MS. DIANE REHMThanks for joining us. I'm Diane Rehm. A recent survey found 76 percent of Americans worried frequently about their finances. The decline of pensions, stagnant incomes and the housing crash have made financial planning a real challenge for American workers. Joining me to talk about how consumers can get the right advice for making good financial decisions, Knight Kiplinger of Kiplinger's Personal Finance magazine, journalist and author Helaine Olen, and Tim Maurer of the Financial Consulate.

MS. DIANE REHMI hope you'll join us as well, 800-433-8850. Send us your email to drshow@wamu.org, follow us on Facebook or Twitter. Good morning to all of you.

GROUPGood morning.

REHMHelaine, let me start with you. I know you spent several years as a personal finance writer for the Los Angeles Times. How did you get interested in that to begin with?

MS. HELAINE OLENWell, I opened the book. I wasn't interested in it is the answer. Somebody called me up, I was freelancing, and said, can you write about personal finance? And all I knew about writing about personal finance at the time was that it paid a heck of a lot better than writing about lifestyle and politics, which is what I normally wrote about. So being, you know, somebody in their late 20s at the time, I said, sure, why not?

MS. HELAINE OLENI figured they'd give me one piece and I'd be on my way, and I'd never write for them again. The next thing I knew they were calling me up saying, oh, this is really wonderful, can you write another one? And that happened again and again, and I guess I realized two things. Is first what I had done without realizing it, was that I loved talking to people about money, so I would ask them actually how they were engaging with their money.

MS. HELAINE OLENBut the second take away was much more interesting, which is that a lot of the stuff is actually quite easy. It's the financial services industry that makes it sound complicated, so that we'll turn to them for advice and help and, of course, make them some money while they're at it.

REHMWhat's so bad about the personal finance industry?

OLENWell, I should say it's not all terrible. I mean, I say personal finance can be an amazing adjunct. But what's terrible about it is two-fold. On one level, of course, a lot of it is designed to line their pockets and not necessarily yours. But the second part is that it's presuming an all-in-all solution for something that might not in fact be something that it's capable of solving, and let me explain that for a minute.

OLENWe're at a 30-year period right now where our incomes have been stagnating, our net worth has plunged, and that's -- and we're turning around and then telling people, you know, you can't do this because you've been spending all your money on lattes. We're not saying it's because you've been -- the cost of retirement has been thrown onto people individually. We're not saying the cost of college has doubled at relative rates of inflation for more than 30 years.

OLENWe're not saying the people have become more and more responsible for their own health care, which has also doubled at rates beyond that of inflation. We're just simply telling people, hey, you messed up. It must be your fault.

REHMYou know, one of the things that you do in your forthcoming book titled, "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry," is that you really concentrate on Suze Orman. And I wondered why, because she has become so popular. She has made so much money doling out personal finance advice and you had some pretty strong words about her.

OLENI have a lot of strong words about her. You know, Suze Orman has sort of become the Sylvia Porter of our time. Sylvia Porter is, as we probably know in this room, but most people don't know, is the person who more or less created the entire personal finance industry. And -- or at least in a mass sense. And Suze's advice is revered by people who generally don't know anything about personal finance.

OLENBut what she does is she's extremely simplistic. Her advice is frequently contradictory. I mean, this is a woman who has written, don't buy a new car, and then appeared a couple of weeks ago in a commercial for a $40,000 Acura. And she also tends to blame people a lot. This idea of can I afford it sets it up that our entire personal finance problems again are about, you know, these extreme examples of people calling up.

OLENI always remember the woman who called up and wanted an $80,000 car to drive her children around town in. This is not a typical example of how people are getting themselves into financial trouble.

REHMKnight Kiplinger, turning do you, your magazine certainly provides what you regard as helpful insights into what's going on in the field of personal finance. How do you regard the kind of advice that needs to be given to people now in this time of downturn?

MR. KNIGHT KIPLINGERWell, Diane, economic conditions are constantly changing. But I submit, and I think Helaine and Tim would agree, that people have it within their power to follow some very simple evergreen tried-and-true principles of sound money management, smart money management.

REHMSuch as?

KIPLINGERSuch as spending less than you earn.

REHMHmm.

KIPLINGERAt any income level, spending less than you earn. Using credit very sparingly. Putting your savings and investing on auto pilot with payroll deduction plans. Using inexpensive, simple investment strategies such as index mutual funds, index traded funds, things of that sort, with low fees and simplicity. People have it within their power, regardless of economic conditions, to achieve basic financial security, protect their family against unforeseen risk, but it starts with saving.

