Personal Finance Blog for Retirement and Investment Advice

Why Most Early Proponents of the 401(k) Now Say It’s a Failure

Herbert Whitehouse was one of the first proponents of the 401(k) 35 years ago, when he was a human resources executive at Johnson & Johnson.

Today the 65-year-old Whitehouse says he will have to work into his mid-70s if he wants to maintain his standard of living, after his own 401(k) took a hit in 2008.

Whitehouse is one of a chorus of early 401(k) supporters who have changed their minds.

A recent article in the Wall Street Journal reveals how pre-retirees at all income levels are falling shortway short – of the amount of money they need to have to be able to retire.

Fully half of those between ages 50-64 have less than one year of their income saved.

The top 10% (those making $251,000 or more annually) have an average of only two years of their income saved.

The article mentions that “financial experts recommend that people amass at least eight times their annual salary to retire.”

Those “experts” ought to have their heads examined, because even a $1 million nest-egg would provide you only $28,000 a year at the current recommended withdrawal rate of 2.8% per year. [Read more…] “Why Most Early Proponents of the 401(k) Now Say It’s a Failure”

4 Mistakes to Avoid to Make This Your Best Year Yet

It’s a brand new year, and I’m very excited! Are you?

Are you reviewing last year’s goals and accomplishments? Taking note of who you’ve become in the process of pursuing your dreams? Setting your sights on even more growth and achievement in 2017?

When you look at the key areas of your life – your finances, relationships, health, career and personal/spiritual growth – can you see how far you’ve come in the past twelve months?

Or when you think back to January 2016, do you realize that you’re almost exactly where you were twelve months ago?

Bummer.

Or as Yogi Berra said,

It’s like déjà vu all over again.”

If your life is beginning to feel like the movie Groundhog Day, you might be shooting yourself in the foot with one of the following four missteps:

Mistake #1: Repeating What Didn’t Work Last Year

[Read more…] “4 Mistakes to Avoid to Make This Your Best Year Yet”

Six Different Examples of 401(k) Scams

UPDATED: March, 2022

I’m going to make a very bold statement that’s sure to get me some nasty blowback. But as a financial investigator who’s exposed the truth about the conventional financial wisdom, I’m used to that, so here goes…

401(k)s are a scam. Want proof?

Here Are Six Reasons Why 401(k)s Are a Scam…

Reason #1: The 401(k) Tax-Deferral Scam

In our immediate-gratification society, deferring your taxes by funding your 401(k) sounds so good, doesn’t it?

But when the tax man eventually comes calling, he won’t ask you to pay what your tax liability would have been if you’d been paying taxes all along. He’ll tell you what your tax liability is at the time your taxes are due.

Conventional wisdom says you’ll come out ahead by deferring taxes. After all, doesn’t that mean your entire contribution can go to work for you immediately? Unfortunately, like many assumptions about personal finance, this simply isn’t true. According to the Society of Actuaries, if tax rates remain the same…

“It doesn’t make any difference whether the taxes are taken away from you at the beginning (before you put the money in a savings vehicle) or at the end (tax-deferred). It’s the same fraction of your money that is left to you.”

If tax rates are lower in the future, you’ll come out ahead. However, most people, including most financial experts, believe tax rates must head higher, not lower, over the long term. And your retirement could last 20-30 years or more.

The reality is that you are probably sitting on a tax time bomb. Simply put, the government is going to need more money in years to come for several reasons. For example, let’s look at the numbers impacting Social Security and Medicare.

Today there are 62 million Americans using Social Security and Medicare. By 2045, 140 million – twice as many – Baby Boomers and Gen X-ers will be over 65 and requiring Social Security and Medicare. Where do you think the money to pay for that will come from?

Social Security and Medicare’s financial condition has deteriorated despite a long economic expansion. In fact, Social Security is already in a negative cash flow situation. What will happen to those funds in the next downturn?

