~ 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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A lot of Americans aren’t going to have enough money to retire on. That is just a un happy reality of these times. Instead of bemoaning that reality (and the unfairness of it all) the best thing someone who hopes to have a healthy retirement can do is simply make sure they aren’t the typical American. We must take actions to assure they will have enough income to enjoy their life and pay their bills, as well as those increasing medical bills.
The best way to avoid becoming one of these Americans who end up working at some remedial job through their so-called Golden Years, according to Robert Kiyosoki, author of the “Rich Dad Poor Dad” book series, is to buy investment property.
Investing in real estate is a wonderful way for people to prepare for retirement because it supplies a great benefit called “passive income”. After someone has laid the ground work, passive income keeps coming in without a lot of effort. A laborer gets compensated only for the hours he puts in. A real estate investor, after setting up his system, gets paid for keeping it running. And keeping it running, if he been wise about it, will involve paying his team to do the job of inspecting them every now and then.
A great thing about passive income (such as from investments) is, the more time the real estate investor holds them, the more ROI they should make for her, with less and less work on the investor’s part. It’s the closest thing to the “Holy Grail” of the world of money.
It sounds attractive, but we shouldn’t just take the plunge. And even though it is completely learnable, there’s quite a bit to learn when one is thinking about buying investment property – things like comprehending P&L statements and real estate law. The biggest concept to learn, however, is one’s own limitations. The individual who understands where to find the knowledge he wants is far better off than the individual who remembers tons of facts and formulas around in her memory.
In the book “Cash Flow Quadrant,” Robert Kiyosaki advises potential investors to increase their cashflow in addition to their knowledge. He writes of developing a business system that can be set up and left alone, freeing the investor to move to the next step instead of investing all her time working in her business. The next step involves continuing the real estate education and start to look around for specialists to employ and investment properties to buy.
Robert Kiyosaki also talks about this change as transitioning from one part of the cash-flow-quadrant to the next. He emphasizes that, the 1st step someone needs to take toward transforming her life is altering the thinking process. If someone adjusts the way he/she processes the thought of money, then he/she will wind up in a better position to change his relationship with it.
The way someone thinks determines the actions they take throughout the day, and those actions determine their success. The primary benefit of reading books like Robert Kiyosaki’s “Rich Dad, Poor Dad” series – brings you closer to new ways of thinking about stuff. When investors see how easy it is to develop new skills and acquire better knowledge, they are virtually unstoppable.
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Investment In Property Can Help You Retire
NEW YORK (CNNMoney.com) — Forget lazy days rocking on a creaky porch swing, these days working is the new retirement.
Last year’s severe market losses left many once-healthy retirement accounts depleted, forcing many seniors to put their retirement plans on hold and head back to work.
There were 450,000 people age 65 and over actively looking for work in July, a whopping 60% increase from a year ago, according to the Bureau of Labor Statistics.
Boyd Barger was one of them –until just recently when he found a job. After a long career in the Air Force, Barger climbed the corporate ladder to senior management at the Dept. of Labor’s Job Corps program. He retired three years ago.
Barger opened a small arts and antiques business out of his home to supplement his retirement plans.
“The first year was OK,” he said, “but then the economy turned.”
Like many small businesses, sales grew sluggish as the recession took hold. That’s when, in April, Barger, 65, decided he needed to go back to work.
But getting back in the game wasn’t easy. “I found that when I went back and read my old résumés they were not really focused on today’s employers’ needs,” he said.
So Barger got up to speed on the current job market by networking with old friends and Air Force buddies, researching tips on how to update his résumé, watching webinars and online videos related to his job search and learning today’s computer requirements.
Barger got a lead on an opening in his area when a former colleague told him about a position at Serco North America as an Army OneSource community support coordinator, providing support and access to services, such as day care and health care, for soldiers and their families.
Barger applied online and heard back within a week. After a series of interviews he was hired and started in June.