KIPLINGERIt starts with living below your means, and this was good advice during that stock bubble of the 1990s, it was good advice during the housing bubble of the mid-2000s, it's good advice today. It's the way to recover from financial setbacks and lay the foundation for the future.

REHMAnd Tim Maurer, as a certified financial planner yourself, how do you react to what you've heard that what you need to do is use some good common sense principles that, using a financial planner is not all it's cracked up to be. What's your thought?

MR. TIM MAURERYou know, Diane, it might surprise you that as a financial planner, I agree with a hundred percent of what's been said thus far, even Helaine's indictment against the financial industry. Sixteen years in the industry myself, the first half of it I spent in the industry where I was being trained by banks, brokerage firms, and insurance companies to become a financial planner. And at one point I literally had a breakdown. I remember calling my wife at some sort of conference that I was sent to.

MR. TIM MAURERThe conference was just all about selling. Techniques for basically manipulating people to get them to do what you wanted them to do. And I called her on the phone, and I said, Andrea -- I was in tears -- I think I'm in the wrong industry. So I like to think that I failed out of sales industry and then did find, thankfully, the financial planning profession, which is steeped in all of the wisdom that Knight has already laid out.

MR. TIM MAURERIt does recognize that there's actually -- there are complex themes in financial planning. There's no doubt. Understand the alternative minimum tax, for example, it would take a lot of study to do that. You're not going to just get that in an article or a show, but it's really mostly about behavior management, and the best financial planners know that.

REHMTim Maurer. He's a certified financial planner with the Financial Consulate, co-author of "The Ultimate Financial Plan: Balancing Your Money and Life." Helaine Olen is a journalist and author of the forthcoming book titled, "Pound Foolish," and Knight Kiplinger is editor-in-chief of Kiplinger's Personal Finance magazine. Americans are not able to save as much now, Knight, as perhaps they were 20 years ago.

KIPLINGERI'm not sure I would agree with not able to save as much. Americans collectively certainly are not saving as much, but interestingly...

REHMBut what about those who are living from paycheck to paycheck?

KIPLINGERThat is a peculiar situation to them, but let me illustrate this. There were times when the U.S. savings rate -- personal savings rate, dipped to zero or a bit below zero, and some of those periods coincided with surging in other assets they owned, so they were using the appreciation of home equity or stocks as replacement for saving from their current incomes. So that was actually emblematic of excessive seeming prosperity.

KIPLINGERThat was a behavior born of bubbles. Savings is not the growth of your assets. Savings is what you are saving out of your current earnings, what you're not spending out of current earnings. Americans used to save ten percent of their earnings. The fact that we are barely three or four percent, some of it might relate to financial vicissitudes that we've talked about today, but some of it might be behavioral.

REHMHelaine?

OLENWith all due respect, I agree with you to an extent, but I would like to point out that Americans were also encouraged in this belief that they could rely on the stock market and real estate to make up for the savings issues. Alan Greenspan told people to get an adjustable rate mortgage so that they could, you know, not put as much money into their houses. Other people said the same thing. We were really told for a very long time that this was okay behavior.

REHMAnd it wasn't just Alan Greenspan, it was a fair number of other people as well.

OLENThere were loads of people. I could take up the entire show probably listing names, articles in magazines that promoted this concept, not yours.

REHMBut there were also financial planners...

OLENMost certainly.

REHM...who were selling as well as advising.

OLENYes.

REHMShort break here, and when we come back, we'll talk further, take your calls. Stay with us.

REHMAnd welcome back. We're talking about financial planning in good times, in medium times, and in bad times. Right now, Helaine Olen, you think we're in pretty bad times.

OLENWe are. I mean, as you said earlier, I mean, half of the country is living paycheck to paycheck. To ask people to save on top of that, and to save more and more money on top of that, I mean, it's almost -- it's delusional at best, and it's, you know, it can be almost offensive at worst to turn to people who really can't get by and say, but it's your fault you can't get by. We're all imperfect.

OLENNone of us here, I think at this table will say we haven't made a financial mistake, we haven't bought something we shouldn't have bought, and yet, we're turning around as an industry and we're sort of promoting to people that you should be perfect.

REHMThe idea that savings can continue in times like these is pretty hard to come by, wouldn't you say?

