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CNN Live Saturday
Dollar Signs: Retirement
Aired June 28, 2003 - 16:29 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.
FREDRICKA WHITFIELD, CNN ANCHOR: Time now for "Dollars Signs." Today, when you think about retiring, you probably think of golfing, traveling, maybe even gardening (ph). Well, sounds great, but maybe you're also worrying about being lonely, bored and having to eat cat food to survive or something.
Having the best possible retirement requires planning, before and during the golden years. With more Americans than ever approaching that imaginary finish line, how ready are you? CNN Financial News correspondent Ali Velshi works the numbers.
(BEGIN VIDEOTAPE)
ALI VELSHI, CNNfn CORRESPONDENT (voice-over): Retirement. The word makes most Americans think of warm climates, card games and rounds of golf. But how many will really be able to afford it? The fact is, census figures indicate about four million Americans will hit retirement age in 15 years, and many find themselves woefully unprepared.
CLARE HUSHBECK, LABOR ECONOMIST, AARP: There's always something else. There's raising the children and buying the house and having the car and all of those things that we all confront. And then panic time hits right around late 40s, early 50s.
VELSHI: As a result, the government says almost two-thirds of the population between 55 and 64 have put off early retirement and continue to work. Also, almost 13 percent of Americans over 64 still draw paychecks. That's up from 10 percent a decade ago.
And they're wise to do so. Most Americans won't be able to survive on Social Security when they leave the work force. The government says the average monthly payment for a new retiree is $895. According to a Washington thinktank, that's less than half their pre- retirement income. It's also much less than many expect.
But there are answers to these problems. First, do the math. Find out how much you need to save. You can calculate this on many financial Web sites. They'll ask you to consider when you want to retire, how long you expect to live, and what kind of lifestyle you envision. But what happens if you want to retire in 15 years and you don't know all that?
DOUG FLYNN, CERTIFIED FINANCIAL PLANNER: We have what we call the magic number, and what that is is if you determine that you want $40,000 a year of income from your investment portfolio during retirement, if you're a conservative investor, you multiply it by 25.
VELSHI: That comes out to $1 million. What do you do if that number seems impossible to achieve?
HUSHBECK: Do the financial equivalent of eat your spinach, and you know, get a grip on your finances, and cut back on the number of movies you go to or dinners you eat out, and you know, make a more concerted effort to save religiously every week.
VELSHI: And once you cut out as much as you can, you have to put that money to work in the market. Your risk tolerance is only part of the equation. Knowing how much you need, not just how much you want, is important.
FLYNN: If it turns out that your savings ability over the next decade or 15 years is 3 or 4 percent interest is all you need, then you can sort of develop your investment portfolio around that. But if it turns out that you're going to need 12 to 15 percent per year to make it happen, then you need to rethink whether or not it's a realistic goal, or perhaps extending retirement.
(END VIDEOTAPE)
VELSHI: Fredricka, the situation here is depending on how far you are away from retirement, you may have less to worry about. If you've got more than five years to go before you're set to retire, you can think about working a little longer if your employer will let you, finding part-time work after you retire, consulting, opening a small business, maybe even starting a franchise. And you really should take the time to think about it.
If, however, you're within five years of retirement, and you do the math and you realize you're not going to have enough money, it's a little more dire. You've got to start thinking about selling your home and downsizing or maybe taking a reverse mortgage. But people are going to have to have a very aggressive look at their situations now. I think when you put your numbers through that financial calculator and you find out how much you need, it would surprise most of us -- Fredricka.
WHITFIELD: Ali, selling your home, that is not what people want to hear as an alternative to try to make up for lost earnings.
But you know, when we talk about, in your piece, we talk about 12 to 15 percent annual returns. You know, how realistic is that, really, for most people?
VELSHI: It's also an element of how much time you have before you retire. And let's divide it this way. If you have more than 10 years to go before you're set to retire, it's possible. Realistic, we'll see. But it's possible. If you have less than 10 years, it may be too risky to go after aggressive investments.
But let me just give you some perspective. From the '20s all the way to 2001, the broader market, if you invested in the stock market, would have returned you 11 percent. Now, that's 75 years we're looking at. So let's look at a tighter period, from 1980 to 2001, 21 years, the market actually returned 12 percent on average. That assumed you were fully invested in the market in a broad range of stocks. So 10, 11, 12 percent is actually possible, but remember, when you look at a 20-year period from the '80s to 2001, you had the boom years of the '90 in there; you've got to count on boom years and you've got to count on bust years. Most financial experts tell me if you've got a minimum window of 10 years, you can invest possibly -- you can invest sensibly and possibly get yourself a 10 percent plus return. If you've got less than five years, again, you're looking at a more dire situation.
