Dishonesty in Retirement Planning
Retirement Plans Can Have a Dark Side
The traditional retirement plans products often have a dark side. The tax laws are great, but many of the investment products just stink! The entire concept of retirement has been incredibly over marked to most hard working Americans. People should write down everything they have been told about retirement and then burn the paper. The emotional marketers have done irreversible damage. What has been sold to the American people is so far from the truth! Read these facts and see if they make sense to you!
The current plans are limited to a philosophy of buy and sell. When I talk to the retirement plan specialists that sponsor our plan, I hear the same old line of bull. They preach about investing in a diversified portfolio of mutual funds that have been pre-selected for our plan. The advisor speaks about buying the funds that he and the “real money-men” of the firm are sure will go up in value. He never comments on creating any dividend income. The expenses of the funds are not discusses in detail relative to other products available in the market. When I ask what the funds actually own, I get a standard response about the industry leaders in each area. And of course, he always comments about how their strategy will beat the S and P 500 index. They want me to buy a bunch of shares over time and sell about 4% a year when I am old and retired...Same old load of Bunk! Make a pile of their expensive shares and then deplete the pile to live just above poverty in paradise. Of course, while they collect fees that are too high for too many years.
The funds offered are limited, have high expenses, or double expenses if they are targeted retirement year funds. The retirement industry makes a living buy putting a target on your retirement investments. They have their highly educated staff ask the question, “How can we target this money being set aside for individual retirement so we make a big profit?” When a company makes a deal with an investment company to offer a retirement plan, they select a basket of funds that will be offered. The selected funds offer some variety, but will rarely be the “best in the industry” investment products. It is likely that even the computer algorithm managed index funds could have expense rates equal to managed funds. There is so much corruption at this level that it just makes me sick. Most often, the funds offered are going to benefit the retirement company and their internal salesman more than the investor or employee. They are really just using smoke and mirrors to get you to purchase loaded mutual funds with high up front fees or high yearly expenses. The game is to get you to focus on the current tax savings and some paradise type of living which may happen well into the future.
The Funds sold are not what is in your best interest. I love to tell this story. I was employed by a fortune top 100 company for several years. The company had a contract with a major insurance and retirement plan company. I obtained internet access to the company retirement plan website so I could track my personal retirement. The front page had a disclosure banner. I clicked on it and opened the banner. A document popped up that stated very clearly, investment advisors may not always act in the best interest of the client. The advisors may advise clients to invest in certain company funds that lead to rewards such as cruises for the most shares sold. I printed the discloser and hung it on the wall in one of the company men’s restrooms. I was quickly disciplined for inciting disruptive behavior. I laughed at the human resources executive whom politely and politically correctly threatened me with my job security. I held my ground and laughed. I stated clearly that they were upset because I printed the retirement company disclosure documents and posted them. I was bold and suggested they should be fired for aiding in raping our hard working employees. The confrontational meeting ended in a stale mate as there was nothing they could really legally do to me. One year later, we had a new firm managing our company retirement plan and lots of people who worked in the human resources department were no longer employed. I know other people also saw the writing on the wall, but they did not have the guts to bring it to the attention of senior management.
Normal people do not have access to the real money experts. One of my neighbors in our neighborhood of million dollar houses is an investing professional with a large brokerage house. We had a few glasses of wine a week ago and I got him talking. He was talking about how painful it was to have to work with clients such as NFL football players that are just so financially stupid. In the same conversation, he confirmed what I thought to be true. The real money men and teams that manage wealth are focused on clients whom have 5 million or more to invest with the firm. The people that invest with less are assigned to investment counselors that are trained by the firm to move clients into specific company investment products. These trained investment advisers are not allowed to think as they are instructed to sell the company products. If you want access to the real money management teams, then you have to have about 5 million in capital to invest. The advice is not the same. This is just the truth; deal with it!
We are not learning from the true science and research. Retirement investment firms are just not honest with their clients. Over and over, studies have shown that individuals and teams managing money do not outperform the S and P 500 index funds. The managed funds will always have higher fees. Investing mostly in S and P 500 funds will yield the same or higher returns with lower expenses over long periods of time. This is the absolute mathematical truth. If the industry admits this research proven fact, they make themselves mostly irrelevant. Yet there are thousands of mutual funds... Stop falling for their emotional marketing sales pitch, and put most of your money into low cost and low fee S and P 500 index funds. Long term, you just cannot go wrong investing in American Business.
Nobody is really focusing on income. This is the predominant fact that I do not understand. Many well researched income funds now pays 10-20% annually with dividends monthly. Many of these income funds even publish their dividend rates three months in advance and track the S and P 500 index. Investing in quality funds that pay consistent highly monthly income is not a bad thing. It is also not a more risky plan than buying the other funds investment advisors try to sell to clients. The dividends can be used to purchase more S and P 500 funds or used for living expenses. Ignoring these funds is just ridiculous. Income funds should be a part of any realistic plan for retirement. I do not mind paying a higher annual expense when I get an annual return like 20% paid monthly. These funds also do not deplete the principle or number of shares owned. With these funds, an individual can build a pile of shares and have no intension of ever selling. Thus, creating wealth that has the potential to last generations.
In summary, the retirement industry has over promised and over marketed the american people. Most Americans have unrealistic expectations as to what our lifestyle, income, and overall wealth will be during our years of retirement. The truth is we need to build assets each year as well as income. We need income that comes from funds we do not have to sell to generate liquid capital. In the future, the retirement companies that figures this out first will become the next financial power players. The only way to overcome this aggressive misinformation campaign is with personal education. More government regulation cannot solve this problem. People need to wake up and take control of their own financial lives.