I know this is a bold, and possibly controversial title, but retirement planning is broken and leaving people broke.
The destructive narrative is, “work hard, save money in a retirement plan, wait and it will all work out in the long run.”
The reality is, without the ingredients of responsibility and accountability, there is no easy solution for retirement. Meaning, if we just work hard and set money aside, we are putting money into a market we have no control over.
The institutions are winning though. Taking fees along the way. Convincing us to separate ourselves from our hard earned money, encouraging us to take it out of the business we know and put it into investments we don’t.
Low interest rates are great for those borrowing money, but terrible for those wanting to take income from a retirement plan. Those low interest rates are not providing enough cash flow, so that even if you’re a millionaire on paper, you still may be living like a pauper. For example, if you could find 4% interest in a fixed income account, that is only 40,000 dollars a year per million in your retirement account. Oh, and that income is taxable if it isn’t coming from a Roth IRA.
The concept of retirement has robbed the public of the responsibility and accountability required with personal finance. It has become too easy to hand money over to so-called experts due to the busyness of business, kids, hobbies, and other obligations competing for our time.
The reality is, we have more opportunity for time now than ever. For thousands of years people were limited and constrained with the monumental duty of providing for their family by having to hunt, farm or provide shelter with less technology, efficiency and access to resources. We have become addicted to saying yes to things less important than financial stability and freedom.
Instead we run our kids back and forth to numberless activities and programs, we join groups, clubs, spend hours on social media, and worry ourselves with countless meetings and events. There is time for our finances, but the subtle lie that it is overwhelming, too complicated, or you can just set it and forget it by leaving it up to the experts has failed us and failed us big.
When we abdicate responsibility in finance, there is little hope for economic independence. When I was writing Killing Sacred Cows I found a statistic from the U.S. Department of Labor that 95% of Americans were not able to retire at age 65. Retirement plans combined with Social Security and the like couldn’t cover their basic living expenses. That looks like a failed financial experiment to me.
There are those that it has worked tremendously for though. Look to the financial institutions and Wall Street. They are not living by the philosophies of “high risk equals high return” or “it takes money to make money.” You are the one who is taking the risk. They are making money on your money. Do you feel Wall Street is going to take care of our funds? Does anyone think to themselves “Wall Street, they’ve got my best interests at heart.” Yet, that’s where most of the retirement funds are invested.
The answer? It is essential for you to discover your Investor DNA and take personal responsibility.
People fund retirement plans blindly. They don’t focus on cash flow, they focus on accumulation. And when it’s time for cash flow, they’re heavily disappointed. They are being guilted into doing these things regardless of the amount of debt load they have. Small business owners may think it’s too risky to invest in their business because everybody else is putting their money in the bigger establishments and businesses. But remember- those businesses still have risk, the only difference is you have less control over them.
My main message here is this: how, if it has been failing for so long, are we still buying into this? This retirement plan notion, that focuses on accumulation and setting money aside; and then one-day, someday, you might actually retire. It hasn’t worked and it won’t work.
It is time to get clear about your finances. You don’t have to know all the different types of investments available, just know your Investor DNA. What do you have the ability, knowledge, and interest in? Where can you gain expertise and focus rather than relying on risk and Wall Street?
You could even focus on your business, grow it and then secure that wealth with the least amount of risk possible by transferring your business wealth to personal wealth. Pay off loans if the interest is higher than your earnings. Automate your savings and then deliberately invest. Keep control of your cash and focus on cash flow. Learn to manage and mitigate risk so you don’t have to start over or deal with major hits to your wealth. If you don’t know where to invest, invest in yourself.
Rookie investors always stay invested. The pros sit on the sidelines and provide cash to those in a cash crunch so they can buy at a deep discount, find value and profit upfront.
We have an epidemic; a problem. People are not prepared for retirement. And the truth is, they are not going to be; because they don’t want to be responsible, they don’t want to take accountability. They want to hand their money over, and hope for the best. The reality, however, is wealth doesn’t work that way. Handing your money over will just end up making other people rich at your own expense. Others are getting your fees, whether the market goes up or down, and commissions are creating hits to your account as well.
How can we have such massive failure, yet so much compliance? It is time to ask new questions, to demand results and take back control of your finances.
Question the conventions of a system that has shown time and time again it doesn’t work, and instead, make sure your money works for you