WHITFIELD: All right, Ali, we've been asking people to send in their e-mails as well as call in with some of their questions. Here's one of the e-mails that we received from Irvine, California, from Aron. And he says: "I'm a 24-year-old graduate student, and would like to start putting some money away. What is my safest bet, besides a simple savings account?"
VELSHI: All right, Aron gets 10 out of 10 for thinking about this at the age of 24.
WHITFIELD: No kidding.
VELSHI: Exactly. I mean, in your early 20s, your college years where you start getting into debt, and you need to start paying that off before you hit 30. That would be the ideal situation. Aron gets very low marks for worrying about safety. He's 24 years old. That's exactly not the point in time where you need to worry that much about safety. As I said over 75 years, the market does very well; over 20 years, the market does very well. If Aron wants to get out of a bank account where he's getting absolutely no interest at all, he can go into laddered CDs, he can go into money market funds, but none of them are returning even 2 percent, which means inflation, though it's hardly there, will essentially eat up all your earnings anyway.
So what Aron needs to do is if he's got more than $5,000 to talk about, there are some financial advisers who will deal with him. If he's got less, or he doesn't want to talk to a financial adviser, most of these financial Web sites or his own bank will allow him to determine his risk tolerance. And actually, you know, you might be surprised. As risk averse as you think you are, your calculated risk tolerance may allow you to get involved in some stocks.
Aron should have more than 50 percent of his investments in stocks, not as an individual trader, in mutual funds. There are some very conservative mutual funds out there for guys who are worried about losing their money. Aron needs to look at that. His money is wasting its time in a bank account.
WHITFIELD: Well, Ali, I'm still hanging on your sell the home concept. Look at the differences of some of the generations of how they've been going about their home buying. A lot of the people who are in their golden years now, they bought their homes long ago, and they may even be paid for by now. So selling a home -- I mean, really, their home is probably not the expense -- their biggest expense. But you talk about a lot of younger people, and maybe even the baby boomers now, who have had so many different homes buying and selling after a few years, they don't really have the equity and don't really expect that their homes might be paid for by the time they reach their retirement ages.
VELSHI: Yes, and one of the trends that we've seen over the years, Fredricka, is higher ratio mortgages. There are people with 90 or 100 percent loans on their houses. We are in a housing -- we've seen housing do very well for people. It's been their best investment over the last few years. In most cases, now if housing prices start to come down, people will find themselves not only without the equity that they thought they had in their home, but maybe less than that.
The bottom line here is that we have to sort of look at how far you are from retirement. If you've got more than five 10 ten years, you've got to tighten your belt now. You actually need to develop an austerity plan for yourself now. It's a lot easier for us to do it than to get into our 60s and beyond that and start to say, you know, with all these drugs that are out there that help you lower your cholesterol and live longer, 72 or 73 is not the age at which we expect to pass on. A lot of us are going to live into our 80s and 90s. You've really got to plan well. It's going to be very hard to tighten your belt when you're 80 or 90 years old, and find out that you can't afford to pay for the home you're in. Some belt-tightening and austerity planning early on is going to help a lot of people.
WHITFIELD: OK, because by the time you're in 70s and 80s, already the belt has been tightened.
VELSHI: That's right.
WHITFIELD: You're on a fixed income there, not as much flexibility.
All right, thanks very much, Ali. Appreciate it.
Well, is the first year of retirement really the hardest year? What if you haven't even saved enough, as Ali was recommending, and you still need to work? Our guests will share their experiences. Hopefully for some of you it will help you decide on how to make the most of something that we'll all eventually have to deal with, those golden years. And of course, you can still e-mail us at dollarsigns@cnn.com, with a question or two. Or you can call in. The number is 1-800-807-2620. We'll be right back.
(COMMERCIAL BREAK)
WHITFIELD: Well, joining us now with their retirement and semi- retirement experiences are four members of the Emory Academy for Retired Professionals right here in Atlanta. First, two of the academy's co-directors are here, Mary Callahan and Seymour Lavine. Also with us, semi-retired social worker and therapist, Millie Kagan, and semi-retired realtor, George Goldman. And in New York, CNN financial correspondent Ali Velshi still with us now to talk a little bit more about all this. Thanks for all of you for joining us here. Mary, let me begin with you. As we talk about trying to prepare, you know, for retirement, everyone kind of fantasizes over retirement being, oh, this is the time when you go sailing, you're at the beach house, et cetera, but the reality is you really have to plan for it that way, don't you?
MARY CALLAHAN, RETIREE: Yes. We have a course called reinventing retirement, and people really don't know what to do with themselves when they first retire. They're just lost, because they've lost that social connection that they enjoyed so much. And then the men go home and start telling their wives what to do. They say, would you please clean up that shelf, would you do this, would you do that? It's a hard adjustment.
