Is Your Retirement Plan Safe?
By: Chemain Evans | Posted: 07th February 2007
Once upon a time there was a man named Joe who decided he
wanted to be a fisherman. He went out looking for work and
found a job on a fishing boat. Joe was very dedicated and
hardworking. He planned on working on the boat the entire day.
After all, the boss had promised extra incentive for those who
would. During the middle of the day his boss came to him and
said, "Joe, you're a terrific employee. I can provide you food and
shelter while you're on the boat, but I'm not going to be able to
pay you that extra incentive at the end of the day. However,
here's a net. Throw it out there and hope for the best."
So Joe found a good spot to the side of the fishing boat and
threw out his net. Lucky for him, he put out his net in a place full
of all kinds of fish. Periodically he would look over the edge at
the net and was pleased that the amount of fish was growing.
Finally it was time for the boat to return to shore. Joe started to
draw in his net when he noticed something-all of the fish were
slipping out into the water! How could this have happened?
Everything seemed to be going so well. But upon closer
inspection, Joe realized his net had a very large hole in it. Joe
had not thought to check it before he threw it out, because Joe
really didn't know that much about fishing. Now Joe had to go
home, empty-handed and hungry. As far-fetched as this little
parable may sound, it's not too far from the truth when it comes
to retirement, at least according to several key people in the
finance industry. You see, we are no longer in the age of
pensions. We don't receive a monthly paycheck at the end of
our working years (that extra incentive that was promised Joe).
We live in the age of Employee-Funded Retirement Plans, also
known as 401ks, IRAs, and Roth IRAs. We are expected to
provide for our own retirement (here's a net; hope for the best),
which would be fine if we had some idea of what we're doing.
But, alas, we don't, and most of us failed to check our net
before we threw it into the stock market.
Yes, the stock market. Investing in 401ks and IRAs is investing
in the stock market. Most people don't really know how to invest
in the stock market, but they think they're doing a pretty good
job of "fishing", as Robert T. Kiyosaki, author of the Rich Dad,
Poor Dad series of books, explains in his book Prophecy: Why
the Biggest Stock Market Crash in History Is Still Coming¡and
How You Can Prepare Yourself and Profit from It!. The problem,
as he and other financial leaders see it, is that the stock market
growth is being propelled by the numerous, albeit investment-
ignorant, Baby Boomers, all desperately investing in order to
"save something for retirement." The law that allows this, the
Employee Retirement Income Security Act (ERISA), is, at least for
now, fatally flawed-and here is where the hole in the net comes
into play. ERISA forces people to start withdrawing money when
they reach 70 ? years of age. The first of the baby boomers
reach this point in the not-too-distant year 2016.
That's a pretty big hole in the net, because we all know that
there are more baby boomers working than there are workers
to replace them. So what happens when there are more people
who are being forced to sell their stocks and convert it into cash
to live on than there are people to buy that stock? The price of
stocks declines (the old economic law of supply vs. demand).
People start noticing that their portfolios are dropping in value,
rather rapidly. People get nervous. People sell. Stock values
decline further. The cycle continues until you have a full-blown
stock market crash. Sorry-despite what you've heard,
diversifying will not save you. No sector will be safe. Everything
you've worked so hard to "save" in the stock market could
easily be wiped out in a very short period of time, as many
people learned in the stock market crash of 2000.
There are other factors that Mr. Kiyosaki discusses in his book
that could hasten this crash, but they will not be discussed
here. The simple fact is, most of us have no idea what we're
doing when it comes to "investing" in the stock market. In fact,
it's pretty safe to say that we're not "investing"; we're trying to
use the stock market as a savings vehicle, something it was not
designed to do. At the first sign of major trouble, most of us will
turn tail and run, trying to "get out "while we can.
However, all is not lost, but you must take the power back into
your own hands. If you are truly interested in protecting
yourself from this coming crash, you need to get educated about
investing, not saving. You need a way to have residual income,
regardless of what the stock market does. Check out some of
the Resources links on this website to find books and other
resources to help you become informed. After all, your future is
at stake, and you don't want to go home at the end of the day
hungry and empty-handed.
Chemain Evans is a quality control specialist for Simple Joe, Inc. Income & Expenses PC software is a Simple Joe product that is a quick and simple way to keep track of your expenses and stay within your budget. Learn more at http://www.simplejoe.com
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Tags: truth, job, retirement, fishing boat, boss, fisherman, paycheck, pensions, parable, roth iras, finance industry, large hole, kinds of fish