There has been an enormous amount of attention given to an article written by Robert Kiyosaki about 401K plans on the Yahoo Finance page. Many people read the article, and are very upset. They cannot believe that Robert would question the viability of 401Ks as the means of funding 75 million baby boomers’ retirement. As a matter of fact, a 401K is a glorified savings account. If this strategy is going to fund anyone’s retirement, there better be more than $500,000 to $1,000,000 or more in your plan.
I certainly hope the investment adviser representative that is managing your 401K is on the ball and has invested in the right strategies. However, if you have lost quite a bit of your investment in the last few years, you are not in the right strategy. You will never be able to retire if your 401K is invested in a “Buy and Hold” Fund. You are invested according to the Prospectus when the market is doing well. You are also invested according to the Prospectus when the market is going down. The manager can move the money around within the Fund, but his/her hands are tied by the Prospectus and cannot move your money out of the fund and put it in a money market or in cash if the market goes down. That would be known as a defensive strategy. Do your investments have a defensive strategy as well as an offensive strategy? I think not.
Many of you are not even sure what I’m talking about because I’m talking in a different language. I’m hoping if you are curious about what I’m talking about you will comment and ask some questions. However, if you do know what I’m talking about, let me tell you that most of us have never had much financial education. My upbringing was such that the people that brought me up were retired on the man’s pension and social security. This was more than 50 years ago. Our financial future and that of our children has changed dramatically.
For one thing, as a baby boomer, I’m aware that social security may not have enough money to fund my retirement let alone my 30-something children’s. I’m sure my grandchildren will want to know what Social Security was. They will read about it in their History books.
Let me take you back in History for a minute. When Social Security was created, people were not living as long as they are now. At that time, when a person, usually a man, retired, he didn’t live for 20 or 30 years past his retirement. Congress enacted Social Security at a time when people generally died before age 75. If someone lived longer, it was the exception, not the rule.
Now and in the future, people will be living well into their nineties and one hundreds in decent health because of breakthroughs in medical technology. If this is the case, we will need to start educating people about their own finances and how to invest in their own retirements. In my humble opinion, Social Security is a wonderful program that helped a lot of people, but unfortunately it was another good idea that ran out of money, not unlike Cash for Klunkers.
We all need to take responsibility for our own retirement. That means we have to get smart about our investments. We need to be in the best investments that will consistently make money with the least amount of losses. Is that type of investment out there? You bet it is. Just ask me.