WHITFIELD: So, Seymour, this program is really important to have, to have -- to really help more people prepare for it, because who would have thought that you needed some courses or instruction on how to enjoy retirement.
SEYMOUR LAVINE, RETIREE: Exactly. This was started in 1979 as Emory Senior University, and we felt the need for people to learn more intricate, more interesting courses. So we have prepared for that and we built up a wonderful, wonderful series of courses.
WHITFIELD: And these are courses that you take for how long?
LAVINE: Four quarters, Tuesday mornings and Thursday mornings, one hour each, and you can take two courses on Tuesday, two courses on Thursday, and there's a tremendous variety for them to choose from.
WHITFIELD: And Millie Kagan, you're semi-retired. What does that mean? Was it, you know, wasn't that comfortable being completely retired, or what happened?
MILLIE KAGAN, SEMI-RETIRED THERAPIST: Well, I had my fears.
WHITFIELD: Yes.
KAGAN: I worked as a therapist, social worker for over 50 years. I really had committed and cared deeply about the people I worked with, and I wondered, what could be on the other side? And I was really, really getting fearful. And then, I said, but there should be more to my life than just this one track, and so I decided I'm going to take the leap. And what helped me more than anything is I took a year to really prepare, to look out and see what might interest me and what might fill that void, the void that you were mentioning of your mother, who lost a lot of her social contact.
Well, I found Emory Senior University. And now I guess it's the Emory Center for Lifelong Learning. And I decided, after taking two courses, that I had a new passion, that I really was a perennial student, and this was delightful. It filled a lot of what I really needed that I wasn't able to have when my life was consumed with work.
WHITFIELD: Well, that's so interesting because I... KAGAN: And I loved my work.
WHITFIELD: Oh, that's so great. And hopefully, you love your work and you love the retirement.
KAGAN: Absolutely.
WHITFIELD: ... because both of my parents are retired, and we talk about it all the time. And you know, the toughest adjustment I think my mom has expressed, you leave the socializing that comes with your career and the rewards you get in that kind of human interaction. You don't get that as much, George. And so do you find that that really makes it difficult initially, the first or even the second year of retirement? Just getting used to trying to reprogram yourself?
GEORGE GOLDMAN, SEMI-RETIRED: I think the greatest adjustment is, I don't have to go downtown anymore. My new office, for five years, is close to my house. I pick up the bookkeeper. We have lunch. We pay bills. I no longer collect rents, I no longer manage any property, but Mary and Seymour are working me to death teaching courses or hosting courses on old Atlanta, on how to avoid being scammed, conned, safety for seniors, and we've had 55 people in one class, about 30 in another, and there's a constant interest in these classes. The last one we just had was about 29 people behind the doors at Emory, in hospitals, libraries, museums, and they're begging for another course.
WHITFIELD: And, in fact, George, we want to talk a little bit more about the scams and all those other things that folks need to be weary of in a moment. But first we have got on the telephone with us, because we are encouraging people to call in with their questions or comments, Vivian from Indianapolis. What's your question or comment?
CALLER: Hi. Thank you for taking my call. My husband and I are planning to retire within 10 years. And at that time, all our bills are going to be paid before we retire. So my question is, what is a good ballpark percentage to set as a guideline for retirement income such as 70 percent of your current income or 80 percent of your current income? Thank you.
WHITFIELD: All right. The question is, how do you best prepare for your retirement, five years, 10 years out? How do you know, you know, what kind of limits to set for yourself in terms of financially how do you prepare for it? That was the question coming in from Vivian.
LAVINE: Well, you have to really invest yourself in this very seriously. And don't go about it haphazardly as I did, which is a story in itself. And as long as you go about it with your full gears, go straight ahead and learn what you should learn about it, you'll be OK.
WHITFIELD: Well, Ali, let me ask you, you know, how would you respond, or what would you recommend?
VELSHI: That's probably one of the biggest questions that we hear from people, whether it's a formula, whether you have to think about your lifestyle. The Economic Policy Institute in Washington says that you should think about 80 percent of your pre-retirement income. One of the rules of thumb I've heard a lot of times is 70 percent.
But it's actually a lot more complicated than that, and this is where some of those financial Web sites come in, and the beauty of the trends today is that most people approaching retirement have some access to these things.
You have to know some of the variables. How much you want to spend in your first year of retirement is just one simple part of the variable. You need to actually know how long your likely life expectancy is. If you're retiring in your early 60s and you're likely to live until 95 or 100, that's a big part of your calculation. You've got to have a good guess at how quickly your money is going to be eaten away.
