The WORST Investment In America, Part 2

Dear Reader, 

Today, I and many other professional investors are concerned about the mantra, “Invest for the long-term in a well-diversified portfolio of stocks, bonds, mutual funds, and ETFs.” 

What concerns us about this line of thinking is what we believe 2020 and beyond will hold. And when you look at the 125-year history of the Dow you may understand why we are concerned. 

We believe the paradigm is about to shift. And those that are heavily invested in the stock market are in big trouble.

Sadly, the pandemic has shown us what can happen when people have little financial education. 

Millions are out of work and struggling financially. They are holding on to the hope that the stock market won’t crash as it did in 2008, causing them to lose their life savings in the blink of an eye. 

Of all Americans who have savings set aside for retirement, most are invested in 401(k) plans stuffed with mutual funds. 

These plans are exposed to systemic risks, meaning, if the market falls they fall.

In my latest book, Who Stole My Pension?: How You Can Stop the Looting, my co-author Edward Siedle, a leading expert in pension looting, writes about the precariousness of the shifting of retirement burden from employers (pension plans) to employees (401(k) plans):

“Shifting responsibility for retirement planning onto workers has been disastrous for workers but great for corporate bottom lines.

The 401(k) defined contribution plans which employers and Wall Street sold to workers as providing comparable retirement benefits to pensions have failed dismally. With a median 401(k) balance for 65-year-olds at $70,000 or less, it’s no secret that the great 401(k) “experiment” has failed in the United States. And, as deeply flawed as they are, approximately a third of America’s workers do not have any employer-sponsored retirement plans at all.

According to a 2018 study by Northwestern Mutual, 21% of Americans have no retirement savings and an additional 10% have less than $5,000 in savings. A third of Baby Boomers currently in, or approaching, retirement age have between nothing and $25,000 set aside.

The Economic Policy Institute paints an even bleaker picture. Their data from 2013 reports that, “nearly half of families have no retirement account savings at all.”

The failure of 401(k) innovation was foreseen decades ago by experts—including me—and was avoidable had legislators and regulators acted in the best interest of investors and had the financial services industry curbed its greed.”

Edward goes on to conclude: “The solution to the retirement crisis, I assure you, is not costly 401(k)-type defined contribution plans that put all of the responsibility for the selection of investments onto individuals.”

Yet, that is exactly the reality most Americans live with today. And their blind faith both in 401(k) plans and the continued rise of the stock market could be their downfall come retirement.

What Should I Do With My 401(k)?

Once you understand that come retirement there may not be much left in your 401(k), the next logical questions you might be asking are: 

Should I stop contributing to my 401(k)? 

Should I take money out of my 401(k) and invest it in something else, despite the tax penalties for doing so?

The problem with a 401(k) is that you put up 100% of the capital, assume 100% of the risk, and you only get 20% of the profits. 

The other 80% of the profit goes to fees and commissions. 

So really, the key question is: Do you have the financial education needed to find an investment that will give you a better return?

There are certainly better investments than 401(k)s. If you want to be rich, you must have a financial education and control over your money and your investments. 

This is why I like to invest in my own business, purchase real estate, and create products. I have a lot of control over those investments. Generally, a good matrix is the more control you have, the higher your potential return. The less control you have, the lower your potential return.

Of course, it takes high financial intelligence to invest in things where you have control because you have to make a lot of important decisions. This is why being forced into a 401(k) probably isn’t a bad thing for most people. 

Just like you wouldn’t want to give a teenager a car before they learn to drive, you don’t want to purchase an investment before you’ve learned to control the risk. Every investment carries some risk, but as your education about that investment increases, your risk decreases.

With a 401(k) you are turning your money over to someone else, which means they get most of the control… and most of the profits. You can do a better job with your money than anyone else. 

The Rich Dad Way To Prepare For Retirement

My wife, Kim, and I don’t believe in living below our means. We think that crushes our spirit. 

Instead, we buy assets that pay for our liabilities. The difference between us, and the people struggling at retirement, is that those people play by the old rules of money, relying on savings and 401(k)s for retirement. 

The problem is that people are living longer, healthcare is more expensive, and those savings are not enough—yet, they have no other way to have money come in besides going back to work and making cuts in expenses.

There has to be a better way to prepare for retirement. Thankfully, there is. And my rich dad taught it to me.

When I was a young boy, my rich dad (my best friend’s dad) taught his son and I the simple formula for building wealth through the game of Monopoly. 

He repeated over and over, “Four green houses and one red hotel.”

He was teaching us the magic of cash flow. The more cash flow you could get out of your assets, the higher your wealth would be. It was the way to win the game and to win at life.

Today, Kim and I invest in assets with cash flow like real estate, oil wells, business, and more. Each month, cash pours into our accounts from these investments, covering our expenses. 

I dedicated a chapter in Who Stole My Pension about how to print your own money with infinite returns. Once you understand the words infinite returns, you will never have to work for money again. I teach financial literacy because, if you have enough knowledge, I know that you will never have to work for money. 

Kim and I founded the Rich Dad Company in 1996. We raised $250,000 from investors. The investors received a 200% return of their money in three years. Today The Rich Dad Company, a private company, produces millions of dollars a year—all infinite returns since Kim and I do not have any of our own money in The Rich Dad Company.

Rich Dad is an international brand. The business licenses the use of the Rich Dad brand to book publishers and approved education companies all over the world. The revenue this generates represents a 100% infinite return.

Moving from the old ways of money to thinking like my rich dad, is the only way forward when it comes to preparing for retirement in today’s world.

But that takes a big shift in mindset.

Kim and I never say, “We can’t afford that.” We always ask, “How can we afford that?” We then find an investment that will pay for our standard of living. 

The difference is our money works for us, not the other way around.

So, the question today is: Are you ready for retirement? 

If not, take the time and start financially educating yourself today. 


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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