According to Barger’s supervisor, Johannes Graefe, age was never an issue.
“What stood out to me was what Boyd did in the Air Force, working with individuals and spouses and how well spoken he is,” he said.
Graefe said he interviewed several other candidates for the position, but “you have to have it in your heart and Boyd has that.”
Getting back in the game
Workers forced to delay retirement and reenter the workforce will find that today’s job market bears little resemblance to those found 40, 30, 20 and even 10 years ago, according to Bob Skladany, chief career coach at RetirementJobs.com.
“Mailed, hard copy résumés and walk-in applications have given way to Internet-based job listings and interactive, online applications. Yesterday’s job searching techniques and skills are generally not effective today and new skills are required, particularly for workers in their 60s, 70s and 80s,” Skladany said.
Skladany recommends that job seekers first update and rejuvenate their résumé, get up to speed on basic computer skills, such as word processing and e-mail, join social networks and be easily accessible by cell phone and e-mail.
For mature workers with previous military experience, like Barger, there are also many advantages that often go unnoted, according to John O’Connor, president and CEO of Career Pro Inc. in Raleigh, N.C., which specializes in helping military personnel transition into the workforce.
In addition to an extremely vast and valuable network, there are also often many technological, logistical and coordination skills obtained in the military that can translate to today’s job market, he said.
“There’s so much coordination that needs to be done, working with inside and outside vendors. That could be the same thing that a manufacturer or distributor does.”
“It may be called something different,” O’Connor said, but that’s just “the semantics of it.”
Excerpt from:
Hired! Coming out of retirement at 65
The following is the story of how my wife Kim, my best friend Larry Clark and I, began our journey from broke, to rich, to retired in less than 10 years.
When Kim and I started, we were nearly out of money and filled with doubt. We all have doubts. The difference is what we do with those doubts. In December 1984,  Kim, Larry and I were on a skiing holiday.Â
At night we would discuss our plans for the future. Kim and I were on our last few dollars and Larry was in the process of building another business. On New Years Day, we tried to set some goals. Larry wanted to do more than just set goals for the coming year, he wanted us to set goals that changed our lives.
“Why don’t we write a plan on how we can all become financially free?†he urged.
I had talked about it and dreamt about it. But the idea of being financially free was always in the future, not today.
“Let’s write it down,†Larry said. “Once we write it down, we have to do it, and we’ll support each other on the journey.â€
Kim and I looked at each other doubtfully. “It’s a good idea but I think I would rather just focus on surviving for the next year.â€
“Come on,†said Larry. “Let’s go for freedom. I don’t want to spend my life working just to pay bills. I want to live. I want to be rich. I want to travel the world while I’m young enough to enjoy it.â€
I recalled the words of my rich dad: “The biggest challenge you have is your own self-doubt and your laziness. It is your self-doubt and your laziness that define and limit  who you are. It is your self-doubt and laziness that deny you the life you want.â€
It was time to choose. “OK, let’s set the goal to be financially free.†That was New Year’s Day 1985. In 1994 Kim and I were free. Larry went on to build his company, which became one of Inc. Magazine’s fastest growing companies of the year in 1996. Larry retired in 1998 at the age of 46 after selling his company.
How did we do it?
It’s not about how we did it. It’s about why we did it. From 1985 to 1994, Kim, Larry, and I focused on rich dad’s three paths to great wealth:
-Â Increasing business skills
-Â Increasing money management skills
-Â Increasing investment skills
The why is because I wanted to challenge my own self-doubts, my laziness and my past. It was the why that gave us the power to do the how.
My arguments against Larry’s idea were things like: “But we don’t have any moneyâ€; “I can’t do thatâ€; “I’ll think about it next year, or once Kim and I get settledâ€.
Rich dad had told me: “Whenever someone says something like ‘I can’t afford it’, or ‘I can’t do it’ to something they want, they have a big problem. Why in the world would someone say ‘I can’t afford it’ or ‘I can’t do it’ to something they want? Why would someone deny themselves the things they want? It makes no logical sense.â€
My own whys
I was fed up with being broke and always struggling for money.