Fredricka, one of the things we keep talking about is the fact that there's no inflation here. Talk to the four people with you. There is inflation in health care. Health care and education are the two areas where there's almost double-digit inflation. So you have to think about how fast your money's going to be eaten up. You have to think about how much money you need on the day you retire, and how you're going to grow that over the time that you're in retirement, because if you are going to be retired for 20 or 25 years, you have got to be pretty active about how you retire -- how you manage your money in retirement.
And some of our most astute viewers and callers are people who are in their retirement years, and they can pay more attention to how their money is managed. So it's actually a bit dangerous to take a percentage, and determine that that's, you know, you want 70 percent of your income. I think it's wise to take a real hard look at this and speak to a financial planner about your own particular situation -- Fredricka.
WHITFIELD: Well, OK, Ali, we're going to talk a little bit more about that after the break, just how to save that kind of money, how in the world do you try to plan your retirement so that when you do finally retire, you can enjoy it. We are accepting more of your calls and your e-mails about protecting your retirement, planning for it, enjoying it. We'll be right back right after this break.
(COMMERCIAL BREAK)
WHITFIELD: That's the phone number of the Emory Academy for Retired Professionals. In fact, I'm joined right now by four members who have attended the session there at Emory, talking about retirement, how to plan for it. That's the subject here on "Dollar Signs." We're encouraging you to continue to call in at 1-800-807- 2627 or dollarsigns@cnn.com. We're answering your questions about how in the world you plan for retirement.
And, you know, Millie, let's talk a little bit more about trying to plan for it. So many baby boomers and younger are really kind of living for the moment. Not even thinking about, oh, should I have to really sign up and start saving for retirement? But I've got 401(k), you know, invested. Isn't that enough? Social Security?
(CROSSTALK)
KAGAN: ... and talked about very carefully, looking at the fact that we had to pay off our mortgage. And would my -- my contribution be needed any longer? And you know, life is a risk. You don't know what's down the line five years from now.
But what I realized, and it's really on the front cover of "Newsweek" this week, is that so many young couples are now getting caught up with so much pressure that they don't have time for romancing. And retirement gives you that time. I think one of the most important elements of retirement is time. You have time to really relax. You have time to be with a husband of 63 years, and enjoy each other, and renew your marriage. It's really a very important element. And I know we can't tell ahead what will be in five years, and whether we'll have enough means.
WHITFIELD: And that's what it should be, about enjoying one another's company, enjoying life. But George, also with retirement also kind of comes another bane of existence, which is people really seem to look at folks who have retired as vulnerable, so therein lies the scams that start coming in, flooding your phones, flooding your mail, really reeling people in to almost relinquish a lot of their retirement money for promises of getting great gains, and then they don't.
GOLDMAN: Our local guru Clark Howard says, "if it sounds too good to be true, it isn't true." And our course was eight weeks, and we had lawyers, we had stock brokers, we had personal care people, to talk about caregives and what is needed and how to avoid traps. We've had all kinds of professionals come in, and the scams, cons, safety for seniors is an eight-week, eight-hour course. And we've taught it at Emory and Mercer University just had it for their seniors.
And if any group ever wants to put it on, we're happy to send them a course outline, a syllabus, if they would fax us at senior university, 404-727-6001. Then we would be happy to respond if they would give us their phone number, address, fax, e-mail, we could send them some material. Because we've developed a lot of programs in the last two years to avoid these scams.
WHITFIELD: Now, in fact, we've gotten e-mail. We've gotten several in. And I want to read you one. This is from Don. And he says -- "In February of this year, I was downsized out of a $70,000 a year executive job. Luckily, I saved enough money to make it the last four months, but have spent most of my savings and retirement money. How does someone who can't find a job plan for the future?" Seymour.
LAVINE: That was something -- well, I had a peculiar situation. I was making a lot of money in business, my wife was a psychologist with a splendid practice, and we had an account with a brokerage firm in New York, brokerage firm in Atlanta, and we were doing just fine. My wife passed away, the broker in Atlanta suggested we bring the account down to Atlanta under his advice. Under his advice, we had 70 percent in stocks, 30 percent in safer investments. P.S., I lost 25 percent of my investment.
WHITFIELD: So you really can't make up for that, can you?
LAVINE: No. But I'll tell you what happened. At the advice of a very fine estate planner in Atlanta, I got the larger firm to refund almost 25 percent of the money, because of my advanced age, he had planned it incorrectly.
WHITFIELD: Well, you were pretty lucky, then.
LAVINE: I was very fortunate that way.
