The Secret to Retiring for Real… And Much Sooner than You Think

The first lesson you’re taught when you get to Las Vegas is “the house always wins.” Every casino is rigged against the millions of tourists that visit Sin City by at least a 60/40 margin.

The economy is like a casino. Washington is the pit boss. The average citizen is the gambler.

In 1999, President Clinton signed the repeal of the Glass Steagall Act, which forbade commercial banks and investment banks from combining to co-mingle funds from savings accounts, mortgages, and business loans in high-risk investments like mortgage backed securities and derivatives. Thus turning the government into a casino.

The reason the repeal of the Glass-Steagall Act caused much of today’s problems is it allowed for banks to take on compounding and greater risk with other people’s money—your money—by putting savings into high-risk investments. These high-risk investments became larger and larger, and more intertwined.

When they all came crashing down, they brought the banks down with them. And lost a lot of unsuspecting people a great deal of their money.

A casino relies on the losers coming in so those at the top can win. If you want to avoid being wiped out in the next crash—there will always be a next crash—you must get educated.

Games of Chance

Among other reasons, 401(k)s and IRAs involve putting money into an investment vehicle over which investors have little control. And since most people end up choosing mutual funds as their primary investment within these plans, playing the lottery might be a better way to go…

Gambling away your retirement funds in a government-sponsored game of chance is a game you have little hope of winning. Sounds crazy, right? Millions of people buy lotto tickets with the same hope. How sensible is it to play the lottery when chances that you’ll lose the money you put in are so high?

At least when you play the lottery you recognize that you’re gambling. At least it’s a bit of fun.

And you don’t have the government, financial institutions, and your employer telling you that the lottery is a good investment. And your employer doesn’t go so far as to match the amount you put into the lottery like it might with your 401(k).

Getting money taken from your paychecks isn’t as thrilling.

Gambling vs. Investing

There is risk involved with both activities.

Gambling requires a lot of hope. You give your money to the casino and “the luck of the draw” determines whether you win or lose. And with cashflow investments, whether you buy a property, invest in commodities, start a business, or something else, there is always some level of fear or anxiety present. While both activities can actually be a lot of fun, there is one big difference between the two…


Good cashflow investments are based on having a financial education. This means that you know what to look for and the appropriate actions to take when an opportunity presents itself. You have control over your cash—you can decide where you focus your spending, how you run your business, how you structure those you work with—and all this, with an underlying education to make such decisions, improves your chances of increasing wealth.

There are always those lucky people who win at the casinos and come home with a small fortune. The same goes for some investors who hand all of their money over to a financial planner, spouse or family friend and do well. We all know someone like that.

But when it comes to my life, I want financial freedom, and the only way to experience it is to have complete control over my cash without relying on luck (or anyone else for that matter).

Gambling may seem like an easy way to make money, but it’s very risky. On the other hand, getting a financial education to increase your cash flow is not difficult (and the rewards usually far outweigh the risks).

Retire (for Real)

I’m using the word “retire” as the time in your life when you may want to stop doing any further active investing. Your passive investments will continue, but you will also be using these assets to pay for your living expenses.

One of the reasons I was able to retire at age 47, and my wife, Kim, at 37, was simply because we had enough cash flow coming in (primarily from our real estate investments). It wasn’t much—about $10,000 a month—but we only had about $3,000 in monthly expenses. That left us with $7,000 a month to do with as we pleased.

On the other hand, capital gains are when you buy a stock for a dollar, and it goes up to $10 so you make $9 a share. Or, you buy a house for $100,000, and it appreciates to $150,000. You sell it and make $50,000.

One of the reasons people do not become financially free is because most of them are focusing on capital gains rather than cash flow.

Chasing capital gains alone is gambling—not investing.

Want proof? You don’t have to go back very far to find it, just 10 years: American’s 401(k)s and IRAs lost about $2.4 trillion in the final two quarters of 2008. Homeowners lost a cumulative $3.3 trillion in home equity—this is why your house is not an asset.

“When you invest for cash flow,” my rich dad said, “you’re investing in a money-back guarantee. If you invest for capital gains, you invest in hope. The biggest thief of all is hope.”

Most retirement plans are based on hope and promises stretched over many years. That makes very little sense to me, yet it seems to make a lot of sense to the millions of investors who are hoping the money they expect will be there at age 65.

Opportunity Knocks

A depression is coming. The world is waking up to this fact. The good news is that in every crisis there is also opportunity. The ultra-rich know that and have profited from the market’s swings since it’s existed.

As I’ve often said, this coming depression will be the biggest wealth transfer in history. This is your opportunity to become rich. But you must stop gambling with your future. You must understand how to make the wealth-stealing forces of taxes, inflation, debt and retirement work for you—not against you. And in order to do that, you must be financially educated.


Robert Kiyosaki

The Daily Reckoning