I was tired of being average.
My parents had struggled under a mountain of bills.
Most painful of all, my beautiful wife Kim was in this financial mess because she loved me.
Things got worse for us before they got better. Kim and I lived in a car for about three weeks after our money ran out. So things did not get better just because we made the decision to retire rich, but it was the reasons why that kept us going.
Rich dad used to say: “If you want something, be passionate. Passion gives energy to your life.†Passion is a combination of love and hate. “If you want something you do not have, find out why you love what you want and why you hate not having what you want. When you combine those two thoughts, you will find the energy to go get anything you want.â€
For example, I would create the following list:
LOVE
Being rich
Being free
Buying anything I want
Expensive things
Having other people do what I don’t want to do
HATE
Being poor
Being required to work
Not having what I want
Cheap things
Doing things I don’t want to do
So sit quietly to find and define your loves and hates. Then write down your whys. Write down your dreams, goals and plans on becoming financially free, retiring early and retiring as young as possible. Once it is in writing, you may want to show it to a friend who will support you in achieving your dreams. Take a look at this paper with your dreams, goals and plans on a regular basis. Talk about it often, ask for support, be willing to continually learn, and before you know it, things will begin to happen.
I have heard many people say: “Money doesn’t buy happiness.†That statement has some truth to it. But what money does do is buy me the time to do what I love and pay other people to do what I hate doing.
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Become rich and retire young
In my free time I regularly read Yahoo finance or the CNN Money articles related to personal finance and retirement. People are told that they need to save as much as possible for retirement, because they will be spending somewhat close to 75% of their pre-retirement incomes per year.
In addition to that most so called financial guru’s claim that Social Security and Medicare will be either bankrupt or providing only enough coverage for the elderly that would allow them to enjoy cat food and insufficient health care in retirement.’
In order for people to be able to retire comfortably in those gloomy future years, they have to save as much as possible and invest it all in the stock market, in order to generate one or two million at the time of their retirement, which would then allow them to withdraw fund during their non-working years.
I generally disagree with these articles, since they are way too general. They are written with the intend to target as many people as possible. But they are far away from the truth.
In my opinion, it is important to have paid in full your primary residence at the time of your retirement. Once this is done, the income requirements are much lower than during your working years.
Most financial experts recommend that the annual mortgage payment for a primary residence should not exceed 35%-40% of the family’s income. If you are currently spending 30% on your income in order to be able to pay off your house by the time you retire, then you will be able to live on 30% less income during retirement.
In addition to that, if dividend and capital gains income continues to get a preferential tax treatment, you will need less investment income for each dollar of job income that the investment income is replacing. The best thing of investment income is that you don’t have to pay Social Security and Medicare on it.
Finally, in order to determine your income needs in retirement, you should subtract the amount of money which you normally contribute to your salary every pay period. I wouldn’t expect that you will need to save for retirement, in retirement. If you contribute 10% of your salary to a 401K plan for example, then you need to subtract that percentage from your income needs.
A potential wild card that could possibly derail one’s retirement is the rising costs of healthcare. We are constantly reminded how healthcare costs are rising exponentially and how they would become even more expensive in the future. I do think however that in the future health costs increases will not rise more than the rate of inflation, after stricter insurance reimbursement policies require health management organizations to be more selective in their billing to patients and the procedures that are recommended.
After one’s retirement needs have been estimated, it is a good idea to create an investment plan, which would help you in your quest to reach your goals. A solid mix of dividend stocks and some bonds would be a good place to start. Don’t have time to play a stock picker- then select a mix of index funds. Then set it up on autopilot by investing a fixed amount from your paycheck every pay period.
By: Dobromir Stoyanov
Source:
Is $1,000,000 Enough to Retire On?
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