Mistake number 1 out of 10 when saving for retirement.
In this episode, I'm going to address the question "What mistakes do people make when saving for
retirement?" This is the first mistake out of 10.
So, my name's Doug Andrew and I've been a
retirement planning specialist now for more than 47 years helping people optimize their
financial assets and accumulate money safely for a comfortable retirement so hopefully they don't
outlive their money. So, I have watched thousands of people prepare for retirement, enter retirement
and try to make it through retirement without outliving their money. And so, there are lots of
mistakes that I see people make but in this series, I have selected the top 10 mistakes or reasons
why people outlive their money in retirement. So, in this episode, it's number 1.
What is it? It's having your retirement nest egg, your money invested in the volatile stock market
in mutual funds, that's where most people have their funds in traditional accounts like IRA's or
401k's. When I see that, I usually respond with, "What are you thinking? You should have no more than 30%
of your retirement income coming from money invested in the market because
the market was not built for predictable income streams."
The market is there for growth but if you ask Wallstreet, "When is the best time to sell or start to
liquidate my retirement account?" They'll say, "Never! You should never sell your stocks." See, when people
stalk away money in traditional accounts like IRA's and 401k's, usually asset managers will recommend, "Oh,
you diversify in the market and if the market goes down or crashes, the market always comes back." Well,
you ask those advisors to show you an illustration of predictable income streams and they're usually
forbidden from doing so. In fact, they're usually restricted to what is called a 4%
rule. What's that? The 4% rule is what the financial services industry came out with because
DALVAR and other analysts that actually study the behavior of people where they have their money
invested for long-term goals like retirement found that most people, they get emotionally
involved. In other words if they left their money alone, if they bought and held the average return
according to DALBAR would be around 9%, maybe 9.14, some decades 9.6 but it averages around
9%, that's before tax. Now, that's another mistake we'll address in another episode but
if you're earning 9%, you might net 6% or so after tax. Most people aren't earning
9%. According to DALBAR, most retirees are only earning about 3.49%. Why is that? It's because
most people get emotionally involved. They look at their money in their IRA's or 401k's in the market
and when the market starts to crash, which it does about every, you know, 6, 7, 8 years
and the market starts to drop and it goes down 15, 20, 30%. When it
hits about 30, 35% decrease which has happened many many times, it happened in February March
of the year 2020 with a COVID-19 pandemic, people panic. They finally go, "Enough already," and they
sell low. We told our clients, "Buy. Link your returns," and a year, later many of them experience over
60% gains but most people are doing the opposite. They're selling low and then they wait
when the economy comes around and comes back, back, back, they wait, wait, wait and then they buy high
so the average return that's investor behavior because of the way people actually act is only
3.49%, that's pretty pathetic. So, that's why the financial services industry said, "You know what?
If you're going to illustrate income and their money's in the market only illustrate 4%
payout," because if you're earning 3 and a half and you're taking out 4, you will slowly deplete
your nest egg but not before your LE. LE is life expectancy. So, they don't want you to outlive your
money because they might get sued and they don't like being sued so they tell their advisors, "Don't
illustrate any more than a 4% payout," that's pretty pathetic and it's all due to market
volatility. So, I usually recommend that retirees get their money out of the market at least 70%
of their money out of the market before retiring so that you can create predictable
cashflow or income streams. How do you do that? You can do that by linking your returns
to those things that inflate, that are growing in the economy and that will be tax-free. You'll learn
about that in this series, but what I want you to do is subscribe to this channel and I want you
to watch every single one of the top 10 mistakes that retirees make. But click like, post a comment,
subscribe to the 3-dimensional wealth channel because I have over 500 educational videos
and every week, I post at least 5 new answers to financial questions that people ask 300 to 3,000
times a month and I want you to take advantage of these insights into opportunities that maybe
you didn't know existed before. If you stay with me to the end of this episode, I'll show you how
you can claim a free copy of this 300 page bestselling book, The Laser Fund. I'll pay for
the book, you just contribute a nominal amount towards the shipping and handling and there's
also options there to listen and learn and watch and learn. So, because the average person who has
their money in the market is only earning about 3 and a half percent, it means that a million
dollar nest egg, if you had a million bucks, Wallstreet only wants you to pull out 40,000 a year,
that's pathetic. Then you have to pay tax on that and so you're only netting 30,000. Many
times the asset managers are charging 1% fees on the million and so after subtracting taxes
and fees, you're only netting 2% but you need predictable rates of return and you cannot
have predictability when your money is subject to big downturns in the market 30 and 40%.
You get it out of the market and you position it where you can experience upside gains, upside
potential but when the market crashes during the golden years of your retirement, you don't want
to lose. You don't want to have to put off taking out income and wondering how you're going to make
ends meet because you're having to withdraw money during a downturn in the market. Get rid of that
concern and that worry, that's why I recommend my favorite vehicle which I call The Laser Fund. LASER
is an acronym that stands for liquid assets safely earning returns. Get it out of that volatile
market. How does this work in real life? Let's take the worst decade since the great depression,
they started in the year 2000 at the turn of the century and it went about 10, even 12 years
to 2012. People who had their money invested in the market saw their retirement nest eggs dwindle
in value by 40% twice in that decade. After the 911 terrorist attacks in 2001, the market dropped
from 2001, 2002, 2003 down 40%. A million dollar nest egg in the market was only worth
600,000 dollars at the end of 2003 and it took 4 years until 2007 to make back that lost.
They had to put off retirement 7 years. Is that what you want? Well, what happened in 2008? Maybe you
or someone you know lost 40% in the value of your IRA's or 401k's in 2008. Now, do you think
that's going to happen again? Yeah, I do. So, do you want to have happen next time what happened last
time to your money when it does happen? Most people say no. Well, what are you doing differently? See,
if your money is in the market you're subject to those downturns, the crashes because it took 4
more years until 2012 for people to recover from that loss and be back to break even. During that
12-year period, many of our clients using my favorite vehicle, The Laser Fund, not only doubled
their money but many of them tripled their money tax-free. A million grew to 3 million.
They may not have made very much money in 2001, 2 and 3 or 2008 but they didn't lose.
And when the economy turned around, they just picked up from where they left off and that's
why they were able to see double and even triple their money over that 12-year period.
This is a concept or a strategy called indexing. So, I would recommend you avoid the number 1 mistake.
Don't have your money invested in the market. I would recommend no more than 30%
in the market. You want to roll that money out and put it into what I would refer to as
The Laser Fund or a portfolio of laser funds. So, to learn how to diversify and create the
foundation for a tax-free retirement where you are immune from market volatility, where you can
create predictable cashflow, where every million dollars can generate 70,000, 80,000, even a 100
thousand dollars a year of tax-free income and it doesn't matter if the economy tanks. Many
people in 2008 that owned laser funds were almost cheering, "Go! Go!" because they weren't losing a dim.
The first 90 days of 2009 many of them locked in gains of 16% after not losing a penny.
Would you like to be empowered with that vehicle? Go to laserfund.com, click on the link below, pay a
nominal amount towards the shipping and handling and I'll cover the rest of that cost and I'll pay
for the book and there's options there to listen and learn and watch and learn more so you can
avoid the number 1 mistake having your money invested in the market subject to that volatility.