Return to Transcripts main page
CNN Sunday Morning
Interview With David Bach
Aired March 16, 2003 - 09:45 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.
ANDERSON COOPER, CNN ANCHOR: We're going to focus for a few minutes on finances and retirement planning.
The economy is shaky, joblessness is rising, investors fear a possible war in Iraq. And just this week, the Charles Schwab company has decided to stop matching employee contributions to 401(k) retirement plans. Could it happen at your company? What's an investor to do in these tough times?
Our guest's the CEO of Finishrich.com, the author of the "Finish Rich Workbook," financial expert David Bach, and he joins us from New York.
David, thanks for being with us on this Sunday morning.
DAVID BACH, CEO, FINISHRICH.COM: You're welcome.
COOPER: This obviously got a lot of attention, people, you know, when Charles Schwab dropped matching their 401(k)s. Does that mean 401(k)s are not worthwhile anymore?
BACH: Well, it's really stunning news. I mean, Charles Schwab is -- when you think of Charles Schwab you think of saving for the future. And what Schwab looked at was their earnings are down.
They basically had to make a decision, do we lay off employees or what else can we do? They made a decision to stop contributing, or stop matching their employees' contributions. They say this is going save $15 million a quarter.
But if you're an employee at Charles Schwab, what happened just now, you just saw your retirement benefits basically cut in half, if anything. They were matching on the first 5% of contributions.
Now, how will this affect other Americans? Well, unfortunately, we're seeing a lot of companies stop matching 401(k) plans. Ford made the announcement. Daimler-Chrysler made the announcement.
Here's the key thing. Number one, you need to sign up for your 401(k) plan. But most Americans are saving less than 4 percent of their income in these accounts. Well, when the companies were matching, and basically putting in dollar for dollar, that gets you up to an 8 percent to 10 percent savings. But if your company stops matching, you've just basically seen your retirement benefits cut in half. And that means you have to act. You need to do something. COOPER: All right, let's talk about what to do. The best ways to secure your future. You say the best way, number one first step, is pay yourself first. What does that mean?
BACH: If you want to finish rich, you have to be paying yourself first. That means, literally, when you get your paycheck, the first person you write a check to is yourself.
Now, the easiest way to do that is to go into your benefits department, sign up for your retirement account. That could be your 401(k) plan. If you work for a company that doesn't have a retirement account, go open up a deductible IRA account. They can do what is called payroll deduction, where the money is automatically taken out of your paycheck, or if they can't do that, they can have money automatically transferred from your checking account directly in your retirement account.
But pay yourself first means exactly what it sounds like. Before you pay taxes, before you pay anyone else, you pay yourself first.
COOPER: All right. Next is use your retirement account at work. You've talked about that. Even if the company isn't matching the funds, necessarily, it's still worthwhile because you're saving money on taxes?
BACH: Absolutely. When you put a dollar in your retirement account, you just avoided taxes, which would normally be 40%. It's like getting an instant 50% return on your money.
Right now, we know the stock market has not been going up for the last three years. But you still need to be saving. Quite candidly, the best time to save is when the market is down as much as it has been.
But even if you don't want to put money in the stock market, you can still be putting money in the fixed income investments in your 401(k) plan. You can be using bonds, money markets, guaranteed returns. The key thing is a piece of your income going away for the future on every paycheck every two weeks.
COOPER: And you say the other steps, increase your contributions, open a Roth IRA, and make it automatic. Let's talk about all of that.
Obviously, use your -- you know, increase your contributions, most people only do about 4 percent. You say do the maximum.
BACH: Absolutely. First of all, two out of three Americans are saving. One out of three Americans are not putting anything away. So, the number one thing, sign up for that plan.
You should be saving ideally 10 percent of your income before tax. Again, if you don't have a retirement account, you can also look at Roth IRAs. You can put up to $3,000 a year in a Roth IRA. You still have time to actually fund these accounts, even for last year. So you have up until April 15 to be funding retirement accounts for last year. It's not too late.
But the key thing to being rich, you have to automate it. You have to make that plan automatic so it's not you physically writing these checks. It's all being done automatically for you, either via wire transfer or payroll deduction.
COOPER: David, we've got ten seconds left. The bottom line for all this stuff, really, is it's up to you to plan for your own retirement. The days of depending on your company pension plan are over?
BACH: Well, not only is the pension plan over, but seeing companies like Schwab stop matching 401(k) plans is really saying to Americans, it's up to you. Your employer won't do it, your government won't do it. You need to do it now. It's all up to you.
COOPER: All right. David Bach, appreciate you joining us. Thanks. It was interesting.