WHITFIELD: Well, you know, we thank you all so much for sharing your valuable lessons on planning retirement, and inspiring so many of us to start thinking now instead of later about retirement, because it really can't start too early, can it? Mary Callahan, Seymour Lavine, Millie Kagan, George Goldman, thanks very much for, all of you, for joining us, and thanks for the guidance from the Emory Academy of Retired Professionals as well.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired June 28, 2003 - 16:29 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: Time now for "Dollars Signs." Today, when you think about retiring, you probably think of golfing, traveling, maybe even gardening (ph). Well, sounds great, but maybe you're also worrying about being lonely, bored and having to eat cat food to survive or something.
Having the best possible retirement requires planning, before and during the golden years. With more Americans than ever approaching that imaginary finish line, how ready are you? CNN Financial News correspondent Ali Velshi works the numbers.
(BEGIN VIDEOTAPE)
ALI VELSHI, CNNfn CORRESPONDENT (voice-over): Retirement. The word makes most Americans think of warm climates, card games and rounds of golf. But how many will really be able to afford it? The fact is, census figures indicate about four million Americans will hit retirement age in 15 years, and many find themselves woefully unprepared.
CLARE HUSHBECK, LABOR ECONOMIST, AARP: There's always something else. There's raising the children and buying the house and having the car and all of those things that we all confront. And then panic time hits right around late 40s, early 50s.
VELSHI: As a result, the government says almost two-thirds of the population between 55 and 64 have put off early retirement and continue to work. Also, almost 13 percent of Americans over 64 still draw paychecks. That's up from 10 percent a decade ago.
And they're wise to do so. Most Americans won't be able to survive on Social Security when they leave the work force. The government says the average monthly payment for a new retiree is $895. According to a Washington thinktank, that's less than half their pre- retirement income. It's also much less than many expect.
But there are answers to these problems. First, do the math. Find out how much you need to save. You can calculate this on many financial Web sites. They'll ask you to consider when you want to retire, how long you expect to live, and what kind of lifestyle you envision. But what happens if you want to retire in 15 years and you don't know all that?
DOUG FLYNN, CERTIFIED FINANCIAL PLANNER: We have what we call the magic number, and what that is is if you determine that you want $40,000 a year of income from your investment portfolio during retirement, if you're a conservative investor, you multiply it by 25.
VELSHI: That comes out to $1 million. What do you do if that number seems impossible to achieve?
HUSHBECK: Do the financial equivalent of eat your spinach, and you know, get a grip on your finances, and cut back on the number of movies you go to or dinners you eat out, and you know, make a more concerted effort to save religiously every week.
VELSHI: And once you cut out as much as you can, you have to put that money to work in the market. Your risk tolerance is only part of the equation. Knowing how much you need, not just how much you want, is important.
FLYNN: If it turns out that your savings ability over the next decade or 15 years is 3 or 4 percent interest is all you need, then you can sort of develop your investment portfolio around that. But if it turns out that you're going to need 12 to 15 percent per year to make it happen, then you need to rethink whether or not it's a realistic goal, or perhaps extending retirement.
(END VIDEOTAPE)
VELSHI: Fredricka, the situation here is depending on how far you are away from retirement, you may have less to worry about. If you've got more than five years to go before you're set to retire, you can think about working a little longer if your employer will let you, finding part-time work after you retire, consulting, opening a small business, maybe even starting a franchise. And you really should take the time to think about it.
If, however, you're within five years of retirement, and you do the math and you realize you're not going to have enough money, it's a little more dire. You've got to start thinking about selling your home and downsizing or maybe taking a reverse mortgage. But people are going to have to have a very aggressive look at their situations now. I think when you put your numbers through that financial calculator and you find out how much you need, it would surprise most of us -- Fredricka.
WHITFIELD: Ali, selling your home, that is not what people want to hear as an alternative to try to make up for lost earnings.
But you know, when we talk about, in your piece, we talk about 12 to 15 percent annual returns. You know, how realistic is that, really, for most people?
VELSHI: It's also an element of how much time you have before you retire. And let's divide it this way. If you have more than 10 years to go before you're set to retire, it's possible. Realistic, we'll see. But it's possible. If you have less than 10 years, it may be too risky to go after aggressive investments.
But let me just give you some perspective. From the '20s all the way to 2001, the broader market, if you invested in the stock market, would have returned you 11 percent. Now, that's 75 years we're looking at. So let's look at a tighter period, from 1980 to 2001, 21 years, the market actually returned 12 percent on average. That assumed you were fully invested in the market in a broad range of stocks. So 10, 11, 12 percent is actually possible, but remember, when you look at a 20-year period from the '80s to 2001, you had the boom years of the '90 in there; you've got to count on boom years and you've got to count on bust years. Most financial experts tell me if you've got a minimum window of 10 years, you can invest possibly -- you can invest sensibly and possibly get yourself a 10 percent plus return. If you've got less than five years, again, you're looking at a more dire situation.
