The Retirement Facade; a creation of malpractice education and evil marketers!
The most important things in life are spiritual relationships, family, friends, and the experiences you have together. Time is the most valuable resource closely followed by health. Next is how you manage your personal gifts and life energy.
What matters financially is the money you keep to build your wealth. The rest of it is just stuff that will not matter at all as you move down the path to financial independence. Once you process that and incorporate it into your life, everything else become crystal clear.
The commercials on television about retirement are just ridiculous. Some of them imply that if a person stays on their path to building wealth, they can spend most of their days on the beach, drinking umbrella drinks all day, and have servants at their beck and call. They claim a person will not have a care in the world. Just sign over the control of all of your money to them, and for a small fee (ha, ha), they will manage everything. For just a 1% assets under management fee and .5-1.7$ per share managed mutual fund fee, they will manage everything. Then a person can stay drunk on the beach and go on an endless numbers of European river boat cruises.
There is amazing value in the levels of wealth that can be built using both Roth and traditional deferred investment programs. When these programs started, $2,000 was the maximum that could be contributed. The mutual funds had front load fees, and there were large annual fees. The brokerage companies and financial planning industry started out financially raping working people as the retirement myth began. And, they got away with it for a while. The concept of main stream Americans investing for freedom was stronger than the evil financial professionals.
When retirement investing and planning became more widespread across the country, these early practices were mostly ended. As sunshine and truth were applied to the financial raping of Americans, change slowly happened. Front load funds are mostly history. Low cost index investing has become much more popular as the education has spread. It is considered universal financial law that almost no managed mutual funds beat index funds over time.
And then, the “financial professionals,” showed up with a new marketing campaign using fear, extending the working years of a person, and charging them more in fees. Same greedy people not acting as fiduciaries again. Same target on the accumulated wealth and income streams of a working person seeking FI. The target date retirement plans with layers of fees was the new con. These funds (with management fees) are made up of funds (with management fees) that consist of both stocks and bonds. As a person approaches the desired retirement date, they move more of the assets into bonds. This is supposed to make the portfolio more stable. All it really does is a prevent a person from getting the last two or three doubles of their money. All the while they continue to collect assets under management fees, as well as layers of fees from the target date funds. It is the same bull and same evil people.
Managed funds at most financial institutions are rarely around more than 5 years if they do not beat published Dow or S and P averages after 5 years. The funds are just dissolved and the money is moved to other investments. This is how they eliminate funds with bad performance. That is why almost all funds that do not beat the averages do not exist long term. Before the 5 years is up, they can sell people into other funds. By the time people realize they have been duped by the managed funds with high fees, their investment advisors are selling them into the next great managed fund. It is hard to watch people being financially raped like this. Over any 5 year period, the computer based index funds have much less expenses and equal or higher returns. It is time to stop being nice to these financial rapist!
The only benefit of deferred investment retirement accounts is the tax deferred growth. Investing in bonds in these accounts makes very little mathematical or emotional sense. Preservation of wealth is the stated goal with bond investing. They say this makes the road flatter or less bumpy. What is really does is decrease returns and increase working years. This is by far one of the most prevalent malpractice education and evil satanic concepts in financial planning. Very few people understand bonds. And, I have no interest in learning or teaching about bonds.
If the stock market goes down, the price of stocks goes down quarters or years before the dividends. When a person stays the course during a downturn and reinvest the dividends, they increase their shares bought at a discount through dividend reinvestment. This leads to quicker recovery and more wealth. Learn emotional control. This is especially true with index funds.
Later in life when significant index funds have been accumulated in tax deferred accounts, the last couple of doubles matter before starting withdraws. If an investor is invested in target date funds with 30-40% in bonds, the last double will not happen. For example if a person has 2,000,000 in deferred investments and 40% bonds in a target date funds, returns will be negatively impacted. Over 5-9 years, money usually doubles in index or total stock market funds. Index funds would lead to 4.0 million in wealth while target date funds would yield closer to 3.2 million. The next double is even more dramatic 5.12 million vs 8.0 million. I am going for the 8 million! Unfortunately for the malpractice educators and evil satanic marketers, I can control my emotions and do elementary school math at the same time.
Invest 100% of capital in retirement funds in s and p 500 or total stock market index funds. Do not fall for higher fees and lower returns. Learn to control your emotions. Do not buy bonds or bond funds that you do not understand. It is much more fun to ride the roller coaster up and down than to be less wealthy as a person ages. If a person wants a cash buffer, do it outside of deferred investment retirement accounts in high yield savings accounts. At least they will understand the vehicles chosen for investment. Do not give up the tax advantage and pay higher fees. All that does is add years to your career path work. Invest and keep your money so you can live your best life!
For those of you that think your advisor is worth the 1% of assets fee, let me burst your bubble. Go on any of the websites of the brokers. Scroll to the bottom of the page and click on careers. When this is opened, scroll to the bottom of the job descriptions. Read the education requirements. Many of the jobs only require a high school diploma or GED. There is on the job training, and then they encourage employees to go for their series 7 or other certifications. These people in the store front, on site at your job, and manning the phones are not likely college educated, and a majority of them obviously do not have MBA degrees from Ivy League business schools. So do not be intimidated by “Skippy,” in a suit at the storefront wanting to secure 1% of your wealth annually!
