“The 401k generation is beginning to retire, and it isn’t a pretty sight.”
That’s the conclusion of a recent Wall Street Journal study.1 But the most shocking revelation is just how big the gap is between how much retirement income people will need to maintain their standard of living… and how much they’ve actually saved:
Many have less than one-quarter of what they’ll need
And how are they dealing with this challenge?
Facing shortfalls, many are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined.” 1
Like Carol Dailey, who is continuing to work at age 71 because her 401(k) took a hit in the 2008 market crash. She also cut back spending for entertainment and food, and is substituting boxed wine for the ones she used to enjoy from her favorite vineyards.
Her financial advisor is planning to help her be able to retire by shifting her assets into riskier investments that can “return 10% a year.”
Hmmm… I wonder if that’s the same financial advisor who advised her on where to invest her money prior to the 2008 market plunge?
If people could take more risk, and do it successfully, why haven’t they been doing that all along?
Isn’t that the classic definition of insanity?
How much more evidence do we need to know that 401(k)’s and “doing all the right things we were told to do financially” aren’t working?
Not everyone has been a loser in the high-stakes Wall Street casino game…
401(k)’s “were a gold mine for money-management firms. In 30 years, the 401(k) went from a small program to a multi-trillion dollar industry supporting thousands of financial planners and money managers.”1
The cards are stacked against you as an individual investor. And truth be told, most Americans have no real financial security.
Pamela Yellen, interviewed on FoxNews.com Live, reveals the right questions to ask to know if your retirement is on track!
Wall Street’s average performance over recent decades has been flat at best, with long-term treasury bonds – the “turtles” of the investment world – outpacing Wall Street’s “hares” for the past 40 years.
Even in bull markets, if you are like the average investor, you will wait too long to buy and then compound your misery by selling too soon. What money you do manage to preserve could very well be subject to annual fees and taxes that will chew up a hefty chunk of what should have been yours.
What’s left, the scraps, will be your only financial legacy.
If that isn’t awful enough, you get to spend months and years of your life, hands clenched and veins popping, worrying about where your money will land on the roulette wheel that is Wall Street. Hint: Only the dealers are certain to win.
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So, what lessons have we learned from two decades of “doing all the right things” with little to show for it?
Here are seven key take-aways:
1. Wall Street makes money whether you win or lose
2. “Saving to invest” works far better than “investing to save”. The key to a secure financial future is to first build a financial foundation that is not dependent on risky, unpredictable and volatile investments.
That gives you the ability to weather life’s ups and downs and know you’ll still have a retirement income you can predict and count on.
3. When trying to determine how much money you’ll need to last throughout your lifetime, assume you’ll live to be at least 100 years old (can anyone tell me what day you plan to die?)
4. Build a rainy-day fund equal to at least one to two years of your income, before even thinking about investing a penny
5. Don’t invest any money you might want or need access to in the next 20 years
6. Consider what direction you think tax rates will go over the long term, before stuffing your money into tax-deferred retirement plans like 401(k)’s and IRA’s
7. Ask yourself this key question: Do you know what your nest-egg will be worth on the day you plan to retire? If you don’t, you don’t have a plan – you’re gambling, pure and simple
Do you want to find out what your nest-egg would be guaranteed to be worth on the day you plan to retire? If you haven’t already requested a Bank On Yourself Analysis, you can do that now at no cost.