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When Will You Retire?

Aired July 22, 2002 - 13:35   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: The Murmurs of the stock market are enough to give you and your 401(k) a heart attack. If you are an older investor, you may be asking, when will I ever be able to retire? That's the question of this week's "Time" magazine. Dan Kadlec is a senior writer who cowrote this story.

Dan, hello.

DAN KADLEC, "TIME" MAGAZINE: Hi, good to be with you.

PHILLIPS: Good to have you here. Good to be with you, have you here, all that good stuff.

So how many college funds are being affected now?

KADLEC: How many college funds?

PHILLIPS: Yes.

KADLEC: All of them. You know, this is a retirement issue. It's a college funding issue. It's a social issue. It's a government policy issue. You know, the declining market here is huge, and it's effecting everybody. I think the cross section you just presented is pretty much what we found in our reporting over the last few weeks.

PHILLIPS: We got some graphics made up. Let's talk about this. When the heck can we ever retire, not that you and I want it retire now, right, Dan?

KADLEC: Well, depends on what you want to call retirement. Certainly we will retire one day. We have found is most people are going to be working a little longer than they ever thought. You know, a few years ago, all of the talk about retiring at 55. Today it is more about retiring at 75, and it's not just the stock market. There is this shift away from guaranteed pensions to 401(k)s is really a big deal. 401(k)s on average do not perform adds well as pension fund managers. And people don't put enough money where they should put it. They don't know how to protect that money. They are left on their own. And we are just seeing the downside of the 401(k) revolution.

PHILLIPS: Are there jobs out there? You say we have to work longer. Can we hold on to jobs that much longer? Can companies afford to keep us that much longer? And if not, where do we go? KADLEC: Well, the new model that is evolving is that you stay with your current job, your main career, until you are maybe 55 or 60. And then maybe think about, you have paid off your mortgage, the kids are out of college, hopefully. Then step back and maybe do something that's more fun and more rewarding, but still pays you, and then you let your savings grow for another 10 or 15 years while you are having fun. Maybe you are coaching a college -- I'm sorry, coaching a high school basketball team or grade school. Maybe you're teaching or working for the Park's department, Something that would be fun and isn't so trying, or stressful. And do you that for a few years, let your savings grow, then retire at 75.

PHILLIPS: What would you do if you weren't writing for "Time" magazine?

KADLEC: I would coach basketball. I would try to find a grade school basketball team that needed some help.

PHILLIPS: But working until 75, oh, my gosh. Dan, that sounds horrendous. You want to be enjoying your grand kids. You want to be traveling in a motor home cross country.

KADLEC: Yes, look. You are not necessarily stuck like this. I think a lot of people are going to be. But that's probably the worst case scenario. You know, the way you get around it, you save more, you save earlier. People that are under 45 certainly have lots of time. Even at 55, you still have lots of time. The biggest problem, especially for Boomers, is that they don't save. They haven't saved any money. They thought that the stock market was their savings vehicle. And it made sense for while, but now we're seeing that it's not. You know, you need to put away 10 to 20 percent of your income every year, and things look a little bit better.

PHILLIPS: What about financial aid? If you are completely stressed out and maybe you don't want to work a little longer, what's the financial aid situation look like at colleges right now? Is it just jam packed and there is no money to give?

KADLEC: No, there is money. What we have found is a lot of people that have been accepted at colleges have had to go back and plead a special circumstance because, you know, the portfolio isn't what it was. And in a lot of cases, there is aid out there, and you may qualify now where you didn't a year ago. It is certainly worth asking. You know it is also not a bad idea with interest rates this low, borrowing, no one wants to borrow too much, but it's not a bad option right now, student loans under 4 percent. It's a good deal.

PHILLIPS: And scholarships, too, right. I know there are new Web sites, and ways to go on the computer and find out, yes, it takes more time to have to fill out that out and apply, but that could be a good way to go, too, right, see what type of scholarships are out there?

KADLEC: Exactly, and you know, that start really at the university. Call the university and they can sort of walk you through all that, but, yes, I wouldn't leave any stone unturned. These are exceptional times. And there is money available; you have to look for it.

PHILLIPS: State schools. Are they overwhelmed since this has all taken place?

KADLEC: We have seen some degree of people that had enrolled or had been accepted at the more expensive private schools opting out, saying we don't have the money, and now attending state schools, and we did find a few state schools where enrollment or applications were as much as doubled as they were a couple years ago. So there is no question that people are looking to spend less wherever they can, and education is one of those areas.

PHILLIPS: For anyone under 50, who has been told there will be no Social Security for them and the stock market is their only option?

KADLEC: Well, again, save early, save often. Social Security will be there, it just won't amount it a whole lot 20 years from now. And you know, let's not completely give up here. The market is down almost by half, a lot of people's portfolios are cut in half, but they still have something there. And the secret here is to stay with it. A lot of people that we found are willing to stay with it, if they still have you know 20 years to retirement. And over the long haul, that's going to work for you.

PHILLIPS: Dan Kadlec with "Time" magazine. Great cover on the magazine, by the way. Maybe we can take another shot of that.

Who designed the cover on this article?

KADLEC: It wasn't me. But a picture of grandma serving hamburgers, right?

PHILLIPS: Exactly.

KADLEC: OK.

PHILLIPS: I don't know. I don't know if can I do that, get on roller skates at 75.

KADLEC: I don't know if it will come to that. There are probably better ways to make a living when you are 80, or 75.

PHILLIPS: Live off your grandchildren.

KADLEC: We're just going to let them work and they can pay our room and board. I can go for that.

PHILLIPS: There you go, Dan. Thanks so much.

KADLEC: OK.

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