WHITFIELD: All right, Ali, we've been asking people to send in their e-mails as well as call in with some of their questions. Here's one of the e-mails that we received from Irvine, California, from Aron. And he says: "I'm a 24-year-old graduate student, and would like to start putting some money away. What is my safest bet, besides a simple savings account?"
VELSHI: All right, Aron gets 10 out of 10 for thinking about this at the age of 24.
WHITFIELD: No kidding.
VELSHI: Exactly. I mean, in your early 20s, your college years where you start getting into debt, and you need to start paying that off before you hit 30. That would be the ideal situation. Aron gets very low marks for worrying about safety. He's 24 years old. That's exactly not the point in time where you need to worry that much about safety. As I said over 75 years, the market does very well; over 20 years, the market does very well. If Aron wants to get out of a bank account where he's getting absolutely no interest at all, he can go into laddered CDs, he can go into money market funds, but none of them are returning even 2 percent, which means inflation, though it's hardly there, will essentially eat up all your earnings anyway.
So what Aron needs to do is if he's got more than $5,000 to talk about, there are some financial advisers who will deal with him. If he's got less, or he doesn't want to talk to a financial adviser, most of these financial Web sites or his own bank will allow him to determine his risk tolerance. And actually, you know, you might be surprised. As risk averse as you think you are, your calculated risk tolerance may allow you to get involved in some stocks.
Aron should have more than 50 percent of his investments in stocks, not as an individual trader, in mutual funds. There are some very conservative mutual funds out there for guys who are worried about losing their money. Aron needs to look at that. His money is wasting its time in a bank account.
WHITFIELD: Well, Ali, I'm still hanging on your sell the home concept. Look at the differences of some of the generations of how they've been going about their home buying. A lot of the people who are in their golden years now, they bought their homes long ago, and they may even be paid for by now. So selling a home -- I mean, really, their home is probably not the expense -- their biggest expense. But you talk about a lot of younger people, and maybe even the baby boomers now, who have had so many different homes buying and selling after a few years, they don't really have the equity and don't really expect that their homes might be paid for by the time they reach their retirement ages.
VELSHI: Yes, and one of the trends that we've seen over the years, Fredricka, is higher ratio mortgages. There are people with 90 or 100 percent loans on their houses. We are in a housing -- we've seen housing do very well for people. It's been their best investment over the last few years. In most cases, now if housing prices start to come down, people will find themselves not only without the equity that they thought they had in their home, but maybe less than that.
The bottom line here is that we have to sort of look at how far you are from retirement. If you've got more than five 10 ten years, you've got to tighten your belt now. You actually need to develop an austerity plan for yourself now. It's a lot easier for us to do it than to get into our 60s and beyond that and start to say, you know, with all these drugs that are out there that help you lower your cholesterol and live longer, 72 or 73 is not the age at which we expect to pass on. A lot of us are going to live into our 80s and 90s. You've really got to plan well. It's going to be very hard to tighten your belt when you're 80 or 90 years old, and find out that you can't afford to pay for the home you're in. Some belt-tightening and austerity planning early on is going to help a lot of people.
WHITFIELD: OK, because by the time you're in 70s and 80s, already the belt has been tightened.
VELSHI: That's right.
WHITFIELD: You're on a fixed income there, not as much flexibility.
All right, thanks very much, Ali. Appreciate it.
Well, is the first year of retirement really the hardest year? What if you haven't even saved enough, as Ali was recommending, and you still need to work? Our guests will share their experiences. Hopefully for some of you it will help you decide on how to make the most of something that we'll all eventually have to deal with, those golden years. And of course, you can still e-mail us at dollarsigns@cnn.com, with a question or two. Or you can call in. The number is 1-800-807-2620. We'll be right back.
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WHITFIELD: Well, joining us now with their retirement and semi- retirement experiences are four members of the Emory Academy for Retired Professionals right here in Atlanta. First, two of the academy's co-directors are here, Mary Callahan and Seymour Lavine. Also with us, semi-retired social worker and therapist, Millie Kagan, and semi-retired realtor, George Goldman. And in New York, CNN financial correspondent Ali Velshi still with us now to talk a little bit more about all this. Thanks for all of you for joining us here. Mary, let me begin with you. As we talk about trying to prepare, you know, for retirement, everyone kind of fantasizes over retirement being, oh, this is the time when you go sailing, you're at the beach house, et cetera, but the reality is you really have to plan for it that way, don't you?
MARY CALLAHAN, RETIREE: Yes. We have a course called reinventing retirement, and people really don't know what to do with themselves when they first retire. They're just lost, because they've lost that social connection that they enjoyed so much. And then the men go home and start telling their wives what to do. They say, would you please clean up that shelf, would you do this, would you do that? It's a hard adjustment.
