Chris Miles discusses options with a 401k. If you cash out your 401k, what are your options? Is it wise to cash it out, or should you leave it where it is? Learn 3 strategies to consider with your 401k, whether you leave it in a 401k or could you do something else.
Remember, these are only options, not recommendations. This is not intended to be advice, but merely given for informational purposes.
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What strategy could be better than using a 401k? Learn a strategy used by the wealthy that allows them to use their money like a bank does. This strategy can be used with a number of investment vehicles, but we will discuss one that works most effectively right now. Learn to use your same dollar 2 or 3 times.
Note: This is not intended to be interpreted as advice. The strategies discussed is for educational and illustrative purposes only. Results vary based on the investor’s knowledge.
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The best investment for you is to invest in being a better investor in what you know best, not some financial investment sold to you by an “investment specialist.” Listen to know which investment is right for you, not what is right for the person selling it to you.
You can Listen to our previous blog about this as well.
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Many believe that if they do everything they are taught by the financial industry, they will be financially free. From what I’ve seen and what common sense tells us, it’s a load of *%&@! Here’s a few reasons why:
1. Traditional savers still feel broke after years of saving. I have yet to meet someone in retirement that KNOWS their money will last for the rest of their life. Listen why. Some can do it for a certain number of years before they can’t enjoy retirement anymore. The only people I know that have peace of mind are those that invested outside of 401k/IRA’s, OR the financial advisers getting paid commissions on their clients hoping for better returns.
2. Numbers aren’t reality and people aren’t numbers. Just because some suave salesman pulls out his fancy calculator and tells you it’s going to be alright, doesn’t mean it will be. Can he/she foresee your future? What if something changes in 20 years? 20 minutes?
By the way, Mr. Adviser, stop looking at my financial assets to produce returns for you and look at me as the REAL investment!
3. Average returns are not actual returns. If they tell you “Historically, this ‘investment’ has done ___%…” ask them if they will guarantee it in writing. THEY CAN’T!
Also, you can have a positive average rate of return, and in reality, still be losing money. Watch this video to learn how.
4. Inflation is much higher than what many believe. This is the most subtle way to tax the poor and middle class so the politicians look better. Listen here.
5. Your taxes will likely be higher. Even if taxes don’t increase (which I’m sure they will), you will likely have to pay more solely due to inflation. Things get more expensive over time meaning you need more money each year.
Besides, if your retirement accounts actually succeed like your adviser crosses his/her fingers for, wouldn’t you be in a higher tax bracket? If not, it’s probably because your accounts failed.
6. You cannot accumulate enough to only live off of the interest. Like I mentioned in one of my recent podcasts, it’s nearly impossible for even the best savers to live off of 4-5% of their money each year.
7. Paying off “debts” early will shrink your nest egg. Although I am in favor of paying off liabilities, there’s a catch. If pay off your liabilities, it will take money away from your retirement. Unfortunately, you cannot eat a paid-off home. Paying off “debts” is more in the self-interest of the banks than for you. Many retirees are currently asset rich/cash poor which restricts their freedom. For alternative strategies, listen now.
Stop “planning” for retirement!!! Instead, make it happen by DOING THE OPPOSITE which gives you a better chance. Learn the “art” of investing to start becoming financially free today!
If you need further convincing, check out these scary stats!
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A funny quote I heard Ben Stein quote his father saying was “Figures don’t lie, but liars figure.“ That has stuck with me, especially as I read bureau statistics and corporate reports, all of whom have a tremendous self-interest to “fluff” their statistics to make you and I feel warm, fuzzy, and cozy all over (Click to see how the bureaus or banks report their “figures”).
They publish statistics giving us a false hope of a recovery, but could backfire if we made choices based on those “facts!” Couldn’t that have a similar consequence for us as it did the failed banks when a subprime borrower would claim they made $10,000/mo. on the mortgage application when they really only made $5000/mo.? Unfortunately for us, we don’t have the government bailing us out!
I did the same thing when I was a financial adviser. If I wanted to give hope to my client (or to scare them into doing business with me), I would run numbers that were historically accurate, but using average returns, government’s inflation statistics, etc. I would show potential clients what they “could” have in retirement while offering no promises. I would even show a conservative inflation statistic of 2-3% (my inflation podcast killed this statistic) to encourage them to save more with me. By adjusting these numbers, I could show nearly any outcome I wanted! Do you see my point?
