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American Morning

Immigration Battle; Duke Rape Investigation; Financial Matters in Different Stages of Life

Aired May 15, 2006 - 08:59   ET

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

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: I'm Candy Crowley in Washington. A high-profile speech, low poll ratings, the politics of the president, Congress and immigration. That story coming up.
JACQUI JERAS, CNN METEOROLOGIST: I'm meteorologist Jacqui Jeras. Atlantic moisture continues to pour into New England, bringing flooding up to near record levels. We'll let you know when this is going to cut off coming up.

JASON CARROLL, CNN CORRESPONDENT: I'm Jason Carroll in North Carolina. Two Duke University lacrosse players have already been indicted, but will a third be indicted today? I'll have that story coming up.

MILES O'BRIEN, CNN ANCHOR: And buying a home, paying down your debts, saving for the future, all simultaneously. A special guide to managing your financial future in your 30s, your 40s and 50s. We have advice that is earmarked for all those eras. We're going to be taking your e-mails and your phone calls on this AMERICAN MORNING.

SOLEDAD O'BRIEN, CNN ANCHOR: Good morning. Welcome, everybody. I'm Soledad O'Brien.

M. O'BRIEN: And I'm Miles O'Brien.

S. O'BRIEN: President Bush, as we've been mentioning all morning, is about to announce a plan to send National Guard troops to the U.S.-Mexico border. White House aides say he'll unveil that idea in a speech in primetime tonight.

CNN senior political correspondent Candy Crowley is part of the best political team on TV, as we like to say. She's going to talk to us about the president's speech.

Hey, Candy. Good morning.

CROWLEY: Good morning.

S. O'BRIEN: What do you think? What do you make of the thing that everyone's highlighting, of course, which is troops on the border?

CROWLEY: Well, I think it complicates in some ways and it clarifies in other ways. The president needed something. I mean, the idea here is to speak to conservatives who want nothing but border protection, who don't want to talk about amnesty or guest worker programs or a pathway to citizenship. They want to talk about border patrol.

So, on that score, that's a plus for the president and his target audience, but you then have others who are saying, including Republicans, do we have the National Guard available to do that, they're so occupied in Iraq. And then you have the whole thing that Vicente Fox brought up, which is, gee, militarizing the border between Mexico and the United States doesn't sound great.

So, it's -- there are pros and cons, and it really depends on how they sell it.

S. O'BRIEN: Yes. And I guess it's going to depend on what we hear, clearly, from the president tonight. Many people have said the speech just can't be about the border patrol. It has to be also about what the president is clearly passionate about, the guest worker issue, which could change the tenor of the debate.

S. O'BRIEN: What do you think his poll numbers role is in all of this?

CROWLEY: Well, you know, look, his poll numbers are what they are. You can't stop being president. He's got two more years to go, and he has to do something.

This is an issue about which he has a vested interest, as well as a personal interest, having come from Texas and been governor down there. He was beseeched by members of the Senate leaders there saying you've got to do something. We are not going get a bill -- that is, the House and the Senate get one bill together -- unless we see some leadership here. They really felt he had no choice but to step up to the plate and do this

S. O'BRIEN: Well, we will see what happens tonight.

Candy Crowley for us this morning.

Thanks, Candy.

CROWLEY: Sure.

S. O'BRIEN: You'll want to stay tuned to CNN for special coverage of the president's speech. We start a 7:00 p.m. Eastern in "THE SITUATION ROOM." Lou Dobbs is joining Wolf Blitzer. Then the president at 8:00 p.m., followed by a special "LOU DOBBS TONIGHT" at 8:30. Then at 9:00, "LARRY KING LIVE" with more on the debate over border security, and then at 10:00 p.m. "ANDERSON COOPER 360" live -- Miles.

M. O'BRIEN: Torrential, incessant rain is triggering a state of emergency in New England. Massachusetts and New Hampshire are getting the hardest hit right now. The governors there have called in National guard troops to help people evacuate in some cases. Floodwaters are waist high in some areas, as you can see, and officials say the worst may be yet to come. Hundreds of roads are damaged or closed, several schools cancelled classes.

