Breaking down the numbers behind why GenXers are STRESSED!!!! And if you aren’t worried about your finances and future retirement yet, you better listen even more carefully!
Did you know only 22% of GenXers feel confident in their savings? In this episode, I’m gonna tell you about how to move past all the crap that big financial institutions sell you on that trick you into living off pennies in your retirement. AND what the heck you can do instead!
There is really no need for you to spend hours of your life researching the stock market, talking to financial advisors, and stressing about where to put your money.
Why? Because you can access LOADS of free information through our website, social media channels, and podcast.
PLUS, you can start out even stronger by talking to someone on our awesome team (if you wanna take things to the next level)- take our calculator to see if you qualify as one of our clients this month.
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TRANSCRIPTS
Speaker 1 (00:00):
There’s not enough return and not enough safety in the mutual fund game to really make it worthwhile. Unless you are like you want to have some sort of hope of a future and not figure this out till when it’s too late, your best option, your best alternative is to,
(00:32)
Hello, my fellow Ripples. This is Chris Miles, your cashflow expert in an financial advisor. This show us for those of you that worked so hard for your money and you’re now ready for your money to start working harder for you today. You want to be work option where you work because you want to, not because you have to, where you have the ability to do what you love with those of you love, and not just get rich, but live a rich life where you’re able to bless the lives of those around you financially as you are blessed as well, and not just financially, but you bless the lives in so many greater ways. That’s what it means to be a riper. Thank you for tuning in today because the purpose of this show is ultimately we are here to try to create at least 1000 financially independent families.
(01:10)
Buy the year 2030. If that’s one of you, could be one of you. Go to our website, money ripples.com, try our passive income calculator out today and see if that could actually be something possible in your future. So check that out now. Okay guys, so here’s the deal. I’m Gen X born in 77, so I’m on the more tail end of Gen Xers, but I’ve been reading some articles recently that are pretty interesting. Let me give you an example of some of these articles from the street.com. For example. There’s one from the street.com that talks about the BlackRock, CEO, Larry Fink. He says, it’s actually a bit crazy that BB boomers retire at 65. His advice retire later, save longer, work longer, and then retire. So even BlackRock, CEO is saying, Hey, you know what? You should push that data out. Kind of reminds me of some financial advisor that say that when you finally get to that age and they say, oh, you just didn’t save enough, you should do it again.
(02:02)
So there’s him. There’s even this one too. This one right here talks about the retirement 401k strategies and all that kind of stuff, but there’s concerns that these strategies are actually successful. This one was actually also from the street and just going into how so many people, especially Gen Xers are actually concerned. In fact they say only 22% are confident that they won’t outlive their savings. So 22% of my generation are scared, right? They’re scared that they will not be able to retire based on this amount of savings they have, and here’s why. Let me show you. So let’s take an example of someone here that’s saving their 4 0 1 Ks, right? And let’s say this is a Gen X or you have a hundred thousand invest that’s actually already in your 401k plan. I know a lot of you have more, some of you have less, some of you have nothing.
(02:51)
I get it. I was just trying to use an easy number here. But let’s just say that you are now you’re saying I’ve got 20 more years. Maybe you’re in your mid forties. You want to get there kind of like I am, right? You want to be in your mid forties and have a better life 20 years from now. So you say, alright, I’m going to start contributing my 20,000 or so max a year. I’ll get my match from the company. So I’m basically adding 25,000 a year, including some of that free money. You’re packet it away and when do you get at the end just under 1.3 million in 20 years, right? It doesn’t look as impressive as what some of the other people will show you when they show you 40 years, right? Because all that compounding interest and stuff. But here’s the problem that’s bad is I show that for 20 years I show that as 6% return.
(03:32)
The reason I did that is because most of them, especially Fidelity funds, if you guys have heard me do other podcasts on the real returns of mutual funds, fidelity funds, those target date retirement funds that most millennials are picking right now, those are actually doing over two to 3% less than the actual market average. So if the market’s been averaging about 8.4% for the last 30 years, well even 2.75% less, right? We’ll use that number right there. Here’s the problem guys. You do that, you’ve got like five point a half percent return, so I put it up to 6% just to round up and be nice. Even if you put it at 7%, you’ll notice it’ll be a little bit better, but look still at 7%, 1.48, 3 million, almost one and a half million. Here’s the problem. If you happen to have a 5% inflation rate, which is lower than the real true inflation rates that have been out there, see shadow stats.com for what that means.
