Is your retirement plan safe?

by Chemain Evans

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 ½ 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.

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