My advice is to NOT make financial choices based on speculation or so-called “official” statistics. Whether you choose to invest in business, real estate, etc, it’s up to you. In mutual funds (401k’s and IRA’s) and similar paper assets, you have high risk because they are dependent on these statistics. Why gamble your hard-earned money away? I recommend you invest where you CAN control your own statistics!
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Watch this video first before listening to the podcast!
Also, refer to our video “Money Not Math” on this website to see if you can figure out what is happening to our “investments.”
On the podcast, Dale Clarke and Chris Miles discuss how 401k’s and IRA’s are affecting Americans’ ability to retire. Is there hope?
The 401k Fallout
Chris Miles teaches how you can determine what is a great rate of return in your investments and how you can actually INCREASE that return further. Listen to learn what most investors don’t understand!
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Chris Miles discusses the myths people buy into in accumulating money rather than “utilizing” money, and how cash flow creates more financial freedom. Listen to learn why this is.
(This is updated from a previous blog on www.killingsacredcows.)
When I was a “traditional” financial adviser, I would rattle off some assumed 2000 Bureau of Labor Statistics that came out with a longitudinal report that studied where 25 yr olds in 1960 were in 2000. It showed:
29% of 65 year olds were deceased,
66% totally dependent on others or still working,
4% financially independent, and
1% wealthy (By the way, I have never seen any government source confirm these numbers, but I have seen many financial institutions quote it).
The Tragic Truth
The REALITY is much worse! According to the National Centre for Health Statistics, a 25-year old only has a 16% chance of death before age 65, not 29%. Of the surviving, the 2000 Bureau of Labor Statistics:
24.4% of 65-69 year olds were still working,
66% of them depend on Social Security to provide at least 50% of their income (22% are totally dependent).
This means that of the original group, only about 8% are either 50% or less dependent on Social Security or financially independent…at the time of the study. I would bet the majority of this 8% were supported or eventually supported by Social Security to a certain extent.
Furthermore, the median household income for those 65 and older was only $33,802 in 2002. In addition, the 2000 U.S. Census said that this aging population had a net worth of $108,885. However, $85,516 was home equity leaving a measly $23,369 for savings and retirement. If you read my blog on hidden 401(k) fees, you would also notice that the average balance in a 401(k) for 65 year olds (in 2007) was only $60,000. Could you live like that for one year? Two years? How about 25 more years?
Hadn’t more than 8% of Americans implemented some sort of retirement products during their life, like 401(k) and IRA’s, some through financial advisers? Weren’t many of these “Prime lifers” born in 1935 strict savers because of the influence of the Great Depression? What happened?
The Cause
There are many factors contributing to this. For instance, most financial planners will quote some “average” return in the markets that someone can supposedly count on for the long haul. However, the “actual” return often is different. See my blog “The Retirement Titanic” to get more specifics. For example, I illustrate how a positive ACTUAL rate of return of 12% could become a negative return in reality!
The Solution
Get further educated on leveraging the assets you have. One cannot expect to get different results by believing the same things about investing as everyone else. Education is critical to changing your paradigm and taking different steps to create freedom and gain control of your life. Learn more on our blogs and listen to our podcasts to increase your ability to become financially free.
With the Dow Jones Index currently around 6700 points today, its lowest point in nearly 12 years, I hate to say “I TOLD YOU SO!” Oops, I guess I just did.
However, although I am not a big fan of investing money in mutual fund-based investments, like 401(k)’s, IRA’s, etc, I NEVER want people to suffer heavy losses that compels them to wake up and listen to what we are teaching. Nevertheless, loss does cause us to question our assumptions and explore new, and more effective, possibilities.
I had several clients last year (when the Dow was around 11,000) ask me about what I felt the market would do. I told each one of them that even though it seems irrational (at that time), expect the Dow to tank somewhere near 6000, and quite possibly lower because a Depression IS coming. Some took action while others did not. The ones that took action, even when it hovered around 8500, are smiling much bigger now that they took their own initiative to reallocate to safer funds.
For those that still question whether to get out or what to do, I will have you answer the following questions so you can decide for yourself:
You are not alone if you couldn’t answer these confidently. Will you wait for it to drop further before you do something? If you have more questions, feel free to comment, email me, or Dale, at cmiles@freedomfasttrack.com or dclarke@theaccreditednetwork.com.
