Tips to Save for Your Golden Years

This is a rush transcript from "Your World With Neil Cavuto," December 29, 2008. This copy may not be in its final form and may be updated.

BRIAN SULLIVAN, GUEST HOST: Well, Starbucks is becoming the latest company scaling back some retirement benefits for workers, the coffee chain saying it could cut its 401(k) match plan.

Now, as more companies do this, how can you best save your hard-earned money?

Jen Openshaw from is here now to show you how.

Jen, welcome in to the program.


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SULLIVAN: OK, the first one, IRAs.


SULLIVAN: They're not dead. In fact, you say it's a good place to be.

OPENSHAW: It is. And — and that is the first place to be after your 401(k). Folks have two options, a Roth IRA or a regular IRA. I like the Roth if you qualify, because there is more flexibility, and the max that you can put into it is $5,000 a year.

SULLIVAN: Which is less than 401(k)s with the tax benefit.

OPENSHAW: Yes, it is less, but, still, you want to do it. And, also, your spouse can do it, even if they're not working. So, spousal IRA and then an IRA for yourself.

SULLIVAN: If your employer continues to match, are 401(k)s still the best place to be?

OPENSHAW: You bet, because they grow...


SULLIVAN: It's free money.

OPENSHAW: It's free money. So, at the minimum, you want to be investing up to the 6 percent or whatever the contribution that you're company is making. But, I say, absolutely max out before you go to an IRA.

SULLIVAN: Also, number two, open an investment account just for retirement.

OPENSHAW: Absolutely.


SULLIVAN: Don't trade this, in other words?

OPENSHAW: Well, the bottom line is, you need to be saving beyond your 401(k).

Everybody counts on their 401(k), but that is not going to get you to a stable retirement. The typical person who wants $50,000 a year during retirement, they need to have a nest egg of like $1 million, Brian.

And that's why we introduced, to teach people how to understand the market in a way that is fun and engaging and relevant to them. So, absolutely open a brokerage account, start small if you need to, and practice investing at WeSeed.

SULLIVAN: It appears that what is old is new again, buying annuities. I don't think I have heard anybody talk about annuities for about a decade.

OPENSHAW: Well, I think you're going to see them a lot more out there, because they know — the big companies, like Fidelity, know that everybody is so afraid, and they need certain income.

And there are some big flags with them, first off, the cost. They can be very expensive. I think they're just a short-term kind of a Band-Aid approach for people who don't want to actively manage their money, because you get a guaranteed income with an annuity, but they do come with some high...


SULLIVAN: But are they safe, because we know that some of the insurance companies were buyers of the subprime mortgage debt. We found that out. And yield is not free.

OPENSHAW: It's not free, but — and the return that you get on annuities is going to depend on the market generally. So, you need to understand it.

I think the big message of this whole crisis is, you need to own — know what you own. And that's what we preach, is know what you own. If you don't understand where you are putting your money, don't do it. And make sure you work with somebody you trust if you're not going to do it yourself.

But, at a minimum, start to get involved in the market. Understand what is going on. Now is the time for either yourself or your kids or your spouse to engage yourself at a place like WeSeed.

SULLIVAN: It's amazing. Some people spend more time researching a hotel for a vacation in Panama City, Florida, than they do about what their retirement accounts are in.

OPENSHAW: They do. They walk into a Target or store. They spend money on golf clubs that's going to depreciate.

And what we're saying is, you know what? Just put a little bit of money — we don't care if it's just one share of stock — and become an owner, not just a consumer, and you will be smarter. Even if you never become a real active investor, and you end up working with somebody, and you put your money in funds, you are going to be much smarter.

SULLIVAN: You know, and going back, if your company still does match 401(k)s, your view is, you have got to max it out. A, it's tax-deferred. And, B, if they do match that, again, that is free money.

OPENSHAW: It's free money.

I remember having a woman who told me she did not save in her 401(k), and her company matched. And I said, why didn't you do it? And she said, I just couldn't get to it. And I just wanted to pull my hair out, like, what are you doing?

Don't forget that this is a very low market. Even though it's very scary to a lot of people, we are at 1997 lows. And the benefit with a 401(k) is that you have a set amount going in every month, and so you benefit from when the market is high and low.


SULLIVAN: Well, if your employer matches 30 cents on the dollar...


SULLIVAN: ... you are neutral this year. You have broken even, basically.

OPENSHAW: That's true. Absolutely. You're right about that.

SULLIVAN: People don't think that way.

OPENSHAW: That's right.

SULLIVAN: If they match 30 cents on the dollar, and the Dow goes down 10, 10 percent, you're actually up on a tax-deferred basis.

OPENSHAW: That's a very good point.

And, also, only 9 percent of people participate in their 401(k)s.

SULLIVAN: That's it?

OPENSHAW: That is it.

SULLIVAN: Nine percent.

OPENSHAW: Nine percent.

And 15 percent of them max out. Only 15 percent who participate max out. So, the bottom line is, that is money you're leaving on the table.

Do remember, by the way, that, if your company matches, a lot of them have a vesting period, so that, if you were to leave your company, you might not get the match dollars, unless you have been there for four to six — five to six years. If you are forced to leave, you might ask — nice little tip — ask to get that fully vested.

SULLIVAN: Just ask.

OPENSHAW: Just ask.

SULLIVAN: Squeaky wheel...

OPENSHAW: Yes, you never know.

SULLIVAN: ... gets the interest grease.

OPENSHAW: Don't ask, you won't receive, Brian.

SULLIVAN: Yes, there you go.

Jen Openshaw, — Jen, thank you very much.

OPENSHAW: You bet.

SULLIVAN: Good tips in what is definitely a tough time for retirement.


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