BACH: Thank you.
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 March 16, 2003 - 09:45 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: We're going to focus for a few minutes on finances and retirement planning.
The economy is shaky, joblessness is rising, investors fear a possible war in Iraq. And just this week, the Charles Schwab company has decided to stop matching employee contributions to 401(k) retirement plans. Could it happen at your company? What's an investor to do in these tough times?
Our guest's the CEO of Finishrich.com, the author of the "Finish Rich Workbook," financial expert David Bach, and he joins us from New York.
David, thanks for being with us on this Sunday morning.
DAVID BACH, CEO, FINISHRICH.COM: You're welcome.
COOPER: This obviously got a lot of attention, people, you know, when Charles Schwab dropped matching their 401(k)s. Does that mean 401(k)s are not worthwhile anymore?
BACH: Well, it's really stunning news. I mean, Charles Schwab is -- when you think of Charles Schwab you think of saving for the future. And what Schwab looked at was their earnings are down.
They basically had to make a decision, do we lay off employees or what else can we do? They made a decision to stop contributing, or stop matching their employees' contributions. They say this is going save $15 million a quarter.
But if you're an employee at Charles Schwab, what happened just now, you just saw your retirement benefits basically cut in half, if anything. They were matching on the first 5% of contributions.
Now, how will this affect other Americans? Well, unfortunately, we're seeing a lot of companies stop matching 401(k) plans. Ford made the announcement. Daimler-Chrysler made the announcement.
Here's the key thing. Number one, you need to sign up for your 401(k) plan. But most Americans are saving less than 4 percent of their income in these accounts. Well, when the companies were matching, and basically putting in dollar for dollar, that gets you up to an 8 percent to 10 percent savings. But if your company stops matching, you've just basically seen your retirement benefits cut in half. And that means you have to act. You need to do something. COOPER: All right, let's talk about what to do. The best ways to secure your future. You say the best way, number one first step, is pay yourself first. What does that mean?
BACH: If you want to finish rich, you have to be paying yourself first. That means, literally, when you get your paycheck, the first person you write a check to is yourself.
Now, the easiest way to do that is to go into your benefits department, sign up for your retirement account. That could be your 401(k) plan. If you work for a company that doesn't have a retirement account, go open up a deductible IRA account. They can do what is called payroll deduction, where the money is automatically taken out of your paycheck, or if they can't do that, they can have money automatically transferred from your checking account directly in your retirement account.
But pay yourself first means exactly what it sounds like. Before you pay taxes, before you pay anyone else, you pay yourself first.
COOPER: All right. Next is use your retirement account at work. You've talked about that. Even if the company isn't matching the funds, necessarily, it's still worthwhile because you're saving money on taxes?
BACH: Absolutely. When you put a dollar in your retirement account, you just avoided taxes, which would normally be 40%. It's like getting an instant 50% return on your money.
Right now, we know the stock market has not been going up for the last three years. But you still need to be saving. Quite candidly, the best time to save is when the market is down as much as it has been.
But even if you don't want to put money in the stock market, you can still be putting money in the fixed income investments in your 401(k) plan. You can be using bonds, money markets, guaranteed returns. The key thing is a piece of your income going away for the future on every paycheck every two weeks.
COOPER: And you say the other steps, increase your contributions, open a Roth IRA, and make it automatic. Let's talk about all of that.
Obviously, use your -- you know, increase your contributions, most people only do about 4 percent. You say do the maximum.
BACH: Absolutely. First of all, two out of three Americans are saving. One out of three Americans are not putting anything away. So, the number one thing, sign up for that plan.
You should be saving ideally 10 percent of your income before tax. Again, if you don't have a retirement account, you can also look at Roth IRAs. You can put up to $3,000 a year in a Roth IRA. You still have time to actually fund these accounts, even for last year. So you have up until April 15 to be funding retirement accounts for last year. It's not too late.
But the key thing to being rich, you have to automate it. You have to make that plan automatic so it's not you physically writing these checks. It's all being done automatically for you, either via wire transfer or payroll deduction.
COOPER: David, we've got ten seconds left. The bottom line for all this stuff, really, is it's up to you to plan for your own retirement. The days of depending on your company pension plan are over?
BACH: Well, not only is the pension plan over, but seeing companies like Schwab stop matching 401(k) plans is really saying to Americans, it's up to you. Your employer won't do it, your government won't do it. You need to do it now. It's all up to you.
COOPER: All right. David Bach, appreciate you joining us. Thanks. It was interesting.
BACH: Thank you.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