Which brings us to the forecast and Jacqui Jeras.

Jacqui, good morning.

JERAS: Good morning, Miles.

Good morning, everybody.

(WEATHER REPORT)

S. O'BRIEN: Oh, that is just terrible news. All right. Jacqui, thanks.

A third arrest could be coming very soon in the Duke rape investigation. Durham D.A. Michael Nifong is expected to present his case to a grand jury today. He has said before that he plans to pursue charges against a third lacrosse player.

That brings us right to CNN's Jason Carroll. He's live in Durham, North Carolina, this morning.

Hey, Jason. Good morning.

CARROLL: Good morning to you, Soledad.

Defense attorneys are already here at the courthouse. They arrived just a few moments ago. They have prepared themselves for what may come later today. They believe that Durham's district attorney, Michael Nifong, will pursue a third indictment against a Duke lacrosse player.

You'll remember on Friday the D.A. did release the second round of DNA test results. Defense attorneys said that those results were inconclusive, although the report did name a third Duke lacrosse player, someone whose DNA material was found under the fake fingernail of the alleged victim. But defense attorneys also say that that report found that genetic material was found in the young woman that did not match any of the Duke lacrosse players, including the two that have already been indicted.

(BEGIN VIDEO CLIP)

JOE CHESHIRE, DEFENSE LAWYER: We now find that they did retrieve male genetic material from a single source, a single male source, from vaginal swabs, and that that source has been named in this report is a person known to the Durham Police Department but is not any of the Duke lacrosse players.

(END VIDEO CLIP)

CARROLL: The grand jury will be meeting in about the next 40 minutes, and, of course, defense attorneys are standing by waiting to see what Michael Nifong, the district attorney, has to say to them -- Soledad.

S. O'BRIEN: All right. We're waiting, too. Thanks, Jason.

Tennessee authorities are trying to figure out why a deputy U.S. marshal opened fire on two officers, wounding one of them. Memphis police returned the fire and they killed the marshal, a woman. They said they had tried to pull her over after she was seen driving erratically.

Traps are being set for two more killer alligators in Florida. Two women were killed apparently by the gators in separate attacks about 150 miles apart, one near Tampa, one near Gainesville. The attacks follow another fatal attack in Fort Lauderdale that we told you about last week. That nine and a half foot gator was caught.

Salt Lake City Zoo evacuated after one of the animals got loose. The escapee was an 8-year-old gray wolf named Matty (ph). That was why they evacuated it. Matty (ph) scaled an eight-foot fence, eluded zookeepers for just about an hour. A zoo official says Matty (ph) is pretty timid and didn't pose much of a threat.

And some good news this morning. It was a successful rescue for a wayward duckling in Washington State.

Oh, look how cute.

Drop the banner.

There we go. Look how cute.

It got separated from its mother on Mother's Day. It ran across the street, ran right into a storm drain. It took a little while. The neighbors were able to fish the little guy out, and they've named him, her, it, Happy.

M. O'BRIEN: Happy.

S. O'BRIEN: Little, fuzzy Happy.

M. O'BRIEN: I guess you could say it fits the bill.

Whatever...

S. O'BRIEN: Why did you ruin my very cute story with a bad pun?

M. O'BRIEN: I'm sorry. I can't help myself. I'm sorry.

S. O'BRIEN: No, apparently not.

M. O'BRIEN: I really can't.

Whatever stage of life you're in, you're probably spending a lot of time thinking about your financial security. In the 30s, we're laying the foundation, in the 40s, we get seriously squeezed between kids and aging parents, and in the 50s it's home stretch to retirement.

(BEGIN VIDEOTAPE) M. O'BRIEN (voice over): OK. First the good news: we're living longer. The bad news: we're saving less and spending more.

