It’s 2022, gone are the days where people fall in line anymore to follow the herd. I say that hopefully, not honestly. Anyone who is alive and breathing and not zombie-marching through life has started putting the pieces together about what’s happening to their money. For the most part if you are doing what you are told to do, you are losing it. Wall Street has wiped 3T out of America’s retirements just this year.
For years it’s been preached that the 401K, as a replacement for pensions did not work out. But people aren’t hearing it. No one is really educating them on other options, and matches incentivize the workers. I read a bold statement somewhere that the amount an employer gives you on a match, is so inconsequential to them and you that they would rather give it to you than the alternative which is to give you more salary.
The “Father of the 401(K) himself (the guy who invented it), Ted Benna, regrets that “he helped open the door for Wall Street to make even more money than they were already making.”
401(K)s are not winning. The 401(K) plan was part of a push that was an accidental retirement solution. The article above confirms it. In the late 70s, pensions started going away from companies as employee benefits, and the onus was put on the employee to retire themselves. The solution in the form of a 401(K) did nothing to improve the situation. According to a 2017 report by the Government Accountability Office (GAO), Americans between the ages of 55 and 64 had median retirement savings of just over $107,000. But, to retire early you’ll need at least 5M.
The problem is that as long as a worker bee confines himself to a life of working, there is no amount of work and money and savings that can help prop him up to wealth. Wealth is only created by getting excited about something other than a job. It’s about getting excited about taking money and trying to make more with it. It’s about investing in your best asset, which is you. Then taking YOU and investing in what you know. If you are filing in line to get to work, rinse and repeating this, you may not be ready for retirement. This is a real way of saying, a cush retirement requires a side hustle, even if you make 500K/yr. You need a side hustle to hedge against market losses, taxes, inflation and all the “things” you buy (liabilities; things that make you look rich, but don’t keep you rich). It’s not how much you make (that’s your capital), it’s the money you grow from the money you make (that’s money growth), then the money you keep (nest egg). If you have all your eggs in one basket, like Wall Street, it can be good. But it can also be bad.
All this to say, think about the importance of a bucket of money that’s not taxed.
You are likely making more now than you will when you can’t work and that just, sucks. It’s because the money you are saving, the money you *think* you are saving isn’t going to be all yours. By deciding to participate in a 401(K) for example, you have decided to share your winnings with the government just like if you were to win the lottery. It’s not all yours. It’s tax-deferred now, and that means you have to pay taxes on it later when we don’t know what the taxes will be. Right now is the lowest taxes have ever been.
That’s the thanks you’ll get for trusting the herds’ lead. A lot of people in my industry don’t even use the retirement word anymore because so many Baby Boomers will not actively participate in this stage of life. An almost Baby Boomer said to me recently, “I am going to die without ever enjoying my life.” It’s time to start thinking about some of this because without critically considering your life and managing your money situation, it all becomes very dire.
I digress here, but education is key and to that note, start here a course of education on the basics of money, “What’s a liability, What’s an asset?”
Back to the point of this article, insurance strategies are an old solution to an old problem. How do we get people to save for retirement? Think of insurance as a storage center, just like a bank or your 401K. And then think of being able to use the money in your 401K or your bank without having to deplete it for that one use. It’s called collateralization and leverage. That’s the concept of insurance for you to take away in 2022.
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