A whopping 55% of Americans claim they’re behind on their retirement savings.Every year, unfortunate statistics just like this are released. And it just seems to be getting worse. It’s clear that Americans are ill-equipped for retirement. But why does no one talk about the root cause?
On this episode of Investing in Real Estate, we’re going to unpack five pervasive lies you’ve been told about retirement. It’s time to take back control and build a retirement plan on your terms.
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- Most plans have sky high fees. Have you ever looked at the fees on your 401k? Most plans have fees around 1.5%. But you would never know it unless you specifically go looking. They nickel and dime you, and they purposely lack transparency. You might not even be able to tell on your statement how much you’re paying in fees because they’re probably not itemized, and if they are, you’re going to see vague categories like “plan administration fees” and “individual service fees.” One calculation showed that the average American household pays nearly $155,000 over the course of their lifetime in 401k fees. The worst part is, this was several years ago – you can assume it’s only gotten more out of hand.
- The 401k is built to benefit Wall Street, not you. The average 401k plan is only around $112,000. And that’s not my estimate, that’s straight from data at Vanguard. There’s a lot of money to be made in the world of retirement… but if participants aren’t getting wealthy through these plans, who is?
- Social security is crashing. At one point in time, Social Security could add a nice padding to the average American’s retirement account. But today, the average monthly Social Security check is a paltry $1700, and benefits are only expected to decrease after the year 2035. Again, this is not my opinion, it’s straight from the Chief Actuary at the Social Security Administration.
- There’s a whole world of alternative retirement accounts available. Of course, the big wig providers won’t tell you this, but you have many more options beyond the 401k and IRA. There are accounts like the self-directed IRA, the solo 401k, the checkbook IRA, and more. These accounts are far superior for a laundry list of reasons: they allow you to choose your investments, their fee schedule is simple and transparent, and they give you freedom and control that your traditional accounts cannot provide.
- You can’t retire on a pile of cash. Americans have been instructed for decades to save up a nest egg to carry them through retirement. This might be the biggest lie of all. If the average 401k balance is $112,000 and the average Social Security check totals around $20,000 a year – how long do you think you could live off of that? I don’t know about you, but I’d be delivering pizzas on that type of income, too. Heck, let’s be generous and double those figures: how long could you live off of around $265,000? Certainly not the decades that retirement could span.. This is why it’s essential to build streams of income, not piles of cash. When you have multiple performing assets that create monthly cash flow, you don’t have to worry about your Social Security check dwindling.
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