And what about the national debt? Washington has not dealt with the government’s unsustainable debt and spending for decades, and as of March 2022, the national debt has ballooned to over $30 trilliondoubling in just the past decade! And it’s climbing at a head-spinning rate. (For a painful wake-up call, check out USDebtClock.org)

For all these reasons, the overwhelming likelihood is that tax rates will go UP over the long term, and when they do, then OOPS! There goes the whole 401(k) “tax-deferral” argument.

Reason #2: The 401(k) Employer Match “Free Money” Scam

[Read more…] “Six Different Examples of 401(k) Scams”

SuperMoney Interviews Personal Finance Expert Pamela Yellen on Savings and Investing Strategies

Pamela Yellen, Founder of Bank On Yourself
Pamela Yellen, Founder of Bank On Yourself

I was recently interviewed by SuperMoney, a website that rates various financial products and the companies that provide them.

In this wide-ranging interview, I answered questions like these:

Why did you decide to start Bank On Yourself?

I reveal the frustrations my husband and I experienced following the conventional wisdom about investing and retirement planning. Maybe you can relate…

If someone were to say to you, “I don’t have the expertise to handle my finances. I’ll just hire some investment firm to deal with them,” how would you respond?

Here I discuss how and why 80% of all mutual funds, financial representatives and investment advisory services underperform the overall market. If the experts can’t even do it well, how can we regular folks be expected to? [Read more…] “SuperMoney Interviews Personal Finance Expert Pamela Yellen on Savings and Investing Strategies”

7 Reasons the Economy is Worse than it Seems

Do you believe the economy has improved significantly since the Great Recession?

Or do you feel like we’re staring down the barrel of a cannon whose fuse has already been lit?

The stock markets should be down considerably by plenty of measures, but many investors appear to have been hypnotized to believe that nothing can go wrong.

I believe things are worse than they may seem on the surface, and extreme caution is warranted, for the 7 reasons I spell out here.

I’ll also give you some tips on how to protect yourself and have a “Plan B” in place in case the you-know-what does hit the fan.

Here Are 7 Reasons the Economy is Worse than It Seems…

1. Addiction to Stimulus and Low or Negative Interest Rates

[Read more…] “7 Reasons the Economy is Worse than it Seems”

The Bank On Yourself No-Nonsense Guide to Life Insurance

Life insurance is a subject we don’t like to think about. It’s right up there with going to the dentist and writing the annual Christmas letter. (Do people still even do that?)

Thinking about life insurance is one more reminder that we may not live forever. Ugh.

But not going to the dentist doesn’t make things better. And not thinking about life insurance won’t help you live longer.

On the other hand, going to the dentist and thinking about life insurance are two really positive things you can do that are almost guaranteed to make your life better.

If peace of mind, a sense of security, and the knowledge that you’re doing all you can for your family and yourself are important to you, then it’s wise to spend a little time thinking about life insurance.

But life insurance doesn’t have to be complicated or boring—which is why we created this Consumer-Friendly Guide to Life Insurance.

Here are some interesting facts about life insurance that we cover in our Guide. Did you know that …

[Read more…] “The Bank On Yourself No-Nonsense Guide to Life Insurance”

Could the Government Seize Your 401(k) and IRA Money?

Is it far-fetched to wonder if the government could take control of your retirement savings in 401(k)s and IRAs?

Or is that just a paranoid conspiracy theory?

The fact of the matter is that it’s not far-fetched, or a conspiracy theory. The groundwork has already been laid.

And the government already gave banks the green light to seize your bank accounts.

Read on for the facts – and I urge you NOT to discount the importance and urgency of this issue affecting your hard-earned savings…

The Government Has BIG Plans for Your Retirement Savings

An article in American Thinker titled “The Feds Want Your Retirement Accounts” revealed that, “Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts. Slowly the cat is being let out of the bag.”

And Bloomberg reported that,

The U.S. Consumer Financial Protection Bureau is weighing whether it should take a role in helping Americans manage the $19.4 trillion they’ve put into retirement savings.”

For the last 18 months, the Treasury Department has been testing the “myRA” program – which Obama created through executive order – no Congressional approval needed.

