Personal finance author and radio host Jennifer Openshaw has come a long way since working as a motel maid at age 14. The "Rags to Riches" AOL columnist lived her own rags-to-riches story by working her way to top positions at Bank of America, Bank One, Wilshire Associates and eventually founding two financial services companies and writing two books about building wealth, including her latest, "The Millionaire Zone: 7 Winning Steps to a Seven-Figure Fortune."
At a glance
San Juan Capistrano, Calif.
University of California, Los Angeles, M.B.A and B.A.
- Host of "Winning Advice with Jennifer Openshaw," heard by over 100 million listeners on ABC Radio.
- Former director for Investment Services at Wilshire Associates, where she brought the well-known Wilshire 5000 Index into the mainstream.
- Senior vice president, Bank One/JP Morgan Chase.
- Family financial editor, AOL and regular columnist for AOL "Rags to Riches," MarketWatch, theStreet.com.
- National TV appearances on "Oprah," "Dr. Phil," CNN and CNBC.
- Author of "The Millionaire Zone."
- Founder of the TheMillionaireZone.com Web site.
Sharing her retirement planning tips, Openshaw explains how to save smarter, invest more wisely and avoid common mistakes people make while planning for their golden years.
In your new book, you say that "even if you did save through your 401(k) during your career, chances are you wouldn't be close to having what you need for retirement." Would you elaborate?
Millionaires or otherwise financially successful people don't count on their 401(k)s because they realize it's just not going to get them to real financial freedom.
Let's take a 50-year-old person earning $50,000 a year. He or she would need about a $700,000 nest egg to retire at that same standard of living produced by $50,000 a year received from age 65 to 90. And, that "nest egg" doesn't include your primary residence since it doesn't produce retirement income while you're living in it. To get to that hefty number, then, you'd have to be contributing in the neighborhood of $8,000 a year over 30 years. Unfortunately, most people haven't done that and can't because of their salary levels and rules around 401(k) contributions.
Take a 30-year-old earning $30,000. He or she would only have $216,000 in their 401(k) at the age of 67, assuming they were saving 3 percent of their salary, the company was providing a 1.5 percent match and their investments were returning 7 percent per year, according to Vanguard.
So, the sad truth is that nine out of 10 American baby boomers have less than $250,000 saved for retirement, according to a 2005 survey commissioned by Merrill Lynch. As we've seen, that isn't enough. And if you're hoping for a pension, well, good luck, because half of working Americans don't have a pension plan and even if you do, you can't count on it being there later because corporate America has been shifting away from pension promises. As Americans, we've got to take personal responsibility for our financial future and that of our families.
Besides putting money into a 401(k), what else can people do to build a bigger nest egg?
I love real estate because it's tangible and, as an investor, you can enjoy both the appreciation and the income generated as rents rise in the future. Plus, you get the power of leverage with your money -- something you don't get with many other investments -- meaning you might put only 20 percent down but you enjoy appreciation on the entire value of the home. Your real estate income can supplement your Social Security and other income received in later years. Despite the market slowdown, there are fantastic opportunities in markets like Raleigh, N.C., and Atlanta where the rental markets and population growth are exceedingly strong. In "The Millionaire Zone," I talk about how Americans who think they don't have enough to invest in real estate or don't have the time can address these issues by tapping into their "LifeNet" -- the people, places and resources right at their fingertips. For instance, find a friend, colleague or even a family member who might want to co-invest with you or bring project management skills to a real estate project. There are opportunities all around.