Savings Rate Falls to 10-Year Low

Americans are saving much less and spending more – even though their real disposable incomes are unchanged.

The savings rate just fell to a 10-year low of 3.1%, according to the Commerce Department.

What’s most worrisome to economists is that savings rates below 4% occurred before the last two major market crashes, as people felt what turned out to be a false sense of security, due to rising stock prices and/or home values.

Looks like it’s déjà vu all over again…

I recently wrote how the current bull market is the second longest in modern history. If it manages to last until summer, it will become the longest-running bull market at 9½ years.

A bull market has never made it to its 10th birthday.

In addition, historically, the longer a bull market lasts, the harder and deeper it crashes.

Which indicates the optimism that’s caused Americans to save less and spend more is misplaced. And, to take a line from the movie Grease, that means a lot of people are cruisin’ for a bruisin’.

The vast majority of Americans have little or no savings outside their retirement accounts, according to the latest Federal Reserve Survey of Consumer Finances.

If that describes you, and you haven’t built a solid financial foundation to help you weather the challenges life invariably throws you, you’re taking an enormous gamble.

Without significant safe and liquid cash reserves, how will you cope with a medical emergency… disability… broken major appliance… loss of a job… or a family member needing assistance?

A Lack of Cash Reserves is a Recipe for Financial Stress and INsecurity!

So what’s the solution?

Like much of the conventional financial “wisdom,” the standard advice of having a rainy-day fund equal to three to six months of household expenses won’t cut it. In the last recession, millions who lost their jobs remained unemployed for over a year, or even two.

To have real financial security, you must have safe and liquid cash reserves equal to two years of household income.

But first let’s nail down the definition of liquidity. It’s money you can get your hands on:

  • When you need it
  • For whatever you need
  • Without begging for it or applying for it
  • With no penalties for accessing it and no restrictions
  • Without sustaining a loss

That short list of requirements rules out most financial vehicles. But by joining the Bank On Yourself Revolution, you get all those advantages, plus:

  • It’s an asset that has grown in value every single year for more than 160 years (including during the Great Depression)
  • Growth that historically has beaten savings and money market accounts and CDs by a country mile (you’d have to get at least a 5-6% annual return in a tax-deferred IRA or 401(k) to equal the long-term return of a Bank On Yourself plan)
  • You aren’t required to liquidate or sell income-producing assets to get cash
  • You can use your money and have it continue growing as though you hadn’t touched it (if your policy is from one of the handful of companies that offer this feature)

Find Out Why a Bank On Yourself Plan is the Very Best Place for Money You Need to Keep Safe and Liquid

There are a couple things you can be sure of: Bull markets come to an end, and the crash and recovery can be long and painful. Investing is what you do only with money you can afford to lose – because you very well might lose it!

And in life, you can always expect the unexpected. Whether it’s a critical emergency that hits or a positive opportunity that comes your way, you want to be ready for anything life has in store.

To find out how the Bank On Yourself safe wealth-building method can reduce your financial stress and give you financial peace of mind for life, request a free Analysis.

You’ll get a referral to one of only 200 advisors who have met the rigorous training and requirements to be an Authorized Advisor. They can answer your questions and show you ways to free up money to fund your plan – sometimes without reducing your cash flow or lifestyle at all.

If you take that step today, you could start the New Year enjoying far more peace of mind:

Nobel Economist Warns of Irrational Exuberance in the Stock Market

Richard Thaler, who won the Nobel Prize in economics in October of 2017, observed…

We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.”

Thaler has made a career of studying irrational and temptation-driven economic behaviors.

The current bull market is the second longest in modern history. If it manages to last until August 22, it will become the longest running bull market, at 9½ years.

No bull market has ever made it to its 10th birthday.

Which brings me to a very simple, but profound question…

What Happens When a Bull Market Ends?

