Remove Fear of Retirement with 3 Key Strategies
When I wrote Rich Dad’s Prophecy, I garnered a lot of publicity—it was a big prediction about an impending crash, written in 2002. We all know what came just 5 years later.
There was a reporter in a Phoenix, Arizona paper who wrote an article on the book which I felt was pretty fair. But there was one lingering statement by the author whose comment seemed to question a 39% return on an investment.
I tried to let it go, but it nagged at me for a few days. I decided I wanted to set the record straight. I called him and asked for a meeting so I could clear things up. He obliged with the understanding that I wasn’t looking for a retraction, but I needed him to understand the return that I had for that investment.
We met, I brought my accountant. After my accountant and I explained to him how the 39 percent was achieved and why it was actually understated, his only comment was, “Well, the average investor cannot do what you do.”
He said that what I did was “too risky.” My reply was, “Yes, it is, if you’re uneducated.”
Ten years ago, investors lost trillions of dollars, much of it from stocks, and mutual funds. What most so-called financial gurus recommend.
My question to the reporter was, “If stocks, bonds, and mutual funds are considered safe, then why did so many people lose so much money?”
Seniors Fear Retiring into Poverty More than Death
A survey conducted by Wells Fargo/Gallup, just four years ago, concluded that 46% of investors in the U.S. said they are worried they will outlive their savings in retirement. 58% of the respondents had an income of less than $90k and 42% made more than that.
And in a 2016 Allianz study of over 3,200 American seniors, MSN reports: “more than 60 percent of baby boomers fear running out of their savings more than death.”
Karen Wimbish, director of retail retirement for Wells Fargo said, “Many people haven’t saved enough, and some lost a lot of money during the Great Recession and haven’t healed from the experience. They are still hesitant to put money in the stock market even though the market is the best way to grow your savings.”
The findings in the Gallup poll are not surprising, and I would suspect the numbers haven’t changed four years later.
What is sad to me is that Americans are repeating the same behaviors and expecting a different result. Many people break rules by leaving their money on the table in their retirement plans. Millions of people bet their entire financial future on the roll of the dice. Even after losing, millions of people still keep their money on the table, hoping the market will come back and they can make up their losses. They continue to set themselves up to repeat the same mistakes in the future.
Here’s Why So Many People Lose…
One of the reasons, I believe, that people lost trillions of dollars is because they listen to the wrong people.
“The market is the best way to grow your savings.”
I believe this is the worst way: Save money, invest for the long-term, and get out of debt. It’s why so many people lost so much money.
People with a job who put money into a retirement plan such as a 401(k) filled with mutual funds are taking the slow bus through life. It is a bus with a worn-out engine. It does not go fast and does not ever reach the peaks of financial returns. It’s a bus that has bad brakes, and going down hills is frightening.
While putting money into a retirement plan for the long term might be a good idea for average investors, to me, it is a slow, risky, inefficient, and highly taxed way to invest.
To not repeat the mistakes of the past, you have to get educated. I study the market, the global economy, and especially failed investments I’ve had in the past. This is one way I avoid falling for “salesmen” when I hear a pitch.
Not for the Faint of Heart, but the Savvy
In my opinion, business and real estate are far better investments for people with the skills to manage them. Without management skills, control is difficult. Obviously, if a person lacks the skills to manage a business or real estate, these two investment classes can be nightmares.
If you cannot drive and do not know how to coordinate the gas, the brakes, and steering wheel of a car, driving a car can be dangerous to your health.
In my own businesses and in my real estate holdings I have control over how much money I can make, my expenses, taxes, and what to do with my earnings. I also have better control over less-than-honest activities that may be going on in the business.
Another control given up with paper assets is that the investor has very limited tax advantages, if any. One of the best reasons to own a business or invest in real estate is because the tax department loves you.
Keep these basic points in mind, your chances of finding better investments will improve:
- Know your numbers. Don’t be a guessing gambler
- Know the mistakes that lemmings make
- Be generous
- Be creative
One of the best-kept secrets of successful investors is not diversifying, but integrating.
Rather than just investing in one asset, successful investors integrate two or three of the asset classes, and then accelerate, leverage, and protect the cash flowing through the assets.
For example, Bill Gates became the richest man in the world by integrating the power of a business and the power of paper assets. He achieved the dream of many an entrepreneur, the dream of building a business and taking the business public through the stock market.
In other words, he turned part of his business into paper, often known as “shares.” If Bill Gates had not taken his company public, he would probably still be rich, but he might not have become the richest man in the world at such a young age.
Simply put, it was the integration of two asset classes that accelerated his wealth. He did not become the richest man in the world from a salary as a Microsoft employee who diversified his salary into mutual funds.
Donald Trump achieves greater returns on his money by owning a business that invests in real estate. And Warren Buffett, the greatest investor in the world, achieves extremely high returns by owning a business that invests in other businesses.
Integration is key.