MAURERYeah, absolutely, Diane. There's no question. And we can have the principles laid out. One of them that you hear all the time is save 10 percent over the course of your lifetime, and I've done the numbers. The truth of the matter is it normally does work out. I'd like to see that average up a little bit closer to 15 percent. As Helaine says, it's very difficult for folks, but I think it's also about lifecycle.

MAURERSo when I'm coaching young couples who have just come out of school, they're married, they've got a house together, they should be saving more like 20 or 25 percent, because guess what? From the time they start having kids, maybe working less, making less money and having their expenses go up, they're gonna have a span of 15 to 20 years where they're gonna probably not only be able to save 10 -- they're probably only going to be able to save five or so.

MAURERAnd then at the end of that stretch, then they're going to have to boost it up when the kids are out of the house. They're now in their peak income-earning years. We have to think about this in terms of lifecycle, not just in terms of rules of thumb.

REHMKnight Kiplinger, it's my understanding that there are great many people in this country who can retire, but have only $25,000 put aside for retirement.

KIPLINGERThat is true. Most Americans are woefully unprepared for the lengthy retirement that they're going to face with longer life expectancy and greater health today. People should be planning for a 20- or 25-year retirement.

REHMAnd should we...

KIPLINGERAnd most people are not prepared for that.

REHMShould we be planning to work longer?

KIPLINGERIt'll be a combination of things. People will work longer because they can and want to and are in good health, and some because they must. It'll be a combination of the two. I know professional people in good health and advanced age who love their work and will stay with it longer. As you mentioned at the top of the show, the traditional defined benefit pension plan is on the decline in America.

KIPLINGERNobody is starting any new such plans, and many companies are abandoning them. So the burden is on the individual more than ever to take charge of his own fate and his own future, and there are ways to do that. People should be maxing out on their IRA contributions, their 401 (k) contributions. They should be taking advantage of their employer-match and not leaving that money on the table.

KIPLINGERI've written quite a bit about reforming the 401 (k) in a variety of ways. I have actually advocated making a 401 (k) mandatory. A mandatory 401 (k) for both the employer and the employee with a mandatory employer match.

REHMHelaine, you write a lot about 401 (k) s and IRAs.

OLENYes. The problem is, it's almost unsolvable in one sense. I mean, I don't mean to sound dour. What you say, Knight, makes a ton of sense, but again, none of us is perfect. And what starts happening with 401 (k) s is even if there's an automatic putting people into them, the amount is set at three percent, and then everyone turns around and thinks oh, my employer says I should put in three percent, so I should put -- that's the perfect amount.

OLENAnd they don't realize that in fact the proper amount is 10 to 15 percent. Because as Jane Bryant Quinn once told me, if they were interested in personal finance and Wall Street, they'd be working on Wall Street or in personal finance. So we're expecting people to look into things that they're not that interested in to begin with, and they often, unfortunately don't realize it until it's way too late, that in fact that they should have put in 10 percent, and that's, again, assuming they could have put in 10 percent, which as Tim just pointed out is very hard, especially at certain cycles of your life.

OLENThe only thing I would say about what you said, while I totally agree with you, I think to expect people in their 20s to be really thinking about their retirement sort of flies in the face of everything we know about how humans act and react to things.

REHMBut when should they begin to think about their retirement?

MAURERWell, we can. We can look at it and say, hey, it's very difficult. I was in my 20s once, and the last thing I wanted to do was think about retirement savings. We could do that, but times have changed. There was a time just two generations ago, my grandparents' generation, they worked until they could work no longer, and then lived off of a pension and Social Security. That was how it was done.

MAURERThen you had the baby boomer generation, my parents. They worked, they had the 401 (k) come at about halfway through their work cycle. They started contributing to it, so they've got a smattering of Social Security, they've got pensions, and then they also had their personal savings. Well, the younger generations now, I call it the retirement planning pogo stick. It's all on them. It's no longer this three-legged stool of pensions, Social Security, and personal savings. They're going to be doing the bulk of it on their own.

MAURERSo it's true that we wouldn't necessarily think of it in our 20s, but we're now in a phase of life where we must. We don't have a choice.

REHMHelaine.

OLENI'd like to point out, we romanticize this past that was a very short period of time. In fact, Social Security was founded in the 1930s because people hadn't saved money, they weren't being taken care of, and they were landing in things called poor houses, which we mercifully no longer have. But it wasn't like there was this great age in which people were able to save money and accepted that they were responsible for it, and that's the last period we have when it fact it was a pogo stick as you accurately point out.

