Saturday, August 20, 2011

Rich Dad's Endorsement of 401k Plans(not)

Here is an article discussing the ills of the 401K plan, by Robert Kiyosaki from his "Conspiracy of the Rich" series. It is more info discussing the issues with investing in a 401k type plan. Oh here is another article from the Wall Street Journal discussing the ills of 401k plans for Baby Boomers. Enjoy and be enlightened.

Conspiracy of the Rich
The 8 New Rules of Money
by Robert Kiyosaki
Online Exclusive Update - #10
November 9, 2009

401(k)’s Are For Dummies
The November 1, 2009 edition of the New York Times states, “To certain experts, 401(k)’s might not be ideal, but they’re all some investors have.”

Personally, I believe people want to be smarter with their money. No one likes losing money. The problem is that our government-controlled education system does not allow much financial education. So, instead of people being smarter with their money, they’re blindly investing in 401(k)’s – and losing financially. Plainly said, 401(k)’s are for dummies.

1974: The Rules Were Changed.
In Conspiracy of the Rich, I wrote that in 1974 the US government began the 401(k) plan and paved the way for our retirement plans to become one more way for the rich to get their hands into our pockets.

Prior to 1974, most employees had company- or government-sponsored retirement plans. In other words, if you were a good employee, you would receive a paycheck for life, even after your working days were over.

Today, in 2009, companies that maintain those types of retirement plans are dying. Companies such as General Motors and the Federal government cannot afford to pay workers a paycheck for life. To reduce the company’s expenses, employees were told a 401(K) was a great way to save for their retirement.

The problem was that in 1974, even through the rules of employment had changed, the school system did not change. Rather than teach students about money and investments, the schools to this day bring in the very agents of the rich, the financial planners and bankers, the very people that profit from financial ignorance, to teach our children about money.

A Whole New Business is Born
After 1974, big business and the government pushed millions of workers into the 401(k) plan, and a whole new profession was born – financial planners. When the 401(k) plan arrived, many insurance salespeople changed their title to financial planner. Even back then it was hard to get a sales appointment if you called and said, “I want to sell you life insurance.” This new title of financial planner was more accepted, sounding more dignified and important, and hence, making it easier to get a foot in the door. I know this because back in 1974 I was out of the Marine Corps and looking for a job that would teach me the art of selling. I remember an insurance company recruiter telling me, “Don’t worry about being called an insurance salesman. We’re changing the title to financial planner. You’ll still sell insurance because that is where you make most of your money. But you will get in the door by saying you are a financial planner.” Today, millions of people have left their jobs to join the ranks of financial planners, preying upon people hoping to have some sense of financial security once their working days are over.

The October 2009 issue of TIME magazine quoted a former human-resources executive as saying the 401(k) is, “The biggest scam ever put on the American people.” I agree. I am afraid that for millions of people the 401(k) will not provide the security they desperately need. For millions of people, all over the world, these investment plans for the financial naïve will prove to be one of the biggest financial scams ever perpetrated upon innocent people. In 2002, I published Rich Dad’s Prophecy: Why the Biggest Stock Market Crash in History is Still Coming…And How You Can Prepare Yourself and Profit from It! As expected, the book was trashed by the Wall Street Journal, Money Magazine, and Smart Money. Now it seems the press is beginning to agree with my 2002 book.

But here’s the problem: if my predictions are correct, the biggest stock market crash in history is still coming.

The Last Depression
During the last depression, only a few people were dependent upon the stock market for security. Back then most people did not invest in stocks. Those that did often invested on margin, meaning they used borrowed money. This borrowing on margin caused a large financial bubble, and when the bubble burst, the depression began.

Yet, that crash did not really affect as many people as you’d think. In the 1930s, many still lived on farms, which meant they could survive even if the stock markets were down. Also, during the last depression the US dollar was still backed by gold, which meant it had some intrinsic value. Savers could safely save money. During the last depression, there were no credit cards. Since debt was hard to get, most homes were paid for.

As stated in Conspiracy of the Rich, World War II and the Korean War conveniently broke out, and the Great Depression was officially over by 1954, twenty-five years after it started. (In 1929, the Dow hit a high of 381 and then proceeded to crash. It took till 1954 for the stock market to once again hit 381).

The Great Recession
Once the depression was over, the conspiracy changed the rules. In 1971, Nixon took the US and the world off the gold standard, and America was on its way to becoming the biggest counterfeiter in world history. In 1974, the 401(k) system began, forcing many people who did not trust the stock market to depend on it for their retirement.

Today, our leaders are doing anything possible to stop this recession from growing into a depression. They are printing trillions of counterfeit dollars. This new recession, caused by the 1971 and 1974 rule changes, is wiping out jobs, destroying home values, and erasing the savings in bank accounts and 401(k)’s for millions. Millions of lives are being financially destroyed due to financial ignorance. In spite of the losses, our leaders continue to say, “Save more money,” even though our money is now counterfeit money. And they are also saying, “Invest for the long term in your 401(k),” even though the 401(k) has lost money for the past ten years.

On top of this, the US goes ever deeper into debt, making trillions in future financial promises that everyone knows we cannot afford to keep.

This is a Great Time
My message is simply this: “This is a great time to get rich.” But don’t listen to insurance salespeople masquerading as financial planners, selling you the wonders of the 401(k). The 401(k) was designed for people who know nothing about investing, which is why the New York Times says, “401(k)’s might not be ideal, but they’re all some investors have.”

The reason the 401(k) is all most investors have is because our school system is failing us. Without an honest financial education, a 401(k) is all most people know. Even today, after the failure of the 401(k) is evident, our school system continues to invite financial planners and bankers into the classroom under the guise of financial education. This is not honest. This is deceptive. This is self-serving. This is the conspiracy in action in our schools.

If a 401(k) investor had invested in gold or oil in 2000, they would be in great shape today. You do not need a financial planner to invest in gold or oil. Indeed, they won’t even sell you those gold or oil. The reason financial planners don’t recommend tangible assets like gold or oil is because the 401(k) does not allow them to sell hard commodities. In other words, why recommend something if the sales person doesn’t make a commission?

If a person had invested in gold rather than the stock market in 2000, they would be up 400 percent instead of down nearly 30 percent.

But in the end, the 401(k) is not the problem. A lack of financial education is the problem.

The Greatest Transfer of Wealth
The greatest transfer of wealth in history is on right now. Many people who use to be rich will soon be poor. And those that have invested in their financial education will become richer.

Now is a great time to invest in your own financial education. It is time to find out what is best for you – not what is best for your financial planner’s commission. The economy will be down for at least two or three more years – if we do not go into a depression or hyperinflation.

Wealth is currently transferring from the financially naïve to the financially smart.

Remember, your brain is your greatest asset. Protect it. It is up to you to decide what goes in it. Your brain does not belong to President Obama, the school system, Wall Street, the banks, financial planners, real estate agents, your boss, or even people like me. It is up to you to decide what is best for you, your family, and your future. Thank you for supporting Conspiracy of the Rich: The 8 New Rules of Money. Keep learning. Pay attention to what is going on, even if you have no money. Remember, Knowledge is the new money.

Robert Kiyosaki

© 2010 Robert T. Kiyosaki. All rights reserved. No publication or use without the prior written permission.

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