[Read more…]

Federal Reserve Survey: Your 401(k) and IRA Won’t Give You a Decent Retirement

If you’re counting on your 401(k) or IRA for retirement income, I have some bad news for you…

A new analysis of the Federal Reserve’s latest Survey of Consumer Finances by the Center for Retirement Research demonstrates that 401(k) plans are destined to fail millions of Americans.

The Federal Reserve survey is updated every three years, and the latest one reveals that, in spite of the long-running bull market and an improving economy … the typical couple nearing retirement will only receive $600 per month from their 401(k)s and IRAs combined.

That $600 a month is not indexed for inflation, so its purchasing power will decline over time.

And that $600 a month is likely to be the only source of income people will have to supplement Social Security because the typical household has virtually no other savings outside of its 401(k) and IRAs.

The Retirement Savings Shortfall News is Even Worse for Younger Workers with 401(k)s

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Older Folks Say it’s Not Fun Getting Old When You’re Worried About Running Out Of Money

Record numbers of Americans older than 65 are working today, and millions are doing it by need, not by choice.

Too often, the work these folks find involves back-breaking, menial labor.

Many people are entering their golden years with alarmingly fragile finances, according to a recent article in The Washington Post.

And polls routinely show that most older people are more worried about running out of money than they are of dying. They lament it’s not fun getting old.

Thanks to a massive shift from guaranteed lifetime pensions to you’re-on-your-own-good-luck-with-that 401(k)s and IRAs…

People are forced to guess how long they might live and budget accordingly, knowing that one big health problem or a year in a nursing home could wipe it all out.”

[Read more…]

Five Retirement Investment Alternatives to Your 401(k) Plan

With something as vitally important as your retirement security, you need to be aware of 401(k) problems. And you have to ask yourself, “Do I really want to have to deal with all this? Are there good alternatives to 401(k)s?”

Let’s take a look at the drawbacks to 401(k)s and good alternatives to them. The 401(k) drawbacks include:

  • Unpredictable market performance, which means the very real possibility of losing a significant portion of your nest egg
  • Rules and limitations which can cripple your options and lock your money in a virtual prison
  • Fees, both visible and hidden, which can devour one-third or more of your hard-earned money in the plan
  • Tax deferral, which can siphon off another one-third or more of your income during your retirement years

Four Major Issues You Face When Planning for Retirement: Safety, Restrictions, Fees, and Taxes

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Congress Considers Axing Your 401(k) Tax Deduction

Congress is considering proposals right now to take away the tax advantages of your 401(k).

To help finance the tax reforms being proposed, Congress is eyeing axing the up-front tax deduction for 401(k) contributions. And one proposal would also change the tax-deferred nature of 401(k)s by imposing a 15% tax on your annual gains.

Why would Congress consider tinkering with the tax benefits of such a popular program as the 401(k)?

For the same reason that notorious holdup man Willie Sutton gave for robbing banks:

Because that’s where the money is!”

The current taxation of 401(k) plans was estimated to have cost the federal government more than $90 billion in potential tax revenue last year alone, according to the Joint Committee on Taxation. [Read more…]

Why Does Ted Benna, the “Father of the 401(k),” Love the “501(k)” Plan?

The man widely credited as the “Father of the 401(k) Plan,” Ted Benna, is among those saying the plan is no longer a good way to save and invest for retirement. He cites concerns that the government may change the rules, and not in your favor; that an impending market crash will wipe out much of what you’ve saved for your retirement; and that staggering fees can eat up a large portion of your nest egg.

Benna has gone on record as endorsing something that has been creatively called a “501(k) Plan.” Don’t get distracted by the name “501(k).” Although “401(k)” refers to the section of the Internal Revenue Code that deals with retirement plans, “501(k)” is an obscure Internal Revenue Code reference that describes the educational status of certain child care organizations! Using “501(k)” to refer to some kind of retirement plan is a gimmick dreamed up by Madison Avenue types. But all they did was take the Bank On Yourself concept, which is a proven 401(k) alternative, and give it a mysterious new name, the “501(k),” hoping you’ll pay money to find out what they’re talking about.

