My Loans Consolidated

Today I bumped into an article referring to another article written back in October 2009 in Time Magazine. Time Magazine at the time ran this headline, “Why It’s Time to Retire the 401(k).” Robert Kiyosaki, the writer of the article that I stumbled on this morning referred to the headline and called the 401(k) the biggest scam ever.

According to him, very soon the first of 75 million baby boomers are going to retire and when this happens it will lead to the biggest stock market crash in history. If you are from the baby boomers generation and do have a 401(k), my concern is for you.

Even though Time Magazine pointed out apparent problems with the 401(k), the celebrities of financial media continue to promote it, disregarding whatever problem there apparently is. One example that the writer showed was the article by Jean Chatzky, the “darling of financial media”, which talked about using low-interest savings to pay off high-interest credit cards. In the article, she stated, “There is no better guaranteed return on your money (except, perhaps, a 401(k) match).”

Time Magazine countered Jean Chatzky’s wisdom and stated in its article,

At the end of 1998, the average 401(k) balance was $47,004. By the end of 2008, the average balance was down to $45,519.

Time Magazine continues pointing out $100 in 1998 was worth only $73 in 2008 because of the inflation. This is a loss of $27 after ten years. To make things worse, in the article, Time made two more troubling statement. First was that the older you are the riskier a 401(k) gets. The second statement was that 44% of all Americans are in danger of going broke in their retirement years. This means when 75 million baby-boomers in America are preparing to retire, will go bankrupt once they stop working.

Some people may not believe that 401(k) is a risky investment because they see that stock market has gone back up now. However, I found another recent article by Kiyosaki shows that what is happening with the stock market is what he called a dead cat bounce. A dead cat bounce is when the market crashes, rebounds, runs out of steam and then crashes again but this time to a much more lower low. And this is exactly what is happening now. Kiyosaki predicts that the Down will crash again this year, despite the fact that it has gone up, to 5,000.

You may see that the stock has gone up again but one should not ignore the fact that the fundamentals of the US government is not getting any better, in fact it is getting worse. Not to mention that the national debt of the US is deadly. The interest payments on US national debt was $380 billion in 2009. By 2012, the debt is projected to climb another $20 trillion. It means that the US will not even have any money to pay the interest alone. It will have to borrow some more money to be able to pay.

All this leads to the ultimate reason why Kiyosaki believes that 401(k) is the biggest scam ever, it is one of the cash heist that the rich use to become even richer. People with retirement plans eventually will be robbed off their wealth using 401(k). There are 4 expenses that keep the poor and the middle class poor and the rich even richer. These expenses are:

1. Taxes — both apparent and hidden
2. Debt — mortgages, credit cards, and student loans.
3. Inflation — rising food and fuel costs
4. Retirement plans — 401(k) and savings

As Time Magazine already explained the problem of 401(k), the 401(k) is likely only a cash heist the the rich use to get into your pockets and drain you off your wealth. And that is the biggest scam of all.

Read the whole article by Robert Kiyosaki here.

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