When I lived in a mansion in a swanky neighborhood, one of my neighbors worked for a large brokerage firm. I got him to talk after a few beers at a neighborhood event. What he honestly told me will stick with me for life. Nobody with less than 5 million to invest gets a true team of financial investment professionals or “ real money men.” They all work in teams with specific populations of investors. My neighbor was a graduate of a very reputable college. He went on to get his MBA at an Ivy league school. He was put on a team that managed the money of professional athletes. As he was such a fan of college and pro football, it was a perfect match for his skillset.
The stories my friend told were unbelievable. They would try to educate athletes with very large incomes to invest with a minimum of 5 year time horizon. They put a great deal of resources into educating athletes to help them not end up bankrupt as many highly compensated athletes have in the past. Just a few months after investing, almost all the athletes would contact the financial team wanting some of their money back to buy a new car, house, or take care of a loved one.
An unbelievable amount of resources has been invested in trying to educate the highly compensated athletes. After all, the investment professionals get a percentage of the profits so they want to increase this business as much as possible. And guess what? They are still failing for the most part. The malpractice educators and evil satanic marketers are continuing to win this battle with athletes.
The take home message from this story is that individuals with less than 5 million are not getting true educated money professionals. Most of us are dealing with high school educate or seminar trained individuals that completed in house training for a few weeks. Get over it and get comfortable investing your own money in index funds! It is most likely true that the brokerage rep is less educated than you are after becoming active in the FI community. Do not pay them 1% of your assets to tell you to by fund with higher expenses than index funds. They are also not a true self made multimillionaire like mentors available to you in the FI community. Get control of your emotions, and become your own advisor. Put Skippy in his place and grow up! Time to take control!
As discussed in other articles, a person should do everything they can to be done with stressful career path for within 15 to 20 years. We need to change the definition of retirement after completing career path work. While it is 1,000,000% necessary to avoid stressful career path work after 15 to 20 years, a person should try to make money until they die. It is not necessary to go the beach, or endless numbers of European riverboat cruises after leaving career path work. A person can simply engage in activities that they really enjoy doing, spending time with people whose company they enjoy, and living where they really want to live. And they can make money, own a business, or buy and sell to keep making money!
Additional articles are on the way that will support maximizing deferred taxation retirement plans as the best long term method to achieve FI. There are may ways to get money into these plans such as career path work, business ownership, military service, and cashing out other investments. The long term growth potential and tax optimization are not matched by any other investment vehicle. It is truly a FI emergency to max these plans out every year and go back to catch up contributions when ever possible. The more invested earlier will help a person get off the flat part of the investing curve as soon as possible.
The wealth can be accessed with penalties early in a true emergency. It can be borrowed against as collateral. It can be accessed early with the rule of 72t. It is well protected from creditors; much better than cash or real estate. It is a highly desired an engineered location to grow true wealth leading to FI!
Paying off a house early reduces expenses, but it does not make a person FI. After all, housing has become season of life and earning location dependent. Never get a 15 year loan! Did the 2008 crash or covid teacher people anything? Being cash poor with a paid for home is not the definition of FI! Get a 30 year fixed and make extra payments if desired. An entire article is coming on this subject!
In the future, there will be articles about blood money. In the Bible, it clearly states that a good and righteous man will leave an inheritance to his children’s children. There is so much very poor and non-biblical financial planning that goes on when individuals reach their late 70s and 80s.
Many individuals have millions of dollars in stocks and paid off real estate at this point in their lives. They view this as very comfortable success. That is not consistent with what is taught in the Bible. The Bible teaches us to take care of those that cannot take care of themselves, the most vulnerable, family, and friends. The Bible does not champion dying with a bunch of material possessions and the wealth.
Many individuals at this age still own high quantities of single stocks from companies that they worked for when they were younger. They know that singles stock ownership is some of the riskiest investing that can be done, yet they do it anyway. And, there is a great deal of discussion about Roth IRA conversions. There is great concern about tax rates and inheritance tax. And, RMD’s really stress them.
There is almost nobody in the mainstream financial planning community talking about the joy and happiness that can be achieved when an older couple or widow/widower move some resources into the next generation when they get to see this happen.
Blood money is not like other money that is shared. By definition, it must follow the bloodline and keep the wealth in the family. This provides for family stability and for a family to have members that can be very active in the community because they have significant ownership and resources. We need wealthy young community members to be on school board, city, councils, political positions, deacons at the local churches, and so many other positions. When all the good Christians are working and spinning their wheels just to stay a float, this does not happen. Move some of the resources to free up the life energy of the next generation!
Dying with millions of dollars in the bank should not be a goal. It is also not a stated Christian goal in the Bible. The financial planning and discussions that are done around these later stages do not get approached from the Christian perspective. They are much more about hoarding than they are about sharing and giving. It should not be anybody’s aggressive stated goal to die with a large paid off house and millions of dollars in the bank when the next generations truly need the money earlier in life so they can participate in society in a meaningful way. We need to get better at moving well to the next generation ways that it makes sense.
Help the next generation max out Roth Ira’s, max out 401k’s, 403b’s, and 457’s. Help they build brokerage accounts and reduce debt. Help them reach FI so they can improve our community.
And, control any gifts as blood money is not ment for stuff, vacations, and gluttony. If not well managed, then find other ways to powerfully move the money that will do the work of Jesus with the resources. After all, we are just the managers as it all belongs to God!