The myRA, which stands for “My Retirement Account” supposedly “guarantees a decent return with no risk of loss.”

And the only investment allowed in this account is a low-yielding Treasury security.

Of course, the Treasury wants to get more people signed up for this program, because it means more funds flowing right back into the U.S. Treasury to help the government meet its voracious borrowing needs. How convenient… [Read more…] “Could the Government Seize Your 401(k) and IRA Money?”

Dalbar 2016 Report: Many Investors Haven’t Even Kept Up With Inflation

The latest report from DALBAR reveals the harsh reality about the actual returns stock market investors have been getting for the last 30 years.

Would it surprise you to know that many investors haven’t even been able to keep up with inflation for the last three decades?

Many investors haven’t, according to the 2016 Quantitative Analysis of Investor Behavior.

Here are the facts about actual long-term investor returns

The average investor in asset allocation mutual funds (which spread your money among a variety of classes) earned only 1.65% per year over the last three decades!

These investors didn’t even come close to beating inflation, which averaged 2.6% per year.

The average investor in equity mutual funds averaged only 3.66% per yearbeating inflation by only 1% per year. (Was that worth the roller-coaster ride and sleepless nights?) [Read more…] “Dalbar 2016 Report: Many Investors Haven’t Even Kept Up With Inflation”

Review: What’s REALLY In “The Big Black Book of Income Secrets”?

UPDATED August, 2019 

If you receive emails from investment advisory services like I do, you may have gotten a sales pitch for The Big Black Book of Income Secrets from the Palm Beach Research Group.

Photo of the Palm Beach Group's Big Black Book of Income Secrets Book Cover
The Big Black Book of Income Secrets is One of Palm Beach Letter’s Marketing Hooks

The promo promises you’ll discover “30 unique income tools” in The Big Black Book of Income Secrets. It sounded like there were some interesting strategies being covered, so I decided to do some investigating. Read on for my review of The Big Black Book of Income Secrets and what it’s all about…

Photo of the Palm Beach Group's Big Black Book of Income Secrets Book Cover
The Big Black Book of Income Secrets is One of Palm Beach Letter’s Marketing Hooks

The offer entices you with a “risk-free 60-day trial subscription to the Palm Beach Letter.” If you’re not satisfied before the two-month trial is up, you’re told you can get a refund and keep the book and some “bonus” reports that are included in the offer.

To find out if The Big Black Book of Income Secrets lived up to its promises, we signed up for the “Platinum Subscription” for $99 for the first year, which comes with additional “bonus” reports.

Three weeks later, the book arrived, containing 22 (not 30 as promised) strategies, with a cover letter from the Publisher, Tom Dyson, explaining that we could log into their website to access the reports we signed on for and back issues of the Palm Beach Letter. (I guess for $99, they can’t afford to mail you hard copies of the reports.)

As I started reading through the 22 income strategies in the book, I immediately started noticing some red flags.

The First Red Flag in The Big Black Book of Income Secrets is “Income For Life”

[Read more…] “Review: What’s REALLY In “The Big Black Book of Income Secrets”?”

Do You Have As Much Saved for Retirement As the Average Person?

How do you think you compare to other people when it comes to how much you’ve saved for retirement?

The results of a new survey from the Employee Benefit Research Institute (EBRI) reveal some surprising insights into America’s preparedness for retirement.

Read on for the highlights of the 2016 Retirement Confidence Survey and a 6-Step Action Blueprint to make sure your money lasts as long as you do…

The survey revealed that 54% of all workers report less than $25,000 in household savings and investments, excluding the value of their primary home.

That includes 26% who say they have less than $1,000 in savings.

10% have between $25,000-$49,999 saved, 10% have between $50,000 and $99,999 saved, and 12% have between $100,000-$249,999.

And how many have saved $250,000 or more? Just 14%.

Are people close to retirement any better prepared?

[Read more…] “Do You Have As Much Saved for Retirement As the Average Person?”