So do the math. And you know most of us will outlive our savings, if we even have any. The statistics tell us four out of 10 people age 55 or older have less than $100,000 saved toward their retirement, and it's not hard to figure out why.

In your 30s, retirement seems oh so far away. In your 40s, it's often a case of taking care of parents and children, the high expense of being sandwiched between generation. In your 50s, college tuition for children is often added to the mix.

And whatever your age, those credit card debts keep money away from retirement, not to mention the latte-a-day habit which adds up about $1,000 a year not going to your retirement. And yet, despite all the debt and all the expenses and so little savings, a recent survey found two-thirds of Americans do not expect their standard of living to decline in retirement.

It's time to get real.

(END VIDEOTAPE)

M. O'BRIEN: Yes. That's what we're going to do for the next hour. We have a lot of specific advice for you. We'll ask some experts to answer your questions.

So, give us a call. It's toll-free, so you won't be hurting your retirement in any way, shape or form by calling -- 877-AM6-1300 -- 877-AM6-1300 -- that's 266-1300. Or e-mail us at am@cnn.com.

We're back with our experts after a short break. Stay with us.

(COMMERCIAL BREAK)

M. O'BRIEN: So what would the interest bill be on $800 billion in credit card debt?

S. O'BRIEN: I know. I know. High.

M. O'BRIEN: Wow. Big numbers. Big numbers.

Thirties, 40s, or 50s, no matter what age group you're in, you'll want to avoid that credit card debt. That's just one of the tips you're going to get over the next -- well, the remainder of this hour as we look at financial matters in those stages of your life.

S. O'BRIEN: We've invited two experts to come and talk with us this morning. Ellen McGirt, you've seen her here before. She's editor-at-large for "Money" magazine. David Bach, he's been here, too. The latest book is called "The Automatic Millionaire Homeowner."

Good morning to both of you.

DAVID BACH, "AUTOMATIC MILLIONAIRE HOMEOWNER": Good morning. Great to be here.

S. O'BRIEN: We're breaking it down into 30s, 40s, 50s. And our goal today is really specific advice. I mean, everybody knows debt is bad. The reality is, though, we all have debt.

BACH: Of course.

So, here's my question: How exactly does someone who's in their 30s hope to, you know, start off in a job, probably woefully underpaid, trying to figure out how to move ahead in their career, but keep their debt as low as possible? What's the number one thing you tell someone in their 30s?

ELLEN MCGIRT, EDITOR-AT-LARGE, "MONEY": Well, I would say, know what the difference between good and bad debt. Student loan debt obviously is extraordinarily important because it's gotten you where you are today. But if you're overspending on your credit cards because you're trying to keep up with the Joneses and you're trying to make sure that you look good at work, seeking a mate, all of those kinds of things, then you're going to run into trouble with your credit later on down the line. So, know exactly what you owe, how much it's costing you.

Most people don't even know how debt works. Take the time to take yourself to school and make sure that you know how your debt is behaving and how it's going to be affecting you in your future.

M. O'BRIEN: Well, you know, it is interesting, because those credit cards, they practically come in the mail ready to go. And there is no instruction manual, is there?

S. O'BRIEN: You've got to get like three a day, at least.

M. O'BRIEN: Yes. And what do you -- how can people at that age become attuned to this? Because it's very easy to let it get out of control that way. Put it that way.

BACH: Well, one of the big things with credit card debt, it's all about the interest rate. It's not the debt that's killing America. It's the interest rate.

So many Americans right now, their interest rate is 20, 25, 30 percent.

M. O'BRIEN: Ouch.

BACH: What you need to do is pick up those -- pick up the phone and say, "Look, I know you're offering zero percent financing to new customers. Give me a better deal. Give me zero percent for six months so I can catch up." Or literally...

M. O'BRIEN: Or move it, right?

BACH: Or move it.

M. O'BRIEN: Yes. BACH: Simply move it. Take advantage of these great offers right now, because they're out there. And take advantage while those rates are down.