But while others are charging you money for this information, we’ve been giving it away for years! For FREE information about the Bank On Yourself method that others call a “501(k),” download our free report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

History of the 401(k) Plan and Ted Benna’s Contribution to It

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What Is a 501k Plan and Is It an Alternative for Saving for Retirement?

Let me cut through the hype and give you the scoop: The 501(k) plan is just the latest name the Palm Beach Research Group has given to the concept most people know as Bank On Yourself, which is based on a high cash value dividend-paying whole life insurance policy.

The Palm Beach Group has been bombarding subscribers to various email lists about a “warning” issued by the “Father of the 401(k),” Ted Benna.

The Palm Beach Research Group wants you to watch a long video interview they did with Ted Benna, where he reveals three dangers he sees coming that could impact your 401(k) and IRA accounts. He says these dangers could slash your savings by 40%. And you’re promised that by watching this long interview you’ll learn about “a non-government sponsored 501(k) plan” that may “be the only way left for most Americans to retire today.”

This secret plan is touted as a 401(k) alternative “account,” where Benna and some prominent members of Congress have put some of their savings, to shield them from these three dangers.

Unfortunately, even after you watch the lengthy interview with Ted Benna, you still won’t know what this “account” actually is—until you fork over $75 to $149 to subscribe to the Palm Beach Letter and get your copy of their “new” book, The 501(k) Plan: How to Fully Fund Your Own Worry-Free Retirement—Starting at Any Age.

You can’t judge this book by its cover

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Is “Tax-Free Retirement” Too Good to Be True?

Tax-free retirement—living a comfortable life in retirement without the obligation to pay income tax—comes as the result of planning and arranging your finances (following IRS guidelines every step of the way) so that when you retire, none of the money you receive is taxable—perhaps not even your Social Security income.

Tax-free retirement is good, and this article reveals how to make it happen.

Is Avoiding Taxes on Your Retirement Income Legal?

Reducing or avoiding taxes is perfectly legal. People take steps to reduce or avoid taxes all the time. They may donate to charity to avoid paying as much tax. They deduct their mortgage payments. They take legitimate business deductions. They may shift medical expenses, hoping to bunch expenses into one year and exceed the threshold for deductions that year. These are just a few of the legal tax-avoiding measures Americans take every day.

Many people even believe they have an IRA or a 401(k) to avoid paying taxes. But that’s a trap, because traditional IRAs, 401(k)s, and most other government-controlled retirement plans do not allow you to avoid paying taxes. They merely postpone tax day. We’ll talk more about that in a few minutes.

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands.” — Supreme Court Justice Learned Hand

So while avoiding taxes is legal, evading taxes is not. Maybe you don’t report your income. Maybe you take deductions you’re not allowed. Or maybe you just tell the IRS to take a hike. That’s tax evasion.

But make no mistake: A tax-free retirement can be achieved legally, using IRS-approved methods.

Ways to Avoid Income Tax in Retirement

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Austrian Economics—What the Heck IS It?

What is “Austrian economics”? Let’s break it down:

Economics: “A social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” Ooo-eee! That’s gotta be a page-turner! Thank you, Merriam-Webster.

Austrian economics: “A school of economic thought that is based on methodological individualism.” Gads! But thank you, Wikipedia.

I never studied economics in college. And I’m pretty sure I didn’t take economics in high school either. Or if I did, I slept through it.

Ron Paul, 2012 Republican Presidential Contender

But “Austrian Economics” is a phrase you hear from time to time—even if it’s said in code, like what Ron Paul said following the 2012 Iowa presidential primary. “I’m waiting for the day when we can say, ‘We’re all Austrians now!’”

That struck me as odd. As Matthew Yglesias colorfully observed in his Slate article on Austrian economics, “The average Republican presidential candidate would sooner officiate at a gay marriage than praise Europe, yet here was Paul pledging allegiance to Vienna. What did he mean? Why would we all be Austrians?”

[Read more…]