Money Coach: How To Retire In This Economy

This year, 2.7 million people turned 65, and next year that number will increase to 3.3 million. Many of these seniors will be considering retirement; but given the economic downturn some are likely to first consider how to shore up their investments. Guest host Jacki Lyden discusses planning for retirement in a down economy with financial expert Alvin Hall, a regular contributor to Tell Me More's Money Coach segment.

Copyright © 2010 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

JACKI LYDEN, host:

And now to matters of personal finance. In 2011, the Census Bureau estimates that 3.3 million people will turn 65. That's an increase of more than 20 percent over the number who turned 65 this year. Sixty-five, of course, at least for now, is the government's retirement age, allowing for full Social Security benefits. Given the downturn in the economy, though, some potential retirees may need to rethink the idea of calling it a career at 65, especially according to TELL ME MORE's money coach, if inflation comes back in full force.

So is there anything that one can do to future-proof one's retirement? Personal finance guru Alvin Hall, welcome, great to speak with you today.

ALVIN HALL: This is a really great topic to be talking about at this moment. I'm so happy to be here.

LYDEN: Well, let's say that you're close to retirement age or you're thinking of retirement. What do you need to consider about the economy before you do retire?

HALL: You need to consider whether or not you believe that inflation will kick in at some point in the future, because if your stream of income that you're going to live off during your retirement years is fixed, then inflation will ruin that. So you need to look at making sure that your pension plan or your pension stream is inflation protected. This could mean looking at putting some of the money in inflation protected mutual funds or put it in TIPS which are Treasury Inflation Protection Securities. But you need to think about that.

In addition, you also need to think about the fact that maybe you need to increase certain amounts of your insurance so that if you have health problems, it doesn't further erode your financial security.

LYDEN: Now, remind us what type of impact inflation could have one's retirement.

HALL: It will reduce your spending power, even to cover basic things like fuel, food, or the cost of where you're living. It can really erode the value of that money.

LYDEN: Alvin, let's take a moment and look at race and retirement. In 2009, Business Week reported that African-Americans and Latinos saved much, much less than their white counterparts for retirement.

HALL: Yes.

LYDEN: And of course the fear is that many minorities will have to retire into poverty. Have you seen this personally?

HALL: Yes. I have friends who retired who thought they were going to be able to go to the Caribbean or go to the Bahamas and they're just barely able to cover basic expenses because they did not sit down and put a number on how much money they would actually have coming in every single month. And they forgot that the cost of fuel goes up. The cost of utilities go up. Everything goes up over a period of time. You need to have that built into your calculation.

LYDEN: Are minorities too intently focused on Social Security?

HALL: I think that's part of it. But I also think that we as minority people haven't had access to the level of information and the type of retirement planning that other groups have had. Many people have friends who have been involved in these areas for years. They know how to put together a good retirement package for their friends. But many of us don't know people like that and we have not networked.

And also, I think, we spend a lot of time focusing on what will make us happy today. What accoutrements can we bring into our lives that will reflect our success rather than thinking of our success as a long term entity, part of which is being successful also in retirement.

LYDEN: Once again, this is TELL ME MORE from NPR News and I'm speaking with TELL ME MORE's money coach Alvin Hall about retirement savings.

So you mentioned that minorities haven't been as privy to retirement advice as white people have. What's a quick step in the right direction?

HALL: A quick step in the right direction is to go out to a local bookstore or go online and buy a basic book on retirement that explains to people the basic retirement plans. Also, look at charts that show you how much money will grow in different interest rate environments. And don't elect not to participate in your company's 401K program.

I cannot tell you, Jacki, how many of my black and Hispanic friends said when they first went to work at these companies, oh, I need my money now, I don't want my money locked up in that plan. You must make that contribution. It is building towards your future.

LYDEN: Alvin, is there any belief that one investment is safer than the next?

HALL: Yes. People are always saying to me, well, I'm going to put my money in mutual funds because they're really safe. Well, if they've gotten through the past three years with their money in mutual funds and they haven't seen it drop substantially, they are realizing there's no such thing as a safe or risk-free investment.

If you're going to put your money in something that you want to be perfectly safe, then you need to put it into a savings account or a CD up to the FDIC insured limits. Everything else is subject to some kind of risk.

LYDEN: That's a little scary.

HALL: It is. I think we all want there to be a magic pill, a magic formula, that if we put our money in this, Jacki, we'll close our eyes and we'll wake up at 65 and lo and behold, standing in front of us will be the Prince or Princess Charming of retirement.

(Soundbite of laughter)

HALL: And they'll hand us this basket full of the wonders of our golden years. It doesn't happen that way.

LYDEN: TELL ME MORE regular financial contributor Alvin Hall. He joined us from our bureau in New York. Alvin, thank you very much.

HALL: Thank you. Hope you're planning for your retirement, Jacki.

LYDEN: After this conversation, you bet I am.

HALL: Good.

LYDEN: And next Tuesday, TELL ME MORE would like you to join the personal finance conversation. Send in your questions about planning for retirement, improving your credit, buying a home, whatever personal finance issues are on your mind. It's all part of the new money coach series to be called First Tuesdays, beginning with the first Tuesday of November.

To participate, you can call TELL ME MORE's comment line at 202-842-3522. Again, 202-842-3522. Remember to leave your name and you can also email tellmemore@npr.org. And in the subject line write: First Tuesdays.

Copyright © 2010 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.