OLENSo we have no basis to believe that people will do this. So we have to figure out ways to help them do this.

REHMHow?

OLENI've become two things. First, the more automatic you can make it, the better. But that presumes that it's automatic into good things.

REHMAnd the earlier you can do it?

OLENThe earlier, but keep in mind, we're now encouraging people to stay in college, go to graduate school. I mean, these are wonderful things, but...

KIPLINGERAnd maybe that's a mistake.

OLENYeah. But you're not going to be saving money until you're in your 30s and then you're going to be having children most likely. So where exactly is this golden period, or this sweet spot where you're going to be able to save several years of money?

REHMIs it true that 75 percent of Americans nearing retirement have $30,000 or less saved toward retirement?

KIPLINGERDiane, that sounds about right to me.

REHMWow.

KIPLINGERWoefully...

REHMWow.

KIPLINGER...underprepared for this. I'm hearing all of here today say this is not easy. Nobody said it was easy. America has been over consuming and under saving for decades. We need to embrace deferred gratification. We need to embrace living within our means. It's not going to be easy. Look -- I'll make an analogy to health advice. Is there anybody out there who doesn't know how we should live a more healthy life? Diet, exercise, risky behaviors to avoid.

KIPLINGERIs there anybody out there who hasn't heard some of the basic principles of good personal money management, but either cannot follow them, and that's a small group of people, but I would say the larger group of people are still over consuming and under saving and they have it within their power. I'd like to make a point. I know people of very modest earnings. I patronize their small businesses. I employ them in my home.

KIPLINGERPeople of very modest earnings, who have saved an extraordinary amount of money by living simply. Now, it's not coincidental that a lot of these are immigrants, and here in the Washington area we see examples of Salvadoran and Vietnamese immigrants, immigrants from Africa who have started small businesses. Some of these people on very modest earnings are sending money home to their family in another country and saving enough money to put down a small down payment on a modest house in the suburbs of Washington.

KIPLINGERI employ one such wonderful woman once a week as a housekeeper in my home. She owns a home. She and her sister own a rental property. She drives a nice car, and she doesn't use credit. She saved and bought this with cash. Now, a lot of native-born Americans of all races and all backgrounds don't want to hear this message, but we can learn a lot from this example of simple living and high savings that we see around us.

REHMBut is Helaine right about the inadequacy of 401 (k) s?

KIPLINGERI would like to see them improved. I would like to see automatic enrollment. I would like to see mandatory employer contributions, but about a quarter of the people who work for a company with a 401 (k), one-quarter of them are not enrolled in the plan and are making no contribution that could be matched by an employer. Some of that is behavioral I would say.

REHMTim, what do you tell your clients about 401 (k) s?

MAURERWell, I do recommend that first and foremost they take advantage of all the free money. There's no better deal in the world than you put money in an account for yourself and someone else gives you money on top of that. The last decade or so we've seen almost zero percent rate of return S&P 500. Well, if you put your money in there, and your employer matches it, you just got a hundred percent rate of return.

MAURERSo that's the thing that's absolutely a must. After maxing out the match, I actually suggest people defer the remainder of their savings ability in most cases into the Roth IRA where they have more choices.

REHMHow do you feel about IRAs, Helaine?

OLENI think the problem with IRAs, which I have, by the way, I should say I have my own, is that people are often getting advice on how to invest these IRAs, not from you but from their banks. And this is becoming a huge, huge issue. The banks are moving into this. They are telling people to put their money in high fee mutual funds. The New York Times had a huge front page story about this a few months ago with, I believe, it was J.P. Morgan Chase was urging people to invest in their mutual funds that were not performing particularly well and were giving high -- were huge high expenses.

OLENThe problem is very basic. It's that most people are not paying for the advice on how to put the money in the -- what to do, sorry, to put their -- how to invest their funds in their 401 (k) and so they're given advice that just isn't working for them more often than not.

REHMBut what about the fact that these 401 (k) s themselves -- aren't they involved in the stock market, and isn't the stock market going up and down?

MAURERYes and no, Diane. A 401 (k) is really nothing more than a bucket. Now, it does have certain fees and expenses that are associated with it, but a 401 (k) is a bucket, a traditional IRA is a bucket, and a Roth IRA is a bucket. Now, within the 401 (k) you may only have anywhere between five and 50 choices. Inside of a Roth IRA or traditional IRA, you can basically invest in just about anything you want. So yes.

