~ Robert Kiyosaki ~
On the cover of the October 19, 2009 issue of “Time” magazine ran this headline: “Why It’s Time to Retire the 401(k).” The cover picture was ominous, showing a 401(k) sinking like the Titanic.
I recommend reading this entire article, especially if you do have a 401(k). My concern is that the flaws of this retirement plan will grow into personal tragedies as the first of approximately 75 million baby boomers retire, leading to the biggest stock market crash in history.
But in spite of the apparent problems with the 401(k) plan, the darlings of financial media continue to tout its benefits. The same month “Time” ran its article, “More” magazine’s financial guru, Jean Chatzky, wrote an article about using low-interest savings to pay off high-interest credit cards. In the article she states, “There’s no better guaranteed return on your money (except, perhaps, a 401(k) match).”
Countering Jean’s wisdom of “no better guaranteed return,” the “Time” article stated, “At the end of 1998, the average 401(k) balance was $47,004. By the end of 2008, the average balance was down to $45,519.” If that is a great guaranteed return, I’m glad I don’t have a 401(k). The “Time” article pointed out that $100 in 1998, after inflation, was worth about $73 in 2008, a loss of $27 after ten years. So whom do you believe…”Time” or “More” magazine?
If you are unsure as to whom (and what) to believe, the “Time” article made two more statements worth considering. They are:
1. “The older you are the riskier a 401(k) gets.”
2. “Forty-four percent of all Americans are in danger of going broke in their post-work years.”
Now, I can hear some of you saying, “But the stock market is going back up. Green shoots are appearing. Everything is fine. The crash was just a correction.” For those optimists among you: I wish that all of your dreams come true and you live happily ever after.
I do not criticize the 401(k) plans just to criticize. I write because I am concerned. Let’s say “Time” magazine’s estimates are correct. Let’s say 44 percent of all Americans will go bankrupt after retirement. For approximately 75 million baby-boomers preparing to retire, that means 33.8 million of them will go bust once they stop working. To me, this is disturbing.
While many think the financial crisis is over, I believe the worst is yet to come. In spite of the green shoots in the stock market, the fundamentals of the U.S. government are worsening. I doubt Social Security can afford the avalanche of retiring baby boomers. The Social Security fund is empty, underfunded by approximately $10 trillion. For the first time in 35 years, Social Security will not pay a cost of living increase. And Medicare is projected to face a shortfall as well, of between $65 and $85 trillion.
In 2009, interest payments on our national debt are about $380 billion, which is $1 billion a day in interest. At the same time, the national debt is projected to climb to $20 trillion by 2012, which means the U.S. will have to borrow money just to make the interest payments.
I know the Federal Reserve Bank can continue to print more and more money…but city and state governments cannot. This means your city and state taxes will have to go up. If you think your property taxes are high now, just wait five years. I predict that, even if your home’s value does not go up, property tax rates will, and higher taxes will do wonders for property values. This means people counting on their home as their biggest asset may be disappointed.
In 1913, when the Fed was created, and in 1971, when President Richard Nixon took the U.S. off the gold standard, the ultra rich were allowed to siphon off our wealth — via our own money, the very thing we work hard for and do our best to save. In other words, with every dollar the Fed prints, our wealth is being drained via increased taxes, debt, inflation, and savings.
A Cash Heist
There are four expenses that keep the poor and middle class struggling financially. They are:
1. Taxes — both apparent and hidden
2. Debt — mortgages, credit cards, and student loans.
3. Inflation — rising food and fuel costs
4. Retirement plans — 401(k) and savings
It is via these four expenses that the rich get richer. In other words, all four of these expenses are a cash heists, the ways the rich use the government to get into our pockets, draining us of our wealth.
The Silver Lining
The silver lining of all this: With a more sophisticated financial education, rather than have taxes, debt, inflation, and retirement accounts as drains on a person’s wealth, a person can convert those government-sponsored expenses into elements that work in one’s favor. By using the same rules of money the rich use, those four expenses will make you richer. In other words, taxes, debt, inflation, and not needing a retirement plan can make you richer if you use different rules of money. As stated earlier, in 1971 Nixon changed the rules – and so should you.
In closing, the 401(k) has a few good points…but not good enough, in my opinion, given the financial challenges that lie ahead.
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To a con artist, cash is king. International scammers have developed a deviously clever way to trick people into sending them cash. The crooks mail out counterfeit checks or money orders and come up with a creative story to get their victims to wire back thousands of dollars.
