Retirement Rewards Cards: Yea or Nay?

"I like the concept," says Michael Kalscheur, CFP and financial consultant with Castle Wealth Advisors LLC in Indianapolis, Ind. "It's tangible; people will see the money going into their account on a regular basis. Many small business owners use their AmEx card to run their business, so here is a way they can save for their future versus getting frequent flyer miles or something they might not use."

Kalscheur points out several issues that advisors and their clients should think about. "My main concern is that since these deposits are going into an IRA, be careful that you don't contribute more than the annual limits," he says. "For example, if you normally contribute the full amount ($5,000 or$6,000 with catch-up for 2008) to your IRA, now you have to wait and see how much your benefit will be, and then contribute the difference.

For those who tend to charge less, "The $50 a year they earn might not be worth the hassle," he says.

"Also, make sure to read the fine print," Kalscheur adds. "There are probably minimum amounts that must be transferred (i.e. $50), so if the person doesn't use the card that much, they may not see transfers very often. Lack of activity causes people to lose interest and cancel the card for something better."

One final item to remember: It's still a credit card and might not be appropriate for every client. "It doesn't make any sense to earn 2 percent and then pay 20 percent interest on an outstanding balance," says Kalscheur. "If you can't control your spending, stick with the old standby: cash."

To learn more, go to www.fidelity.com/retirementrewards.