MAURERBut when people say, oh, I should have never invested in my 401 (k), I say you should have made better choices inside of the 401 (k), and then we get towards the education. Because there probably was a safe choice inside of that 401 (k).

OLENI think that's where we get into real problems. To expect people to understand this stuff really is just to not understand human nature. I mean...

REHMAnd have them learn how to make those choices?

OLENRight. It just doesn't work. I wish it did. I really wish it did. I feel like I'm the ghost, you know, Banquo's ghost at the feast here. It doesn't work. It hasn't worked. There's no perfect world in which we're going to get people to make these choices perfectly.

REHMHelaine Olen. Her new book forthcoming in January is titled "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry," and you're listening to "The Diane Rehm Show." Knight, you wanted to make a comment.

KIPLINGERYes. A few years ago, the government actually prohibited employers from doing 401 education in the workplace. And employers shied away from it because of liability. Now we've done a 180 on that, and there is good 401 (k) education in many workplaces today in which financial planners come in and talk to employees of different ages about a few simple asset allocations that are appropriate to those employees.

KIPLINGERYoung people should be heavily invested in the stock market with most of their assets because they will be in that market for the longest period of time. They have the farthest horizon, and equities over many years will outperform alternatives.

REHMBut it sounds to me as thought what you're saying, Helaine, is if you have a financial advisor who is telling you about certain stocks you ought to be invested in because they're gonna be the next big thing, you've got the wrong financial advisor.

OLENYou most certainly do. And one of the ways the industry plays on the ignorance of people is that most people have no idea how their financial advisor is being compensated. The second...

REHMAnd that's what Tim was talking...

OLENThe second you say financial advisor, well, what do you mean by that exactly? Do you mean somebody who's getting paid by the hour? Do you mean somebody who's getting a percentage of assets under management, or do you -- or are you talking about someone who's giving quote "free advice," which means, of course, nothing is free in this world. It means somebody else is paying them.

OLENAnd most people, in fact, are using that third type of advisor, but they have no clue. The survey data we have shows that most people have no clue how their advisor is getting compensated, which sounds unreal to those of us at this table, but is absolutely true. And the reason that is, is because there's actually no rule that they need to tell you this.

REHMHow can we find out, Tim?

MAURERWell, Diane, I'll tell you. This is a major, major problem that Helaine is talking about here, and part of it is that the predominance of folks who are out there with financial advisor on their business card are actually the sales people who are working for the proprietary engines that run the financial services industry. It's estimated that over 500,000 people call themselves some form of financial advisor, planner, or consultant.

MAURERI'm part of an association of 2400 advisors countrywide that swore off of commissions and says, no, we will not take an commissions for sales or referrals fees. It's called NAPFA, the National Association of Personal Financial Advisors, and it's been referred to in Kiplinger and other personal finance magazines, and maybe Helaine is familiar with it, as one of the places. It doesn't mean that everybody there is perfect either. It doesn't mean that there are no sales oriented folks there, but that's what we're talking about, the difference between 500,000 people who call themselves financial advisors, and maybe 2500 of them who've sworn off of commissions entirely.

REHMHelaine?

OLENThere's a couple of issues. And first, I should say I'm a huge fan of NAPFA. So, let's take that out for a second. There's not enough people. Second, people have been trained that they don't need to pay for this, so they don't think they have to, so they don't, and they get sold by, as you pointed out, your -- you've got...

REHMWhat do you mean they think they don't have to get -- I mean, clearly, if they go to Tim they're going to pay Tim for his advice on how to manage their assets, correct, Tim?

MAURERThat's how it works.

REHMWhat are they gonna pay you for?

MAURERWell, we make it very clear in that case. A fee-only advisor says here's how we are compensated. And I think, Helaine, one of the big solutions here for folks out there is they should be asking their financial advisor today how are you compensated, and not just how are you primarily compensated, how are you receiving all of your compensation? Do you take any commissions and from whom? In which cases might there be a conflict of interest? Then it has to be said directly.

REHMTim Maurer. He's a certified financial planner with the Financial Consulate and co-author of "The Ultimate Financial Plan: Balancing Your Money and Life." Short break. Your calls when we come back.

REHMAnd welcome back. Apparently a number of you have sent in emails similar to this one which says, "If one has monies they do not want to take a risk within the stock market how can we safely save when the interest rates for savings are near zero?" Tim.

