Important 401K and IRA Advice

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While doing my research for my new book (The Bank On Yourself Revolution, to be published on February 11), I came across four stunning new wealth-killing revelations about 401(k)’s and IRA’s.

If you have money in one of these plans, I urge you to read this advice about your 401K and/or IRA today to find out how to protect yourself from making costly mistakes:

Wealth-Killer #1: The fees you’re paying may be much higher than you think

Target Date Funds

I’ve written in the past about how Congress passed a law in 2006 protecting employers from liability as long as they automatically put employees’ contributions into certain types of mutual funds, known as “default” investments.

Target Date Funds

Target-date funds (TDF’s) have emerged as the default investment of choice. Unfortunately, they’ve also proven to be very risky AND they’re among the most costly mutual funds you can buy. (Would it surprise you to learn the mutual-fund industry lobbied Congress to get that law passed and make sure their interests were protected? Didn’t think so.)

So last month, an article in Forbes (“The Trouble With Target Funds”) revealed that, according to the prospectus of one popular target-date fund, your projected fees and expenses for each $10,000 invested is $2,478 over a ten-year period (assuming it grows at 5% a year).

That’s 25% of your savings!

So, if you had $300,000 in that fund for ten years, you’d get soaked for – are you sitting down? – $74,340! (And that’s just over a ten-year period!) It also doesn’t take into account all the other fees you’re charged in a 401(k).

The author of this article concluded…
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The Recession is Over… If You’re On Wall Street

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There have been a spate of articles in the financial media recently encouraging retirees to catch up on savings shortfalls by investing as much as 40-60% of their nest egg in the stock market.

These “experts” promote the concept as if it makes perfect sense to make up for your gambling losses by doubling your bets.

Gambling On Wall Street

To me, it’s appalling that anyone would advise those who are already retired to gamble their life’s savings on the volatile, risk-filled world of Wall Street.

But my message – that Wall Street is unstable and potentially as explosive as nitroglycerin – is really not age specific. The stock market can (and will) blow up in your face at any age.

For most Americans – and Wall Street goes to great lengths to hide this truth – the stock market is a promise unmet.

Gambling On Wall Street

The success myth hyped by the financial services industry is like a casino showcasing its big winners, without mentioning that the prize pool derives from the much larger pool of losers who generate huge profits for the operators, but who themselves walk away worse off than if they had stayed at home.

Money isn’t the only price that the Wall Street casino extracts from most investors

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Hold your financial course or change your course?

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“Those who can't remember the past are condemned to repeat it.” - George Santayana
The Dow has dropped below 10,000 several times recently – a level it first reached more than eleven years ago and has since bounced over and back an astonishing 63 times!

Millions of people who were counting on their homes to help fund their retirement now have no equity to count on, because they owe more than their homes are worth.

Credit is still extremely tight for both businesses and consumers, underscoring just how little control we have when we have to rely on other people’s money.

As we face continuing economic challenges, many people are wondering… what does the future hold?

Ever hear the old saying, “Change is the only constant?”  Today that is clearly true more than ever!  Stephen Covey, author of the run-away best seller, Seven Habits of Highly Effective People, tells the following story:

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How will the debt crisis affect Bank On Yourself?

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A question we are getting frequently right now is how safe is your money in a Bank On Yourself plan if the debt crisis in Europe continues and spreads to the United States?

Let’s start by answering the question…

What do life insurance companies invest in to be able to deliver on their promises to policy owners?

Life insurance companies are highly regulated and required to maintain sufficient reserves to ensure they can pay all future claims.

They are regularly audited by the state insurance commissioners’ offices, and sometimes by dozens of states, to ensure they are on solid financial ground.  And a multi-layer safety net exists to assure your money in a life insurance policy is secure.

Safety Net

You may be wondering, “What about AIG?”  Many people missed the fact that AIG’s problems were caused by a holding company, not its life insurance subsidiaries.  Their insurance companies were walled off from the problems, have always been solvent and did not receive a bailout.

The companies recommended by Bank On Yourself Professionals are among the financially strongest life insurance groups in the world.

Safety Net

They enjoy some of the strongest surplus positions in the industry, approximately double the industry average.

These companies are, in essence, owned by policyowners, rather than stockholders, which allows them to focus on the long-term interests of policy holders, rather than the short-term demands of Wall Street.

Here’s what the companies used for Bank On Yourself invest in:

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