WHITFIELD: So, Seymour, this program is really important to have, to have -- to really help more people prepare for it, because who would have thought that you needed some courses or instruction on how to enjoy retirement.
SEYMOUR LAVINE, RETIREE: Exactly. This was started in 1979 as Emory Senior University, and we felt the need for people to learn more intricate, more interesting courses. So we have prepared for that and we built up a wonderful, wonderful series of courses.
WHITFIELD: And these are courses that you take for how long?
LAVINE: Four quarters, Tuesday mornings and Thursday mornings, one hour each, and you can take two courses on Tuesday, two courses on Thursday, and there's a tremendous variety for them to choose from.
WHITFIELD: And Millie Kagan, you're semi-retired. What does that mean? Was it, you know, wasn't that comfortable being completely retired, or what happened?
MILLIE KAGAN, SEMI-RETIRED THERAPIST: Well, I had my fears.
WHITFIELD: Yes.
KAGAN: I worked as a therapist, social worker for over 50 years. I really had committed and cared deeply about the people I worked with, and I wondered, what could be on the other side? And I was really, really getting fearful. And then, I said, but there should be more to my life than just this one track, and so I decided I'm going to take the leap. And what helped me more than anything is I took a year to really prepare, to look out and see what might interest me and what might fill that void, the void that you were mentioning of your mother, who lost a lot of her social contact.
Well, I found Emory Senior University. And now I guess it's the Emory Center for Lifelong Learning. And I decided, after taking two courses, that I had a new passion, that I really was a perennial student, and this was delightful. It filled a lot of what I really needed that I wasn't able to have when my life was consumed with work.
WHITFIELD: Well, that's so interesting because I... KAGAN: And I loved my work.
WHITFIELD: Oh, that's so great. And hopefully, you love your work and you love the retirement.
KAGAN: Absolutely.
WHITFIELD: ... because both of my parents are retired, and we talk about it all the time. And you know, the toughest adjustment I think my mom has expressed, you leave the socializing that comes with your career and the rewards you get in that kind of human interaction. You don't get that as much, George. And so do you find that that really makes it difficult initially, the first or even the second year of retirement? Just getting used to trying to reprogram yourself?
GEORGE GOLDMAN, SEMI-RETIRED: I think the greatest adjustment is, I don't have to go downtown anymore. My new office, for five years, is close to my house. I pick up the bookkeeper. We have lunch. We pay bills. I no longer collect rents, I no longer manage any property, but Mary and Seymour are working me to death teaching courses or hosting courses on old Atlanta, on how to avoid being scammed, conned, safety for seniors, and we've had 55 people in one class, about 30 in another, and there's a constant interest in these classes. The last one we just had was about 29 people behind the doors at Emory, in hospitals, libraries, museums, and they're begging for another course.
WHITFIELD: And, in fact, George, we want to talk a little bit more about the scams and all those other things that folks need to be weary of in a moment. But first we have got on the telephone with us, because we are encouraging people to call in with their questions or comments, Vivian from Indianapolis. What's your question or comment?
CALLER: Hi. Thank you for taking my call. My husband and I are planning to retire within 10 years. And at that time, all our bills are going to be paid before we retire. So my question is, what is a good ballpark percentage to set as a guideline for retirement income such as 70 percent of your current income or 80 percent of your current income? Thank you.
WHITFIELD: All right. The question is, how do you best prepare for your retirement, five years, 10 years out? How do you know, you know, what kind of limits to set for yourself in terms of financially how do you prepare for it? That was the question coming in from Vivian.
LAVINE: Well, you have to really invest yourself in this very seriously. And don't go about it haphazardly as I did, which is a story in itself. And as long as you go about it with your full gears, go straight ahead and learn what you should learn about it, you'll be OK.
WHITFIELD: Well, Ali, let me ask you, you know, how would you respond, or what would you recommend?
VELSHI: That's probably one of the biggest questions that we hear from people, whether it's a formula, whether you have to think about your lifestyle. The Economic Policy Institute in Washington says that you should think about 80 percent of your pre-retirement income. One of the rules of thumb I've heard a lot of times is 70 percent.
But it's actually a lot more complicated than that, and this is where some of those financial Web sites come in, and the beauty of the trends today is that most people approaching retirement have some access to these things.
You have to know some of the variables. How much you want to spend in your first year of retirement is just one simple part of the variable. You need to actually know how long your likely life expectancy is. If you're retiring in your early 60s and you're likely to live until 95 or 100, that's a big part of your calculation. You've got to have a good guess at how quickly your money is going to be eaten away.