MAURERDiane, I have to start by being honest with folks who are asking this question. Anytime they use a word like safe my ears perk up and I have to communicate to them that if it is safety you want your options are actually a relative few. And unfortunately, I do believe that for the last 12 years the fed has punished savers in this country rewarding borrowers with interest rates. And it seems -- I don't know, it seems almost like a cardinal sin...

REHM...totally contradictory.

MAURER...because I have people who've worked their entire lives for this. And if they just had reasonable rates in their CDs and savings account they'd be very comfortable with that.

MAURERBut as soon as we start talking about alternatives, Diane, we're talking about taking additional risk. And so I always tell people err on the side of conservatism. If sleep at night is what you want most then let some of this go. Let the next couple years of interest rates being suppressed go away until we get back to more normalized interest rates. And yes, you may actually have to give up some gains but there are some avenues that you can pursue.

MAUREROne of the ones I like the most is short term bond mutual funds, short term meaning that they're not 30-year bonds that are going to fluctuate greatly with interest rate changes. And they will traditionally make a little bit more than your CDs. I will tell you this though. You can lose money.

REHMInteresting. Helaine.

OLENI urge people to be very, very careful here. And I want to say I agree with everything that was just said first of all. But a lot of people are now falling prey to people who say I have a way to get you yield. The second I hear that my radar goes up right away because there's a lot of people out there promising this stuff right now. They're often promising things that aren't that safe.

REHMSuch as?

OLENBut unlike -- they're not telling people this.

REHMSuch as?

OLENThe new thing has been, you know, the free lunches where they're promoting equity annuities and variable annuities. Whatever you do, if I can give one bit of advice, do not go to a free lunch or dinner, and I don't care if it's a steak at the Palm, take a credit card and buy the steak. You will save money even if you pay 30 percent interest on it.

MAURERTake the steak, just put your earplugs in. Are you kidding me? Of course.

REHMAll right, Knight.

KIPLINGERTim is absolutely correct. With each quest for higher yield will come higher risk. I would ask the caller, when do you need that money? What is your time horizon? How long can you make it work? What are your other assets? What is your tolerance for risk? A lot of questions like that. At Kiplinger we started a new publication called investing for income. We have a lot of well educated, higher income readers who are not satisfied with 2 percent in treasuries and zero.

REHMBut they're a higher income, Knight, and we may not necessarily be talking across the country to a higher income readers.

KIPLINGERSure, but there are a lot of ways, good quality corporate bonds, blue chip stocks that pay 2 and 3 percent dividend yields with generally low volatility, utility stocks. Some of the real estate investment trusts are very stable and pay a good dividend income that is passed through to shareholders. The word junk bonds is -- causes a lot of people to run in terror. There are some good quality, better quality higher yield bonds that have a role in some people's portfolio too.

REHMHelaine.

OLENAgain, people need to be super, super careful out there. There is some good stuff you can invest in. Again, it's not, you know, as Tim would point out, it's a tradeoff. But again what's being promoted at the mouths of people they're not reading Kiplinger's unfortunately. They're not coming to town. They're really falling prey to these people who are getting paid to sell less than healthy stuff, shall we say. To give rates are a perfect example right now.

OLENDavid Lerner, which is a huge financial brokerage firm in New York -- and across the country, but mostly in New York and Florida, I should say -- has gotten into massive trouble with the FCC in the past year over promoting rates that people could not sell to -- through these free lunches and free dinners. And people didn't realize what they were getting into. So then they would try to get -- to sell them and they found out they couldn't.

REHMAll right. To La Porte, Ind., good morning, Patricia.

PATRICIAGood morning. Thank you so much for taking my call. And Ms. Olen, you are a breath of fresh air and a kindred spirit. I love it when people...

OLENThank you.

PATRICIA...talk about the reality of the situation. I agree with Mr. Kiplinger, there's a lot of should'ves out there. A lot of people should've done a lot of things. And, you know, I guess one of them is we should be able to see around corners, right, because...

OLENYes.

PATRICIA...I'm the reality of millions of people. I'm in my 50s and like a lot of my friends we've suffered multiple job losses over the years. And while, you know, we try to do all the right things there's no such thing as financial planning when you have no job, when you have no unemployment, when you've been robbing...

OLENYes, that is all too true.

PATRICIA...when you've been robbing your 401 (k) off and on for the past ten years. And one of the things I'd like to mention to the economists out there is that, you know, everyone talks about growth and all this other stuff. We have an economy based on bubbles. We have a lot of income inequality. And the sad truth is that when you're in my situation -- I'm going to -- if I get a job again -- when I get a job again I will work until I die. And when you -- I operate on a cash-only basis. I've been very frugal and I’m been doing this since my last layoff in 2001. But the reality of the situation is poor people don't buy new cars, they don't take vacations, they don't do a lot of things.