(04:23)
You’ll see the buying power is more like 550,000. Well, even so let’s just take that for math because many people, listen, Dave Ramsey say you can live on 8%, but they’ve already debunked that saying no. Almost in every scenario you’d run out of money living on 8% within a matter of years, not even 30 years. You wouldn’t even make it 30 years. And so if you go with the real rule that’s today, it’s 3%, that means 3% of that 550,000, I’ll even run up to 600,000 just to make it nice. That’s still less than 18,000 a year that you then have to pay taxes on 18,000 a year of today’s lifestyle money you saved 25,000, let’s just say 20,000 because you got the employer match too. If you’re working as employer, by the way, if you’re a business owner matching your own money, that’s even worse because then you get no real advantage.
(05:14)
You’re just delaying your taxes till another day when you might be in a higher tax bracket because right now with as a business owner, you’re probably in the best tax bracket you’re ever going to be in your entire life with your active business. So why would you delay it till someday when your tax rate could be much higher? So even if you’re putting away 20,000 years to live on less than 18,000 a year, you’re thinking that was ridiculous and that was at a 7% return. Guys, I think that’s pretty generous for most mutual funds. Now, someone might say, well, I have the s and p index. Okay, great. Well then maybe you’re saving 20,000 of your money instead because you don’t get the match. You’re just investing in the s and p index yourself, and maybe you actually get eight point, I’ll say two 5%, that’s still very high.
(05:52)
Watch 1.506. You’re basically the same number. So I don’t care if you’re saying, oh, I’m investing in the SP index or not, or you’re doing a 401k with a match, it’s all about the same guys. It really isn’t much different when it comes to that. So my point is this is that no wonder people are freaking out and the older you get, the more people freak out and they’ve already seen these stats. The closer you get to retirement, the more you’re less confident that you’ll be there. Now, those that are already in retirement have a little bit more confidence, some clarity, they know exactly where they stand, whether it was enough or not, but the vast majority of Americans are not saving enough with the vehicles they’re using specifically when you’re trying to use mutual funds and 4 0 1 Ks. This is the big difference between what a financial advisor will have you do versus what we talk about and teach you to do here, right?
(06:39)
We’re not telling you to just set it and forget it, throw in these mutual funds and then hopefully the market happens to go up. I was having a conversation, I was having lunch with a friend of mine. Guy has made millions in his business. He’s only 28 years old, very successful in his own and very much a saver. I mean, this guy has literally saved over a million dollars and he is doing it all in his s and p 500 index stocks. Now remember, he’s 28, I’m almost 47. I’ve almost, I’ve almost got 20 years on this guy. And so in fact, the funny thing is actually, if I think about it, I’ve been in the financial industry since he was previous in first grade, so I’ve seen a lot of things. I’ve seen history, I’ve seen what happens in the markets, and he starts telling me, he’s like, yeah, well, the SP 500 does over 12% a year, so it’s awesome.
(07:27)
It’s great. And I said, it’s interesting because in a mastermind with me with a bunch of real estate investors, you’ve seen where the money goes, you’ve seen where people created wealth, yet you throw your money into stocks and mutual funds. Yeah, that’s the place to be. You just keep packing that money away and you live on 4%. I said, well, first, did you know the 4% rule got debunked a long time ago because 4% rule was created in 1976, and it wasn’t a rule, it was just a calculation based on 50 years of data that ended in 1976, which is right after they took us off the gold standard and inflation got worse after that point. So inflation’s worse and people live longer. 4% rule is not going to work anymore. 3% if you’re trying to do it at retirement age or a 2% rule if you’re trying to retire young like he is, he’s like, really?