Fredricka, one of the things we keep talking about is the fact that there's no inflation here. Talk to the four people with you. There is inflation in health care. Health care and education are the two areas where there's almost double-digit inflation. So you have to think about how fast your money's going to be eaten up. You have to think about how much money you need on the day you retire, and how you're going to grow that over the time that you're in retirement, because if you are going to be retired for 20 or 25 years, you have got to be pretty active about how you retire -- how you manage your money in retirement.
And some of our most astute viewers and callers are people who are in their retirement years, and they can pay more attention to how their money is managed. So it's actually a bit dangerous to take a percentage, and determine that that's, you know, you want 70 percent of your income. I think it's wise to take a real hard look at this and speak to a financial planner about your own particular situation -- Fredricka.
WHITFIELD: Well, OK, Ali, we're going to talk a little bit more about that after the break, just how to save that kind of money, how in the world do you try to plan your retirement so that when you do finally retire, you can enjoy it. We are accepting more of your calls and your e-mails about protecting your retirement, planning for it, enjoying it. We'll be right back right after this break.
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WHITFIELD: That's the phone number of the Emory Academy for Retired Professionals. In fact, I'm joined right now by four members who have attended the session there at Emory, talking about retirement, how to plan for it. That's the subject here on "Dollar Signs." We're encouraging you to continue to call in at 1-800-807- 2627 or dollarsigns@cnn.com. We're answering your questions about how in the world you plan for retirement.
And, you know, Millie, let's talk a little bit more about trying to plan for it. So many baby boomers and younger are really kind of living for the moment. Not even thinking about, oh, should I have to really sign up and start saving for retirement? But I've got 401(k), you know, invested. Isn't that enough? Social Security?
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KAGAN: ... and talked about very carefully, looking at the fact that we had to pay off our mortgage. And would my -- my contribution be needed any longer? And you know, life is a risk. You don't know what's down the line five years from now.
But what I realized, and it's really on the front cover of "Newsweek" this week, is that so many young couples are now getting caught up with so much pressure that they don't have time for romancing. And retirement gives you that time. I think one of the most important elements of retirement is time. You have time to really relax. You have time to be with a husband of 63 years, and enjoy each other, and renew your marriage. It's really a very important element. And I know we can't tell ahead what will be in five years, and whether we'll have enough means.
WHITFIELD: And that's what it should be, about enjoying one another's company, enjoying life. But George, also with retirement also kind of comes another bane of existence, which is people really seem to look at folks who have retired as vulnerable, so therein lies the scams that start coming in, flooding your phones, flooding your mail, really reeling people in to almost relinquish a lot of their retirement money for promises of getting great gains, and then they don't.
GOLDMAN: Our local guru Clark Howard says, "if it sounds too good to be true, it isn't true." And our course was eight weeks, and we had lawyers, we had stock brokers, we had personal care people, to talk about caregives and what is needed and how to avoid traps. We've had all kinds of professionals come in, and the scams, cons, safety for seniors is an eight-week, eight-hour course. And we've taught it at Emory and Mercer University just had it for their seniors.
And if any group ever wants to put it on, we're happy to send them a course outline, a syllabus, if they would fax us at senior university, 404-727-6001. Then we would be happy to respond if they would give us their phone number, address, fax, e-mail, we could send them some material. Because we've developed a lot of programs in the last two years to avoid these scams.
WHITFIELD: Now, in fact, we've gotten e-mail. We've gotten several in. And I want to read you one. This is from Don. And he says -- "In February of this year, I was downsized out of a $70,000 a year executive job. Luckily, I saved enough money to make it the last four months, but have spent most of my savings and retirement money. How does someone who can't find a job plan for the future?" Seymour.
LAVINE: That was something -- well, I had a peculiar situation. I was making a lot of money in business, my wife was a psychologist with a splendid practice, and we had an account with a brokerage firm in New York, brokerage firm in Atlanta, and we were doing just fine. My wife passed away, the broker in Atlanta suggested we bring the account down to Atlanta under his advice. Under his advice, we had 70 percent in stocks, 30 percent in safer investments. P.S., I lost 25 percent of my investment.
WHITFIELD: So you really can't make up for that, can you?
LAVINE: No. But I'll tell you what happened. At the advice of a very fine estate planner in Atlanta, I got the larger firm to refund almost 25 percent of the money, because of my advanced age, he had planned it incorrectly.
WHITFIELD: Well, you were pretty lucky, then.
LAVINE: I was very fortunate that way.
WHITFIELD: Well, you know, we thank you all so much for sharing your valuable lessons on planning retirement, and inspiring so many of us to start thinking now instead of later about retirement, because it really can't start too early, can it? Mary Callahan, Seymour Lavine, Millie Kagan, George Goldman, thanks very much for, all of you, for joining us, and thanks for the guidance from the Emory Academy of Retired Professionals as well.
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