PATRICIAI've got friends that have five jobs just to try to hold onto a house and no longer have health care. And this is the reality of the situation. And the reality is we have millions of kids out there that are working low wage retail jobs that have a $30,000 student loan debt.

REHMAbsolutely. Tim.

MAURERI want to disagree with only one thing. And I say this disagreement really in terms of an affirmation. No such thing as financial planning when you don't have a job, you don't have income. I disagree wholeheartedly. I think this is where the financial services industry has gone wrong. We've made financial planning about buying stuff, buying products, insurance policies, mutual funds and so forth that are supposedly going to help us reach our goals and objects that are grounded in our values.

MAURERWhere I begin every discussion -- and it's normally we're talking an hour of discussion before we ever even look at numbers -- is who are you. What do you want to be about in this life? What are some of the goals that you have in mind? And then let's reframe the way that you look at money. And oftentimes when we're starting at this level we're not talking about 401 (k) s, IRAs, insurance policies or estate planning. We're talking about getting to a point of sanity in your life so that you can begin to take steps forward. And I've had that discussion with people making half a million dollars a year.

REHMAll right. To Kathryn in Stem, N.C. Hi, you're on the air.

KATHRYNYes. Well, I appreciate you're letting me in. I have a couple of comments. One is that I've been listening to these takeovers by what I think of as vulture capitalists who, you know, dissemble the companies and then walk off with all the assets including people's pensions. And I want to know why pensions can't be separate from company assets and something that people can take with them when they leave.

KATHRYNAnd that's one thing. And the other thing is that I don't know anyone who can live off the minimum wage and save money. I don't know that they can live period on the minimum wage and live a healthy life. And if they're not getting health care, they're not getting access to the care that they need then they are also underproductive and it affects the whole GNP anyway.

REHMHelaine.

OLENFirst I want to say this is a huge, huge problem for people. The 401 (k) was, in theory, supposed to solve this because it was supposed to be portable. People didn't realize at the time that people would need the money so badly. What you're starting to see -- and you're not seeing it in this country I should say, but you're seeing it in places like Australia -- is the idea of a portable national retirement plan. And that is portable in the sense, not that you can take it out, but that it starts at your first job and it ends when you retire. And it is in some form or another either managed by or under the auspices of the government so that people can invest in a regular mutual fund say. Depends on the country again.

OLENBut it's a recognition that people have checkered work histories, that they are going to lose jobs, things are going to happen and that, you know, we need to change how we're approaching all of this.

KIPLINGERDiane, you'll recall that in the Bush Administration there was a proposal for voluntary, partial privatization of social security, which bears some resemblance to what Helaine is discussing. In addition to regular social security you could divert a percentage point or two into a private account with limited investment choices if you wished. It was voluntary and it was partial. And today 6 percent of everybody's paycheck is being taken out for themselves. Another 6 percent is being contributed to social security by their employer. So 12 percent of everybody's earnings are going into social security today.

KIPLINGERWe know that over a lifetime of earning that will produce a really lousy return in the future of social security benefit. A lot of very thoughtful people, nonpartisan people have said if in additional to social security we had some sort of nationally sponsored private accounts that were completely portable bearing some resemblance to what Helaine discussed this would be a good supplement to traditional social security. But that debate is dead today. People hear privatization of social security and they run in terror.

OLENRight. As well they should by the way.

KIPLINGERI disagree.

OLENPeople can't manage what they have now. How on earth are they going to manage a privatized social security account? What I'm talking about is things that would be in addition to social security. People clearly...

KIPLINGERMe too.

OLEN...yeah, people -- carving any amount out of social security is a terrible mistake given where we are now. People are going to be, if anything, increasingly reliant on social security in the next couple of decades because people in their 50's and 60's who have $50,000 or $25,000 saved for retirement, they have no way out at this point. Even people in their 40's probably don't have a real way out. So to turn around and tell people that we're going to further privatize doesn't work.

REHMHere is an email from Ricardo in Florida who says, "My wife and I both max out at 15 percent on our workplace 401 (k) s. Is that considered sufficient in terms of what our ideal savings rate should be?" Tim.