(08:16)
I got to save now double. I said, yeah, well, I mean the other people tell me this. I’m like, it doesn’t matter that other people say they’re idiots. Okay? They got their own theories. I’ve got real life experience and historicals to back me up. And of course he doesn’t care about that because he just wants to feel that he’s done enough and that there’s no doubt he has been an awesome saver, and I even gave him that credit. I was like, dude, you’re an awesome saver and you could keep investing the way you are, but the truth is you’re making all of your money in your business. That’s where you’re making your money. You’re just packing the extra money away in your s and p 500 index. But here’s the problem. You’ve only been investing in this index since it’s been going up. You’ve only seen one down year the entire time you’ve been an adult, and let’s be honest, the last 15 years since you were barely a freaking pimply teenager the last 15 years, there’s only been that one down year.
(09:09)
Everything else has been up. So in your mind, the stock market just keeps going up because the long term, it always goes up. Yeah, it does. But what if all of a sudden you hit retirement and it goes down at that point, do you now delay and keep working harder? It’s like, well, yeah, I see your point, but I mean still the return has been awesome. I say, by the way, you know what? The real long-term return is? No 8.4% for the last 30 years, and that’s with us hitting market highs in the last 15 years being almost all up, right? That’s pretty significant. That’s one of the highest averages I’ve seen since I’ve tracked it over many, many years. I’ve been tracking it at least every few months, if not every month I’ve been tracking that number. So if you’re seeing 8.4% average over 30 years, but you think you’re getting 12, you got another thing coming.
(09:54)
And so that’s why I showed you guys those numbers. This is why people are retiring worse, and so for you, those of you that are like Gen Xers like myself, you get this because you didn’t just grow up with the markets always booming and real estate booming and stocks booming, and everything’s just everything booming for the last 10 years. Some of these younger millennials are seeing if you’re an older millennial or you’re an Xer, and definitely if you’re a baby boomer, you’ve seen what happens. In fact, if you’re a younger Xer or an older millennial, you got screwed the most because you had to deal with the 2008 recession when you were going out in the workplace. That wasn’t awesome. You could have an MBA and the fact, I’ve had friends that had MBAs and couldn’t get jobs. They had a hard time getting jobs because people weren’t hiring, and there’s so many people with MBAs, it was like a dime a dozen.
(10:39)
So you have all this stuff happening. You’ve seen what happens there. You’ve seen that markets could go down. Us as Xers, we saw Y 2K, we saw what happened when the market tanked right around the time of nine 11, and with all the lying going on in the financial industry, in fact, that’s the big thing. Nine 11 caused the market to go up. People actually started rally and the market came up. It wasn’t until 2002 when they realized that companies like Arthur Anderson were helping people cook their books and they were lying about their profits, and so nobody felt confident, and the market dropped 23% in 2002. I know I was there. That was my introduction as a financial advisor. So you don’t want to be caught in those things. And then we saw the 2008 crash. I mean, if you were somebody who invested in the year 2000, it took you till about 2015 to finally get your money back if you’d let it sit there and set it and forget it.
(11:28)
Okay, so I get it. Why 22% of Gen Xers think they’re actually going to be okay in retirement, and there could be some naivete in that too, right? There could be some ignorance just thinking you’re going to be okay, but you’re really not. That is the biggest cause of concern that I have. This is why we exist, because compounding interest in a place that has high risk mediocre returns is not a great place to be. This is why I look at real estate, because really you need double digit returns to make this work. Let me show you what I mean. So you’ve already heard me talk about having this million and a half maybe investing in the SP 500, but you already know if you’re going to have a decent amount of income and you’re going to get see 80 quarters pretty crazy. I’m going to leave it there, but look, if I even put 50,000 a year that you’re contributing notice it just goes up double 3 million, but still, that’s 1.1 million.
(12:18)
You live on 3%. This is the problem with the accumulation mindset. You’re thinking you can get there. Now you’re at 1.1 million, even I’ve raised that up to 1.2 million. Well, now you’re finally living on really in this case, about 35,000 a year, and then you pay taxes on it. That’s less than 3000 bucks a month. Okay? What if I saved a hundred grand a year, right? Great. Now I’m at five and a half million, but after inflation, 2.1, this is better. This is like a 63,000 a year income. Not great, but better, isn’t it? But notice that’s a hundred thousand a year to live on 60,000 a year. Now, unless you have, now, this is after 20 years. Of course, right now, if you had 500,000, you’re starting with because you’re a penny pension saver and you’re awesome, cool, this number goes up, couple million more, and now you’re at 2.8 million.
