses?
What expenses will decrease?
What expenses will increase?

The answers may surprise you. Although you would enjoy winters in Arizona or Florida, you still want to spend the summers near the grandchildren. Have you planned for the maintenance of two residences? Or money for airfare, so your family can visit you more often? And what about helping your grandchildren with summer camp, or college expenses? Or what about medical expenses? Have you planned for long-term nursing care? Ok, you're in good health but what about your parents? Or a sibling with financial problems?

#3: Preparing for contingencies...

Health care costs
Long-term care

#4: Determine where your income during retirement will come from.

Company-sponsored retirement\pension plans
401(k) & thrift plans
Social Security Personal investments
Continued employment, either full-time or part-time

#5: Determine if there will be an annual surplus or shortfall.

Retirement Income
(less) Anticipated Expenses
Annual Surplus\Deficit

Your retirement income is income from all sources less taxes. Your anticipated expenses will probably be 75% of what you are currently spending.

#6: Disciplined savings and investment programs

Pre-tax savings (401(k), 403(b), or SEP)
Tax-deferred savings (IRAs, life insurance, annuities)
General savings (brokerage and savings accounts)

#7: Periodically review:

Your goals and objectives
Your savings needs
Investment performance
Asset allocation

There are 4 major factors that will impact your ability to achieve your retirement goals:

*Retirement age - how many more years you have to save
*Life expectancy - generally determined by your genes and life's habits *Retirement lifestyle - active & social or staying at home
*Investment returns - your fund selection and risk tolerance

It is never too soon to think about your goals. A little planning goes a long way.


IN MEMORIAM....
Several employees and retirees have passed away during recent months:

Graig Griffith - 8/23/98
Edward Wenckowski - 9/25/98
Edward Janovski - 10/4/98
Leonard Lettow - 10/13/98
Richard Boyd - 10/16/98


SAVING FOR COLLEGE
Paying for college is probably the greatest financial concern for many parents. There is a new product by Fidelity Investments which may help you save for your children's education: UNIQUE. Although currently available only through Fidelity, there may be similar products available in the future.

The 1997 Taxpayer Relief Act provided some enhancements to qualified state tuition plans, which are defined under Section 529 of the Internal Revenue Code. That cleared the way for states to develop a new type of college savings program.

The UNIQUE Plan, which is sponsored by the state of New Hampshire and administered by Fidelity, allows anyone, regardless of state residency, to save for the future costs of higher education on a tax-deferred basis. That means no federal income taxes need to be paid on your accumulated earnings until you decide to withdraw the funds for college expenses. And when the funds are withdrawn, they are taxed as income to the child, whose tax rate will likely be lower than yours. Better yet, investments in the UNIQUE program can be made regardless of income levels, and you can invest up to $50,000 in one year without having to pay federal gift tax.

Investments made on behalf of your child are invested in a portfolio of Fidelity mutual funds designed according to the child's age. Since under federal tax law you are not allowed to direct the investments yourself, Strategic Advisers, Inc., a Fidelity Investments company, will allocate your money to one of seven portfolios based on the beneficiary's age. Each portfolio's blend of stock, bond and money market mutual funds will be adjusted regularly as the beneficiary gets closer to college age. For example, investments make on behalf of a preschooler will be invested in a high percentage of equity funds and then shifted gradually to bonds and money market instruments as the child gets older. Although neither Fidelity nor the state of New Hampshire guarantees any particular rate of return, the portfolios have the potential to beat college inflation rates.

The UNIQUE Plan offers a number of other significant benefits not found in other college savings program:

Flexible contribution schedule
Accounts can be opened for as little as $50 per month with automatic payments, and participants can invest up to a little more than $100,000 per beneficiary.

Use for tuition, room, board, books, required supplies, and other qualified expenses at any accredited post-secondary institution in the United States. These include public and private colleges and universities, graduate schools, two-year community colleges, and vocational-technical schools.

Flexible access
Investments in the plan must be used for higher education, but if the beneficiary (the child) does not attend college, the investments can be used for another family member of the beneficiary, including adults (but not for yourself). Participants may also redeem investments for purposes other than higher education with the earnings subject to income taxes and a %15 penalty.

Although the SIP Committee is not recommending or endorsing this product, more information is available by contacting a Fidelity representative at 1-800-544-1914. You will receive a UNIQUE College Investing Kit, which includes a college planning worksheet.