S. O'BRIEN: Let me ask you a question that is coming from one of our phone callers. Her name is Mary and she's in Quincy, Massachusetts.

Mary, can you hear me?

CALLER: I can.

S. O'BRIEN: What's your question for our panel?

CALLER: I can hear you.

S. O'BRIEN: OK. Go ahead. What's your question?

CALLER: Well, my question is, I'm over 70 and I'm working two part-time jobs, and I don't make -- I don't have enough Social Security. And consequently, I do use my credit card to buy things that I need. And I'm just wondering if in my demise, when the day comes when I go home to my maker and I leave a debt, who's responsible for it?

MCGIRT: Mary, are you married?

CALLER: No.

MCGIRT: You're not married. Well, it's one of those funny gray areas where it actually just -- Mary, what ends up happening is that you're actually going to be leaving that debt unpaid for, which I think is something that a lot of folks do in their 70s. If you were married, of course, it would be your spouse's responsibility.

CALLER: Yes.

MCGIRT: But what's really going to happen between now and then is, if you run into trouble meeting those minimum payments, like so many people do these days, you're going to be hounded in your older years by creditors.

S. O'BRIEN: Plus, I mean, Mary said she's 70. And people are living to 80, 90, mid 90s.

MCGIRT: Yes, I know.

S. O'BRIEN: I mean, that can be a long time to be living off -- you know, and the sad thing is, I don't think Mary's story is unusual.

MCGIRT: Not at all. Not at all.

BACH: No, it's very common. You know, she's got two jobs. So one thing I would tell Mary is, you know, it's not too late for you to even be putting money away for retirement. She may not think it's possible, but saving some money tax deductible, using IRA accounts is something she should look at.

And again, with these credit cards, reduce the amount of credit cards, because when you have a lot of credit cards, what happens is you end up making late payments. So what we're seeing is a lot of people who are older right now are getting hit with late fees, $39 a month, and they're getting hit with higher interest rate fees. This is what's really hurting America. Reduce the amount of credit cards you have. It will be easier to pay them off.

MCGIRT: And there are wonderful resources for older Americans. Eldercare.gov, all across the country. Amazing resources for people who can help you. Negotiate with creditors, plan for the future, and perhaps even find discounts on things that you don't know is available to you.

M. O'BRIEN: All right. We have specific tips we want to put on the screen that will help you, 30s, 40s and 50s, depending on where you are.

In your 30s, you should understand what debt does to your credit. We kind of touched on that. You have sort of educate yourself.

In the 40s, home equity. This is something that is used and perhaps, in some cases, abused in our 40s. I want to ask you a question about that in a moment.

And then finally, in the 50s, share your credit wisely. In other words, with a child, or whatever.

What about home equity loans? Many people see those as a -- you know, and talk about the offers you get in the mail. Tremendous, I mean, just huge amounts of those.

Do people overuse this?

MCGIRT: One of the biggest mistakes I see people make over and over again, and I'm sure you do, too, in their middle of their lives, they start using their homes as an ATM, especially when they've got the kinds of mortgages, the adjustable rate mortgages, they're not sure how it's going to behave and how the housing market has changed. And debt creeps up on you again in your 40s, especially if you've made a mistake in your 30s.

The next thing you know, you've got kids and you've got day camp and soccer equipment. And you're thinking about all of the things you need to do to educate them.

So, use home equity wisely, if at all, and particularly for things that are going to actually create more value for your home, as opposed to a great vacation or a boat.

BACH: Ellen's absolutely right.

The home equity loans, one of the things you have to watch out for is the interest rate, again, because these home equity loans, the interest rate is not locked. So many people who have pulled out home equity, maybe $20,000, $30,000, $40,000 when the rates were low, it was a great situation . But now we're seeing those rates go 7, 8, 9, 10 percent.

See if you can do a second home mortgage versus a home equity loan, or even a cash-out refinancing. When you do that, you can lock your rate.