(13:06)
So now you’re living on about 80,000 or so a year, 85,000 a year better. You still have to pay tax on it, but that’s better. But notice that’s what’s required, and I have you paid a hundred thousand a year, saving a hundred thousand a year. You can’t even save that much in a 401k. It’s impossible. You can’t, it’s not allowed. They will not let you put that much money in. If I put it down, even if you’re a self-employed person closer to 50,000, right? With bonuses and all that kind of crap, cool. Now I’m right back down that 1.8 million, almost 1.9. So now I’m living on less than 60,000 a year after I put in 50,000 a year. See my problem? This is what I’ve seen every time, whether somebody’s investing in the market or even getting a 401k with a match, but the funds don’t perform as well, so the match just makes up for the bad performance.
(13:53)
What happens is that whatever you’re saving per year is the lifestyle you’ll live on per year. You save 10,000 a year, you’re live on 10,000 a year. You save 5,000 a year, you’re living on 5,000 a year. You could see where I’m going with this. This is ridiculous. This is why you need more, say the same person that does have a half million in this great example, and maybe they’re contributing 50,000, but let’s just bring it back down. I’m going to bring it back down to that 20,000 a year. A little bit more realistic for some of our typical clients that are putting money away. Now, remember, you’re at 1.3 million. That means you’re living on about 39,000 a year in the stock market, but what if you can earn now 10% returns and you’re reinvesting this for the next 20 years? Watch what happens. No, it’s not a lot more, is it 4.6 million?
(14:37)
But that’s not the point. It’s not about, remember I said at the beginning of the show, it’s about getting your money working harder for you so you don’t have to work so hard for the money. The problem is that with the traditional financial advisor approach with using mutual funds, so you don’t run out of money, you have to save a lot more, right? You have to live on less than the interest so that you don’t lose your money, especially if the markets go up or down. If you’re getting a consistent return, 10%. Again, results may vary. Nothing’s guaranteed. You can always lose your money even doing real estate investing, but 10% is a pretty conservative return for most investments. Our clients are doing right now, 10%. Okay? So right there, we don’t really worry as much, although we do a little bit, right? In fact, I will actually worry about this. I’ll go to the after inflation number, 1.7 million. Now, 1.7 million doesn’t seem great, but that’s 1.7 million. If you’re earning 10%, that’s 10% of income coming in, guess what? You’re living on 174,000 of lifestyle rather than about three times less, where you’re just saying, well, I can live on this a little over 50,000 a year. Cool, you have a half a million already saved up. We get a lot of people, they might have less. What if you had $300,000 and you can see how this is going?
(15:52)
1.2 million. If you were doing that in a mutual fund, if you had 10%, you wouldn’t, let’s put it back. I’m going to put it at eight. Again, look, 900, $900,000, that means you’ll living on 27,000 a year, but 10% and you’re reinvesting that money. Now you’re at 1.2 million of after inflation adjustment here. That’s 120,000 a year or $10,000 a month. If you’re in this situation, you’re saying, I got $300,000. I could actually move out of the market and do something with, and I’ve been saving about 20,000 a year. Maybe you’re saving more. Maybe you’ve done better, maybe a little less. If you were in this situation having 300,000 bucks, saving 20,000 a year, would you rather live on 27,000 a year or would you rather live on $10,000 a month or 120,000 a year? Kind of a no-brainer, right? And again, like I said, there’s no guarantees you could actually do better than this.
(16:39)
You could do a little worse. Heck, even if I brought this down to 8%, the same thing, but again, that 8% is paying you cashflow back to that 900,000, you’re still making 90,000 a year versus 27,000 a year. You’re making more because we’re not compounding interest like every financial advisor teaches you, we are compounding income, and that is true cashflow, passive income that you’re being paid. So even at 8% guys, which is actually a very conservative return for our clients, most are making the double digits. But if you’re only earning 8%, it’s way better. Way better because you can count on that income. Dave Ramsey thinks you could do that too, but he’s only doing that because he thinks that there’s no market downs apparently, and so you’ll never run out of money because you’ll make 12% average. It doesn’t matter if there’s downs because you’ll still make it compared to 8%.
