Unpredictability: The Wealth Killer Hidden In Your Retirement Plan

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One-quarter of US adults don’t think they will ever save enough to retire comfortably, a new YouGov poll finds. Financial security expert and New York Times best-selling author Pamela Yellen discusses how to boost retirement security in uncertain times.

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The Value Of Your Retirement Account

Most people do not know what the value of their retirement account(s) will be on the day they plan to tap into them. Because most retirement plans such as 401(k) and IRAs are tied to the stock market, they are subject to market volatility, including the possibility of crashing stock values that can wipe out a huge portion of Americans' savings as they near retirement.

Americans have faced two market crashes that have wiped out 50% or more of their savings twice — just since the year 2000. Market volatility has proven to be a cause of health problems, and even relatively small stock declines are linked to early death. Yet many people are unaware their retirement savings are invested in funds with a track record of failure.

"If you have a 401(k), it's very possible that your money is in a Target Date Fund (TDF) — even if you didn't authorize or request it," Pamela notes. "In fact, the latest available data shows that more than half of all 401(k) accounts had fully 100% of their assets in TDFs. That's because most employers choose TDFs as the 'default' investment — the one they automatically choose for you unless you specifically opt-out of it."

Target Date Funds are mutual funds that, in theory, shift from higher-risk to lower-risk investments as participants approach their retirement date. Yet, in practice, they have been a disaster, Pamela notes. In the Great Recession, investors in the largest TDF lost as much as 31% of their money, even though the Dow Jones Industrial Average lost only 1.6% during the same period. Some TDFs designed for participants planning to retire in just two years lost considerable value — over 40% in one case, according to a report from the Government Accountability Office.

"Can you imagine being just months from retirement, only to see your nest egg take a 40% hit," Pamela asks.

These are just a few of the problems with government-controlled retirement plans that Pamela can share with your audience. (Check out her interview with the Wall Street Journal about the dangers of letting your employer decide where to invest your 401(k) funds.)

As a financial investigator, Pamela researched more than 450 financial strategies seeking an alternative to the risk and volatility of stocks and other investments. This investigation led her to a time-tested, predictable method of growing wealth now used by millions of Americans. She calls this wealth-building strategy Bank On Yourself. It uses high cash value, low-commission, dividend-paying whole life insurance. Advantages of this method include:

  • Predictability: Growth on these plans is locked in with no losses when markets crash.
  • Guaranteed Growth: This strategy guarantees wealth grows each year and allows savers to know the guaranteed minimum value of their savings at any point in time.
  • Liquidity and Control: Unlike a 401(k) or IRA, people can access their savings whenever they want without early withdrawal fees and penalties.
  • Protection From Higher Taxes: Funds grow tax-deferred, and withdrawals are tax-free, which protects savers from the coming tax tsunami.

About the Author

Pamela Yellen is founder of Bank On Yourself, a financial investigator and the author of two New York Times best-selling books. Readers can get a free copy of her latest book, "Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans — and How to Avoid Them" here for a limited time. Pamela investigated more than 450 financial strategies seeking an alternative to the risk and volatility of stocks and other investments, which led her to a time-tested, predictable method of growing wealth now used by millions of Americans. Visit BankOnYourself.com.