In America, we are herded into building retirement savings through 401K contributions and considering our homes to be investments. There are others, but this is the model for most working people. The question is, “Who does this really benefit? Who makes money off this model and who takes all the risks?”
Older Boomers like myself bought into this guiding wisdom. We worked hard and steadily contributed to our 401Ks while building home equity. It all smelled like roses until 2008. Then we had a rude awakening. Our retirement plans went up in flames as the stock market crashed and home equities evaporated. On top of that, many Boomers just a few years from retirement lost their jobs as businesses went belly up. Those were exciting times.
Seems the route to retirement preached by the financial industry had some flaws.Their risky behavior drove the world economy off a cliff. But they didn’t suffer, not really. They were “too big to fail,” so we (you and I) bailed them out. Traders still got their annual bonuses because the financial industry needed their expertise to stay in business. In fact, the only people who got screwed were…wait for it…that’s right, fellow Boomers – you and me. Who knew we were taking ALL the risk?!
No major banking or trading figures went to jail. Despite the fact that every major bank (e.g. Chase and Wells Fargo) and securities firm has been repeatedly fined for wrong-doing. Congress then implemented tighter controls in the form of the Dodd-Frank Act. But the financial industry quickly responded by sending an army of lobbyists to foil these efforts. And since the 2016 election, Congress is tripping over itself to kill these restraints altogether because “they tie the hands of the banking industry, preventing them from conducting more business.” Guess who is going to be carrying all the risk again?
The bottom line for Baby Boomers is that there is no safe route to building a retirement nest egg. We are just along for the ride in the stock market. It is manipulated by wealthy investors and huge financial organizations which have their own – not your – interest at heart. They are not working for your benefit. If your money is in stocks, mutual funds, hedge funds, etc., there is no guarantee that the what you saved and built during your entire work career will still be there when you need it.
The best advice us older Boomers can give to our “younger brethren” is to personally take charge of your investment strategy and diversify, diversify. Think “safe” rather than “risky” investments, and we include any investment in the stock market today as risky. Do not blindly follow strategies recommended by financial planners or your employer’s 401K managers. They are using your savings to make money for themselves. Only you lose if they are wrong. There are no reimbursements.
Ditto for home equity. It is not a real asset until a property is sold and the proceeds are in an FDIC-insured account. If your home is paid off, great! Judiciously use the equity as a cushion, possibly via a reverse mortgage or home line of credit, should funds be urgently needed. But be careful – you are betting the roof over your head that the economy will not go into free-fall again, leaving a lien on your property while remaining loan funds get frozen.
Fellow Boomers, do not be like we were, blindly following the retirement savings path preached by employers, the government and the financial industry. Else you just may get a surprise one day. Educate yourself, then step up and take an active role in managing your nest egg according to your own risk profile, not Wall Street’s!