EP222: The 401(k) Scam

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Imagine this: You’re months away from kicking back into retirement. You log into your 401k, expecting to see a fat stack of cash waiting for you. But what’s this?

The numbers don’t add up.  🤯🤯

Your nest egg isn’t looking too comfy.

It’s more like a nest pebble. 

Sounds like a nightmare, right?

Well, today, we’re tearing the lid off this bad boy.

Welcome to ‘The 401K Scam’ – the raw, unfiltered truth about your 401k. 

We’re diving deep into the hidden cracks and crevices of your retirement plan. Why? Because what you don’t know about your 401k can definitely hurt you. And we’re not just here to scare you; we’re here to arm you. 

By the end of this epsiodes, you’ll be ready to take the reins of your financial destiny like a boss. ✨

This isn’t just another talk. This could be a game-changer for your future. So, buckle up, and let’s get this show on the road.

The Illusion of Security

Let’s talk about the safety of your 401(k) plan.

I (Palmy here 👋) had an adventurous experience during my first solo bungee jump in New Zealand. 🥝

Our guide, Ricky Martin, not the 🎼 “She Bang, She Bang” superstar, took us to a famous bungee spot, and I was the only one brave (or crazy) enough to jump.

As I was getting prepared for the jump, I couldn’t help but wonder about the safety gear.

You’ve heard bungee horror stories before, right? Well, my ‘safety’ gear was just a simple blue towel wrapped around my ankles, and the bungee cord was looped through something on my ankles.

I had to put my trust and safety in that basic setup. Looking back, it was a leap of faith, quite literally. I may have been a bit too trusting of these strangers. Thankfully, the jump went smoothly, and I even gained a few inches in height!

But here’s the thing: just because my bungee cord didn’t snap doesn’t mean your 401(k) is equally secure.

Let’s delve into that topic, shall we?

Now, let’s cut right to the chase and break down this 401k thing.

It’s like the holy grail of retirement planning, right? Everyone’s been preaching, ‘Pump cash into your 401k, and you’re golden.’

But wait, let’s actually crunch some numbers here. 🤓🤓

You ready for a cold splash of reality?

According to Nerdwall, the average 401k? It’s sitting, not so pretty at a measly $70,000 to $90,000 by the time you hit retirement.

That’s all, folks. Think about it. Is that tiny pot of gold going to fund your dream retirement?

Not likely.

Adding insult to injury, the 401k was never meant to be your retirement knight in shining armor.

Relying on it as if it’s your financial savior? Big mistake. It’s like putting all your eggs in one wobbly basket. 😣😣

People need to wake up, smell the coffee, and realize there’s a whole world beyond the 401k to beef up their retirement stash.

We’re talking diversification, exploring new horizons.

Don’t just play the game; change the game.

It’s time to get savvy about where you’re stashing your retirement cash.

The Fees will Eat Your Alive

Palm and I, we grew up with an older brother.  One who had an appetite for a pack of wolves 🐺. 

Whenever we order out, what we notice is the moment my mom drops the pizza 🍕 down on the kitchen counter, bam 💥, it’s all gone.  

That’s the way a lot of 401(k) investors feel about the fees these fund managers are taking.

Listen up, when we’re talking about stashing away cash for your golden years, every single buck is a player in the game.

But here’s where a lot of folks drop the ball – they totally 💤 sleep on how killer fees can chew through their retirement stash like a hungry bear or brother. 

We’re not just talking nickels and dimes; these fees can take a monster bite out of your savings. 

👉 Let’s break it down: Investment fees are sneaky critters – expense ratios, sales loads, transaction fees, advisor fees – they come at you from all angles.

Sure, some fees are just part of the deal, like paying for the guy who’s managing your investments.

But when these fees get greedy, that’s when they start gobbling up your returns.

Over your lifetime, these sneaky fees can vacuum up an insane amount of your cash.

We’re talking about a median-income, two-earner family potentially losing nearly $155,000 to fees.

That’s like a third of their investment returns just evaporating into thin air.

And why are these fees so beefy? 

And guess what, the fund managers get their cut when your account is doing well, when it’s meh, and when you lose.  🥵🥵

So what it really means is when you win, they win, when you lose, they still win.

The Risks of Market Volatility 

The Dallas Police Department’s pension fund, as detailed in “Who Stole My Pension?” by Robert Kiyosaki, is a stark example of pension fund mismanagement. 

The fund engaged in high-risk investments, including luxury real estate 🏘️, diverging significantly from traditional, conservative pension strategies.

This approach lacked transparency and proper oversight, leaving the fund’s beneficiaries, mainly police officers and firefighters, unaware of the risks involved with their retirement savings.

The 2008 financial crisis further exposed the fund’s unsustainable investment strategy, leading to significant losses.

The fund’s management had promised robust returns and benefits to its members, promises that became increasingly unrealistic as the financial health of the fund deteriorated. 

Ultimately, this mismanagement led to substantial reductions in retirement benefits for the retirees, causing financial hardship and uncertainty.

Stories like the Dallas Police dept’s pension fund remind us of the sad tales of those who witnessed their 401(k) evaporate before their very eyes.

Those approaching retirement or already retired were hit hard, with no real chance to bounce back. In the stock market, there’s a saying: you ride the elevator down but take the escalator up. 

Sure, the market eventually recovered, but not in time for these people.  🙁🙁

They needed it to bounce back sooner to enjoy their retirement years comfortably.

Instead, the reality was harsh. They found themselves clocking back into work, taking jobs as Walmart greeters, and returning to retail – a bitter pill to swallow.

It’s like life gave them a raw deal: they followed the rules, and saved diligently, and yet, they still ended up on the losing side.

2008 wasn’t just a crash; it was a sledgehammer to everyone’s 401k dreams. T

hat year showed us in no uncertain terms how a market nosedive can turn your 401k into confetti. 

But hey, it’s not all doom and gloom. 😬😬

There’s a game-changer on the scene: real estate investing through self-directed IRAs.

We’re talking about rock-solid stability.

This isn’t just about snagging a piece of property; it’s about crafting a steady cash flow and building wealth that lasts.

Real estate? It’s a whole different beast compared to stocks.

It’s something tangible, something you can actually touch. 😆😆

It’s not just about raking in rent; it’s about an asset that grows in value.

And here’s the clincher: real estate doesn’t dance to the crazy tune of the stock market. It’s a more reliable, steady player for your retirement playbook.

So what’s the real deal here? 

Remember, knowledge isn’t just power – it’s your financial body armor. 

➡️ Ultimately, the choice is yours, to 401k or to not 401k.

Now that you understand the scam that is the 401k, tune into this episode, so you can learn how to become uber-rich in real estate without using your own money.

 

In 2023, the 🏢 multifamily housing market experienced a significant decline of over 40% in new construction starts, as reported by RealPage.

This drop was influenced by several factors, including increased borrowing costs, declining property values, high construction expenses, and lower rental rates and occupancy levels.

​​Looking ahead to 2024, the overall outlook is not very optimistic, with many developers anticipating more decreases in new construction projects.

While there may be a surge in the number of completed projects this year, it is expected that there will be a substantial decline in construction activity by late 2025. This decrease will have consequences for both investors and policymakers.

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