According to a survey released Wednesday by the Consumer Federation of America (CFA), nearly a third of all adult Americans have been approached with fake check scams and at least 1.3 million have fallen for it.
“They didn’t realize the pitch and the check were both phony until they wired off the money,†says Susan Grant, CFA’s director of consumer protection. She says the average victim gets taken for between $3,000 and $4,000.
Sally Greenberg, executive director of the National Consumers League, puts the yearly loss at $20 to $60 billion a year. Her group runs the Web site fakechecks.org. “These are very persuasive scams that play on people’s vulnerability,†she says.
Here’s another reason so many people get burned by these counterfeit checks: They look legitimate. “They look so real your bank teller can’t always tell it’s a fake,†says Allison Southwick of the Better Business Bureau.
It starts with that bogus check or money order
Why did you get that unexpected check or money order for thousands of dollars? Maybe you’ve won a contest. Maybe you hit the jackpot in a lottery. Maybe it’s payment for a work-at-home job. The storylines are varied, but the con always works the same way. You need to deposit the check and wire off most of the money right away.
“Once it’s wired it’s gone, gone, gone,†Greenberg says.
The CFA survey pinpoints one reason why this scam is so successful. Most people (59 percent of those responding) mistakenly believe that when you deposit a check or money order, your bank confirms that it is good before letting you withdraw the money. Forty percent believed they would not be held responsible if the check or money order turned out to be counterfeit. Wrong!
Many victims tell me they asked their bank if the check “cleared†before they wired the money and were told yes. Here’s the deal: When a bank says a check has cleared, it means you have access to those funds. It does not mean the check is good.
If the check bounces – which could take a few days or many weeks – you are responsible to repay your bank for any of the money you withdrew.
Bogus checks can be used for almost anything. All the bad guys need to do is concoct a story about why they sent you a sizeable check and why you need to cash it and wire them money.
Here are some of the most common fake check scam scenarios:
Prize and lottery scams
“Congratulations!†the letter says. You’ve won a bundle of money in a contest, sweepstakes or foreign lottery – one you never entered. The letter looks official and comes with a check for thousands of dollars. You’re supposed to cash it and wire off the money to pay for outstanding fees or taxes. Don’t do it!
Reality check:
You never have to pay to claim a prize. If you’re asked to wire off any money, it’s a scam.
Mystery shopper scam
You answer an ad and are accepted as a secret shopper. Your first assignment is to evaluate the MoneyGram payment system at a local Wal-Mart store. The letter tells you to cash the enclosed check – usually between $2,500 and $5,000 – keep a couple of hundred dollars for yourself and use the MoneyGram service to wire off the rest. Don’t do it!
Reality check:
Never accept a job that requires you to cash a check and wire money. No legitimate company would ever make you do this.
Overpayment purchase scam
You’re trying to sell something that’s fairly expensive, maybe a car or some furniture. So you place an ad in the newspaper or online. Before long you get an e-mail from an eager buyer who is willing to send you a check for more than the asking price. You’re supposed to wire the extra money to a mover, decorator, shipping company or some other non-existent entity. Don’t do it!
Reality check:
You’re being set up. No legitimate business transaction involves a check for more than the asking price with the requirement that you wire the difference to some person or company.
Other victims
Innocent businesses are also hurt by the fake check scam. Many of these bogus checks use the name, address and bank account number of legitimate companies.
This increases the chance the teller will accept the check. Try to deposit a big check from the El Gordo Lottery and the teller might start asking questions. But a check from Bob’s Auto Supply doesn’t call attention to itself.
“Often businesses don’t even know their checks are being used in these scams until they get angry calls from people who want to know where their prize money is,†says the BBB’s Southwick tells me.
A few months ago, con artists sending out counterfeit Publisher’s Clearinghouse prize notices – along with fake prize checks. Some of those fake checks listed the payer as Alpine Environmental Services of Stanwood, Wash.
When the bank realized Alpine’s account number had been stolen it locked up the company’s accounts. The company’s manager, Dennis Dutoit, tells me he could not pay any bills for three days until everything was straightened out. “It created a major mess,†he says.
The bottom line
It’s not very hard to protect yourself from these fake check scams. In fact, Carmen Christopher, an attorney with the Federal Trade Commission, was able to sum it up in one sentence. “If you get a check that requires you to wire money – don’t do it!â€
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As economy worsens, fake check scams spread
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