MAURERDiane, the ideal savings rate for most people is what they can. The difficulty I have in answering that question is it depends on what he's done previously. It depends on where he is today.

REHMAnd how old he is.

MAURERHow old he is. How much he wants to spend in retirement. It becomes really an answer that turns into five or six different questions.

REHMBut the 401 (k) surely cannot be the only thing that people count on.

MAURERNo. Nor should it be because life interrupts our plans. And that's one of the things that I think the personal finance industry has gotten wrong over the years. We give people rules of thumb that they should supposedly follow from the day they're born to the day they die. The problem is life changes that story. And so we have to be able to have some flexibility. A 401 (k) , a traditional IRA, very, very little flexibility in retrieving those dollars if you have some sort of emergency where you need it.

MAURERThe Roth IRA, you're actually able to draw any of the dollars that you put in, the principle with no taxes and no penalties at any point in life. And that's one of the reasons I'd like to see the Roth IRA compliment the 401 (k) .

REHMHere's an interesting email from Clint in St. Louis, Mo. who says, "I left an enjoyable career as a business owner to become a truck driver. I now make twice as much money. I made the conscious choice to change my financial picture. I live in a 680 square foot condo, drive a tiny gas sipping car, shop at the dollar store, live on very little. It's embarrassing to tell people I'm a truck driver but I no longer put my identity in my job. I've turned to spirituality for my inner peace and keep money in its place." And you're listening to "The Diane Rehm Show." What do you think of that, Helaine?

OLENI admire anybody who can do it. But a lot of the stuff starts to sound like a Victorian morality tale. Do you remember history in school where you would read these excerpts from Victoria tracts and they would talk about how the poor people should be happy to wear sack cloth and not envy their betters who could afford to wear silk? That's what a lot of this stuff starts to sound like to me, that people who are doing quite well are lecturing people who aren't doing well into how they're spending too much money.

REHMAnd it sounds as though women are on the downside here.

OLENWomen have huge problems. You know, women earn less and live longer. This is a fundamental problem women have with finances. I always say that's the major difference between men and women and money. And what we do instead is tell women in that case, well you have to save more money, which, you know, to me always brings in mind the late Ann Richards great line about how Ginger Rogers had to do everything Fred Astaire did but backwards and in high-heeled shoes.

OLENI don't know quite how you do that and yet then people turn around and say, well women just can't manage their money. It must be all emotional.

REHMAll right. To finally Tampa, Fla. Mariah, you're on the air.

MARIAHGood afternoon.

REHMHi.

MARIAHI was calling because I have been listening to the show this morning and it's a great topic. But as a young person -- I'm only 22 -- and listening to people talk about 401 (k) s and IRAs and everything of the like, as someone who lives, you know, paycheck to paycheck with messed up credit, this, that and the other, where does a young person go to learn more about how to properly plan for their future when it seems like it's such a dismal outlook on it.

REHMTim.

MAURERListen to "The Diane Rehm Show." This is the obvious answer. No, I think -- here's the good news. You're at the beginning of the journey. I do think that our last emailer had discovered something, and I think it's important. I think it's something that is within reach for everyone regardless of their income level. And that is this notion of less is more. I'm finding there's a renaissance in this idea led by some folks Tammy Strobel, I recently interviewed, this woman who now lives in basically a little tiny trailer the size of a parking spot. She's doing it for a purpose, this idea that hey, we can still enjoy the most of life even with less.

MAURERSo this is one of the things I would recommend you consider as you're at the beginning of your journey. Don't buy into the notion that you have to go out and get a car payment, that you have to have a 52" screen television, that you have to have an apartment that's this size. Consider downsizing life so that then when you do make more you'll be more comfortable.

REHMKnight.

KIPLINGERFor our caller there a lot of wonderful websites out there that have special sections and departments and channels for young adults. You can go to the mintz.com and set up some budgeting plans. Get some advice at Kiplinger.com. We have a starting out channel for people in their 20s, a lot of good basic introductory advice. And it is free information. We are talking about the treachery of free. Most publishing and websites are supported by advertisers, but the good ones have a separation of edit and ad influence.

REHMAnd that's the last word from Knight Kiplinger. He's editor and chief of Kiplinger's Personal Finance Magazine. Helaine Olen is a journalist and author of the forthcoming book "Pound Foolish." And Tim Maurer is a certified financial planner. He's with the Financial Consulate and co-author of "The Ultimate Financial Plan: Balancing Your Money and Life." Thank you all. And thanks for listening all. I'm Diane Rehm.