U.S. Workers Lack Confidence To Manage Retirement Savings

Renee Montagne talks to Michelle Singletary, financial columnist for The Washington Post, about what consumers need to understand about putting income aside for retirement. Investment company Charles Schwab recently did a survey that showed most people feel like they don't know what they are doing with their retirement funds.

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RENEE MONTAGNE, HOST:

Its open enrollment season at many work places, which means opportunities to make changes in your retirement savings plans. The investment company Charles Schwab has found that many American workers lack the confidence to effectively manage their retirement savings.

In search of advice, we called up The Washington Post's financial columnist Michelle Singletary. Glad to have you back.

MICHELLE SINGLETARY: Oh, it's my pleasure to be here.

MONTAGNE: Let's begin with something extremely basic and that is, is there a figure, a single figure for how much one should be putting away in a 401(k) or 403(b) account, at any given time in your life as a worker?

SINGLETARY: Yeah. I wish I had a number that I could just un-wrap in a nice little bow and let you say it's 10 percent, 20 percent. But really, it depends on so many factors. What are you going to get for Social Security? How much do you have in other savings? You know, what kind of debts are you going to have to service if you're going to take those into retirement? Is your house going to be paid off? So really, you have to look at your numbers and come up with a number that's specific to you.

But here's one thing that you can do. If your employer has a match, so they will match whatever percentage you put into your retirement plan up to a certain point, at least put in enough to get that match because that's just free money that you're leaving on the table if you don't put in enough to get to get the employer match.

MONTAGNE: For those of us who do have these kinds of plans and get to choose how that retirement money is allocated, why can this still be so confusing for so many of us? You would think it would be simple.

SINGLETARY: Right. But, you know, it's not simple. There's a lot that goes into this. They have people who, you know, professionals who don't get it right. So to expect the average person, who is just trying to live their life, to figure out how much should I put it in, where should I put it? Should I put it in this stock fund, this bond fund? And they say bonds are really safe, but then right now, the market is roaring, so should I have it in market? And, oh, my gosh, the market could go down, I could lose my money. So you can see how people get so scared that they don't do anything and they opt for the most conservative. But if you have a long time to retirement, you want to have a really good balance. And the good thing about it is the law changed that allows a lot of companies to have the people managing the plans to give their employees advice. Maybe not very specific advice, like put $100 in this plan, but basically give you examples...

MONTAGNE: Parameters, really.

SINGLETARY: Right.

MONTAGNE: Yeah.

SINGLETARY: Exactly. So if you were 20, they'll say, well, this is probably a good plan for a 20-year-old. If you were five years out of retirement, they'd go, well, look, you know what? You probably aren't going to take as much risk. Take advantage of those services. Really call up that 800 number. This is a great time of year to do it.

MONTAGNE: So is the 800 number really the best - at least certainly, the least expensive - place to turn for help? You know, within reason, are there other ways to get help in how you allocate your money?

SINGLETARY: I think it's a good place to start because it tends to be free, and this is the people running your plan so they know what's in your plan. But if you want to really get a very specific plan to you that's long term that doesn't just include your retirement, but insurance needs and other things, then you want to consider hiring a financial planner. Now when I say that right away people are thinking well, why should I pay money to make money? Well, these are professionals who can look at everything you have and help you come up with a plan. Is it going to cost you money? Yes, it's going to cost you money. But definitely do that. If you really feel like you have no clue and you just, you need someone to hold your hand, I think it's a good investment of money so that you be sure that you have enough money for what you want to do in your retirement.

MONTAGNE: Just one last question. When you think about going to a financial planner, is there a red flag, or red flags one should watch for?

SINGLETARY: If you go in and they've got, oh, you should buy into this, you should buy into this, before they've really sat down and talked to you about your needs, that's a red flag for me. They need to listen to you. The first question would be, what do you want to do in retirement? Where do you want to live? What do you - they should be asking you those kinds of personal questions to get a sense of where you are. You want them to be conscious of your risk tolerance, but also make sure that they create a plan that is going to give me enough money to retire. So if they come with a pre-sold kind of these are the things that I want to put you in, that's a huge red flag to me. And if they're talking to you and you don't understand what they're saying or they're trying to sell you something that you don't quite grasp, that's another red flag.

MONTAGNE: Michelle, great talking to you again.

SINGLETARY: Oh, you're so welcome.

MONTAGNE: Michelle Singletary is a financial columnist for The Washington Post.

(SOUNDBITE OF MUSIC)

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