M. O'BRIEN: What happens if the real estate market starts to tank and you've got all these home equity loans and you end up upside down in your house?

BACH: Well, this is exactly what can happen. You can end up upside down in your home. But I will tell you this, the good news for baby boomers is that they have trillions of dollars right now in equity in their homes.

In fact, the average baby boomer, in many cases, the equity in their home is over 50 percent of their home value. So who we're really seeing having the problem right now are people in their 30s and their 40s. People in their 50s and their 60s were more conservative.

My advice to people who are near to retirement, don't be pulling equity out of your home unless you're buying more assets. So, in other words, back to those credit cards, just pulling money out to pay off your credit cards, if you keep using your credit cards, it's very dangerous. But if you're buying another piece of real estate, it could work out to be a very smart investment.

S. O'BRIEN: All right. Well, good.

Thank you very much, you guys.

Let's continue on after this short break. We're going to talk about retirement. If you feel like most folks, you probably don't have nearly enough stashed away for the future. Or maybe you're just beginning to think about your retirement.

We think about retiring every day, don't we?

M. O'BRIEN: Yes.

S. O'BRIEN: It's not frequent (ph), though.

We've got tips to kick-start your savings whether you're in your 30s, or your 40s or 50s.

Give us a call. The number is toll-free -- -877-AM6-1300 -- 877- 266-1300. Or e-mail us at am@cnn.com.

A short break. We're back in just a moment.

(COMMERCIAL BREAK)

M. O'BRIEN: We're talking about finances in your 30s, 40s and 50s this morning. We're going to focus a little bit on saving for retirement now. S. O'BRIEN: Ellen McGirt is editor-at-large at "Money" magazine. David Bach is the author of six consecutive best-selling advice books on money. The latest one is called "The Automatic Millionaire Homeowner."

And a reminder. We're taking your phone calls. We're taking your e-mail messages as well.

The phone number is 1-877-AM6 -1300.

Let's talk about your 30s. Let's first talk a little bit about advice that you give.

The first thing you say is, tackling your debt, understanding in your 30s what exactly your debt is going to do. I'm sorry, we're talking retirement. I got the wrong thing up here.

First you say, saving for your 30s. Pay yourself first. You've given this advice time and time again in your books.

BACH: I have. You can't start fast enough. Pay yourself first. This means taking one hour a day of your income -- we use 10 percent here as an example -- using your 401(k) plan, using your 403 (b) plan.

If you go to one of these jobs where a lot of employers now don't let you use retirement accounts for the first year, then what you must do is not an option. What you must do is go into a bank, open up an IRA account, sign up to save in that account automatically. This year you can put up to $5,000 away. So really take advantage of these plans.

S. O'BRIEN: Save aggressively from the get-go.

BACH: You have to, because when you start young, it's easier to finish rich.

M. O'BRIEN: Ellen, you know, what about the mix of aggressive growth stocks versus blue chips, versus bonds. What do you recommend in the 30s?

MCGIRT: Be aggressive. You've got plenty of time to go. And think about it, people are living and working well into their 70s and 80s and 90s. You're going to want to be as aggressive as you possibly can to have as much access to the stock market.

I'm in my 40s, and I invest as aggressively as if I was in my 20s and 30s, too, because I'm ambitious and I started late. I didn't take David's advice.

M. O'BRIEN: Good of you to admit.

BACH: And I think the key to...

MCGIRT: No, I'm human.

BACH: She's 40. Realistically, she's got 60 years ahead of her here.

MCGIRT: Yes.

BACH: So, really, you can afford to invest aggressively. But the key is, invest intelligently aggressively. That means don't just choose one stock. Most retirement accounts now have what are called lifecycle funds. So there's five of them now, the most aggressive and the most conservative.

If you're in your 30s, go with the most aggressive.

M. O'BRIEN: All right. We have an e-mail now from Roman. He is 31 years old. Let's listen to this.

"By the end of the year, I project to be finished paying off my college loans and college credit cards, the ones I lived off of. Can I also contribute to an IRA if I have a employee plan 401(k)? What other retirement savings plans are out there for my age range?"

