BY GEORGE MYERS JR.

Staff Writer

The sinking stock market has erased trillions of dollars from retirement accounts. Unemployment numbers are growing. So are fears that heating costs will push many Mainers to bankruptcy this winter.

Meanwhile, hundreds of economists predict that we're entering a deep recession, and potentially worse, with fewer opportunities to acquire loans.

What do we do with the savings we have now?

The answers follow, courtesy of Mark L. Johnston, president and chief executive officer of Kennebec Savings Bank; Allan L. Rancourt, president and CEO of Kennebec Federal Savings; and John C. Witherspoon, president and CEO, Skowhegan Savings Bank.

Q: What should I do about my money right now?

Johnston: Review your present savings and investments to be sure that you have made the best decisions on where your funds are held. It is particularly important to look at your funds that are short term (less than five years) differently than long term (at least five years). Shorter-term funds should be invested more conservatively than longer-term funds.

Q: Are my investments and savings account safe?

Witherspoon: Savings accounts in banks are now insured for up to $250,000, and most of Maine's community banks have significant levels of capital that provide additional safety. Investment accounts are, by their nature, riskier but should remain a part of someone's long-term investment strategy.

Q: I'm 55. Should I cash out my 401(k)?

Rancourt: No, no and no. It's natural to be concerned in these uncertain economic times. However, cashing out your 401(k) would have unwanted consequences, including taxes and penalties. Consider reviewing the mix of investments in your 401(k) and reallocating to balance and diversify your investments to a mix that's right for you. Talk with your 401(k) provider to discuss options and get information about your specific investment options.

Q: Is this the time to buy a home, or a car?

Witherspoon: If you are in the market for a home, this is a great time, as prices are down, there's plenty of inventory, and interest rates are still attractive. It's also a good time to buy a car, assuming you need one.

Johnston: It could be. However, I would not buy anything major if it meant that I had to liquidate investments at a loss.

Q: Is this the time to seek a college loan?

Rancourt: Yes. Access to college-loan funds is available through customary sources such as Sallie Mae and Federal Family Education loan Program.

Witherspoon: Higher education is directly linked to higher incomes, so college is a good investment in oneself. There are federally backed student loans that are reasonably priced. I would suggest someone looking for college financing call the Finance Authority of Maine.

Q: Is it true the FDIC insures only $100,000 worth of one's savings?

Rancourt: Last Friday, President Bush signed the Economic Stabilization Bill, which immediately increased FDIC deposit insurance coverage from $100,000 to $250,000 per depositor per institution. Depositors may qualify for more than the $250,000 in coverage at one insured bank if you own deposit accounts in different ownership categories. The most common account ownership categories for individual and family deposits are single accounts, joint accounts, revocable trust accounts and certain retirement accounts. More information is available at www.fdic.gov/EDIE.

Q: I have $5,000 in my checking account and want to earn a higher rate of interest on it. In what kind of account should I put it?

Johnston: To earn a higher rate of interest, you should consider moving the money you don't need for cash-flow purposes into a money-market savings account or a certificate of deposit. These account types typically earn higher rates of interest than transactional-checking accounts.

Q: Should I expect the interest rates or minimum payment on my credit cards to go up?

Witherspoon: No, in fact many people are anticipating that the Federal Reserve will lower short-term rates, which would impact loans tied to the prime rate and some credit-card rates. Mortgage rates are not controlled as much by Federal Reserve Policy, but should go down unless the market anticipates higher inflation.

Rancourt: It is impossible to predict what credit-card companies will do. I do think it's important to pay your monthly payments on time, as agreed. If you miss a payment or make a late payment some card companies will automatically increase your rate and charge you a fee. So, pay on time.

Q: My monthly expenses are more than my income. What debt do I pay down first?

Johnston: Generally speaking, you should first pay off the debts with the highest rates of interest and/or the ones that have the highest monthly payments. Normally, focusing on credit cards first is the best approach.

Witherspoon: Generally, you should pay your mortgage debt first, and credit cards last. A person should work with their banker to see if they can refinance and consolidate debt to lower payments.

Q: Should I risk setting up a biweekly mortgage payment with my credit, food, gasoline and fuel bills expected to go higher?

Johnston: Biweekly loan payments can be a convenient way to budget, if you get paid weekly or biweekly, and they generally save you a considerable amount of interest over the life of the loan. However, a biweekly loan requires more dollars in loan payments per year than a monthly loan. Maine law allows borrowers of biweekly mortgage loans to change from biweekly payments to monthly payments once during the life of the mortgage without any penalty. It should be considered if you having trouble making your loan payments.

Q: Should I apply for a couple more credit cards, to charge things on, in case of an emergency?

Witherspoon: No, I would suggest that it would be better to cut out all unnecessary payments (cell phones, cable TV) and put away the savings in an emergency account.

Q: How bad will this economic downturn be? Should I buy canned food for storage?

Johnston: No one can accurately predict the financial future, but I do not think stockpiling canned food will be necessary for economic reasons. It is, however, always a good idea to have some canned food on hand as another Maine winter approaches.

Witherspoon: It's hard to say how long or deep the economic downturn will be, but in spite of the headlines, our unemployment rates are still not at a severe level, so if your job is stable, you should not panic.

Rancourt: Ah ... Saturday night family dinners of B&M baked beans ... Those are fond memories but, no, I wouldn't start buying canned food to stock in my 1950s basement bomb shelter. The U.S. economy will rebound. We just don't know when.

George Myers Jr. -- 861-9127

gmyers@centralmaine.com