(17:27)
Well, you don’t make 12% average in the stock market. Sorry, Dave. You’re a liar. Or just plain old, wrong and idiot ignorant, or two, you just want this to be true, right? That’s the problem. It just doesn’t happen. So if you’ve even got 8%, you still only live on the 3% of those total returns down the road. If you don’t want to run out of money, and if you want to retire early, then you better start pulling off less than that. Your income is going to be lower because you’re relying on mutual funds. This is why so many of our clients see mutual funds. They might keep a little bit in mutual funds, but for the most part, they’re saying, I can get this out and this money could work harder for me, at least three to four times harder, and I can actually earn income now versus waiting and praying and hoping for someday if I ever live that long, that someday I have finally this nest egg I can live on.
(18:17)
This is the problem that we’re trying to stop, is that it’s just not enough. There’s not enough return and not enough safety in the mutual fund game to really make it worthwhile. Unless you are the freaking super saver like my 28-year-old friend is, right? That guy, he could actually make it work, but even if he could make it work, why wouldn’t I want to have my money in real assets that are backed by real assets, not by some arbitrary numbers, and that money can also produce higher income. If I could make more income without doing anything more, why wouldn’t I do it? Does that make sense? That’s what we’re trying to solve today. This is why I’m the anti financial advisor because financial advisors aren’t teaching you this, and they’re telling you to put your money into these mutual funds and stocks and bonds and things like that.
(19:06)
Some of ’em tell you, don’t put any money in bonds and only put it in stocks. So gamble it all because the market just goes up all the time, doesn’t it? It doesn’t, right? This is what you have to be aware of. This is why so many people are worried, even us in Gen X, I know we’ve been saving. It’s not that we aren’t savers. There’s a good chunk of us that are savers, and we’re very independent people. You’re come on. We were the latchkey kids. We were the ones that were raised without parents. Half the time. We’re the ones that are told to go play until the light post came on. You go play, and even then, because the lamppost came on, you kind of played a little bit longer, didn’t you? I know you did, because I did too, right? You were out there doing that stuff.
(19:45)
We were left to our own devices. We are very independent people. We think we could do it our own. However, whenever we try to do it on our own, sometimes it backfires, and this is what we’re finding out right now. That’s why only about 20% even feel somewhat confident, and even then they’re probably not sure. The reality is, I would say very few percentage of people will actually get to a place where they say, I’m comfortable with retirement. Unless they start getting other assets, their financial advisor would not recommend because they would not make money off of you. Things like in the area of real estate, areas of business, if you’re a business owner, you can make more money there too. Yes, but again, where you take those profits from business, don’t gamble it away in some other company like some other stock like Apple, why would you take money out of your own company you control and can make better returns on than to gamble it away in somebody else’s company?
(20:33)
No, you don’t put in Apple. You buy real assets with it, and you want to buy real cash flowing assets. That’s the cool thing that can happen with your money, what’s been proven to work, okay? So that’s my advice to you guys. If you want to have some sort of hope of a future and not figure this out till when it’s too late, your best option, your best alternative is to do something different. Do something your financial advisor will not ever dare tell you because they will not make money. They’ll stop making their one or 2% fees off of you. When you pull your money out of there, they’re going to tell you, don’t do it. It’s risky, it’s gambling, but look what they’re having you do. They’re having you gamble and risk and something they have no control in anyways. They can’t do jack squat.
(21:12)
They make money. They’re the only ones that make money consistently. If you want to make a lot of money in the market, become a financial advisor and start taking other people’s money and making money off of them. That’s how you make money in the market. If you want to actually make real wealth, do it wealthy people have done, which is if you’re not just investing in a business, invest in real estate or other real assets, tangible assets that can produce great returns. That is the thing that’s been proven. If you have questions, reach out to us@moneyripples.com. Make it a wonderful process week, guys. See you later.
Speaker 2 (21:44):
Thank you. Yes. Hey,
Speaker 3 (21:52):
Visit us online@moneyripples.com for more resources to help you fix money leaks and get your money working harder for you. Now.