Roman sounds like he's on the right track, by the way. What do you suggest for him if he has a 401(k)?

BACH: Well, you know what we didn't get the answer to is, does he own a home? Does he own any real estate?

One of the most important things -- really probably the most important thing you can do in your 30s is buy a home. Don't rent. So I'd sit down and say, if you haven't bought anything yet, we want you to buy a home...

M. O'BRIEN: Before another retirement plan.

BACH: Before another retirement plan.

M. O'BRIEN: OK.

BACH: I want you to say for a home, get a home savings account set up. Go into the bank, find out if you qualify for a first time home loan buyer program. Many of these programs will help a first time home buyer get into a home with very little money down. And buy something smaller than you think you can afford. Don't go for the maximum. Buy a little bit less and get yourself into a piece of property.

M. O'BRIEN: It's hard to do that, though -- Ellen.

MCGIRT: It is, but you actually have to have that safety net, because with homes come additional costs. And if you dig into your savings inappropriately, then your home is going to end up being a drag on your bottom line, not an asset. So be careful.

S. O'BRIEN: We've covered our 30s. You've talked a little bit about the 40s. And some of your advice is, up your retirement contributions, save 15 percent, use your retirement account -- we can throw them up on the graphic right there -- invest for growth, which you guys were talking about with real estate and second homes. Let's move on to the 50s. We've got Nancy in Brick Township, New Jersey, on the phone for us this morning.

Hey, Nancy. Can you hear me?

CALLER: Good morning. I'm so happy to speak with you.

S. O'BRIEN: Well, thank you very much, though you don't want to talk to me. You really want to talk to our panel of experts this morning. What's your question for them?

CALLER: Well, over the last 12 years, every nickel of our disposable income has been invested in the education of our three children. And I'm proud to say in 18 months our youngest is going to graduate college.

M. O'BRIEN: Congratulations.

CALLER: So we're wondering, first, how then to best invest this income. And second, what tax issues we may face as we lose our last dependent.

BACH: Well, first of all, congratulations.

M. O'BRIEN: Let the party begin.

(CROSSTALK)

M. O'BRIEN: You've made it!

BACH: But, you know, your kids are so fortunate that you basically saved for their education, because so many kids today are getting out of school and they have $50,000, $60,000, $70,000 in debt. So what I would tell her is this, focus on paying that mortgage down. Get that mortgage paid down.

Look at a biweekly mortgage so you can become debt-free. Consider a second home or an investment property. But really, the key thing here, start saving that money.

Don't go out and spend the money. You don't just run around and have great trips, start spending that money. Use the 401(k) plans from the IRA account, put it towards the debt, and look for an investment property. Because I think for baby boomers, investment property is going to make a huge difference.

M. O'BRIEN: So forget the party?

(CROSSTALK)

S. O'BRIEN: No party.

MCGIRT: But I would certainly add to that, do a good retirement check. This is the perfect time to think about where you are in your retirement lives. You probably haven't maxed out your accounts, and you probably have more to go there. And so, start socking away cash. And that's a good way to offset some of the tax differences that you're going to see going forward.

By all means, visit with a financial planner that can help you look at ways that you can make -- crunch that retirement number. You need to know now how much you're going to spend in retirement, and start working towards any shortfalls that you have there in cash.

M. O'BRIEN: OK. Good advice.

Stay with us. Don't go away now. We're going to look at some other issues coming up in just a little bit.

Coming up also, a quick look at today's top stories. And we're going to have some tips from our experts here on saving for kids' education. We'll tell you what parents should be focusing on in their 30s and 40s and 50s before you start planning that party.

And remember to give us a call with your questions -- 877-AM6- 1300 -- that's 266-1300, or an e-mail at am@cnn.com works just as well.

Stay with us.

(COMMERCIAL BREAK)

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