How to Turn the “Financial Independence” Odds in Your Favor | 377

How to Turn the "Financial Independence" Odds in Your Favor

Today on Financial Freedom Friday, Matt shares shocking news about 401ks and the reason why 95% of Americans aren’t prepared for retirement – or even headed in the direction of financial independence. Learn how to flip the equation so you can prepare for retirement and come out ahead of all your friends, even if they’re “high income” earners.

How to Turn the "Financial Independence" Odds in Your Favor

What You Will Learn About How to Turn the “Financial Independence” Odds in Your Favor:

  • The reasons why you might have an emotional attachment to your money
  • The shocking responses we got on one of our YouTube videos (and what we took away from it)
  • Why 95% of Americans’ financial plans are failing (including top incomers’)
  • How to take your emotions out of finances (and what you’ll gain from it)
  • How to figure out if your financial plan is working for you
  • Why 401k plans don’t work
  • How to flip the equation and spend money while you’re still young (instead of hoarding it into a retirement fund)
  • Why we’re partial to real estate investing (as opposed to other investing methods)

Recommended Resources:

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Matt Theriault: Hey, I’m Matt Theriault and welcome to Financial Freedom Friday.

Speaker 1: It’s time for Financial Freedom Friday with Matt Theriault.

Matt: You know, I was just thinking, when we meet here each and every Friday, we talk about finances, we talk about financial freedom, we talk about your financial future. When you talk about money, most people, they have an emotional attachment to it, and understandably so, because it’s money that really provides for everything that we care about. It provides for ourself, it provides for our family, and it allows us to do all those fun things, it pays the doctors’ bills, and it pays for the necessities and roof over our head, it pays for the food in our stomach. You know, if you go without some of that, you get pretty emotional, right?

But when it comes to making your financial decisions, when it comes to making your investment decisions, people have a hard time separating their emotion from those decisions, when really it’s just a basic binary math equation, it’s really black and white. So I was just cleaning up our YouTube channel, we’re making some edits over here and trying to make it look better and nicer, and I came across one of our videos I haven’t seen in a long time, it was kind of like Reminiscing Friday also, along with Financial Freedom Friday.

But I went through it and it’s one that’s, What They’re Not Telling You About Your 401(k). It’s probably received the most views out of any, it’s top three on all of the videos that we released for sure. But where it is the leader is the leader in the thumbs down thing, the negative comments. There’s some pretty scathing comments about me and what’s in this video, and they are obviously emotionally charged, sharing that, “What is this guy talking about? He doesn’t know what he’s talking about. He’s a total loony. He’s a scam artist. Where did he get his education? He doesn’t know anything. Don’t listen to him.” They say that over and over, “Don’t listen to this guy.”

All I’ve got to say to them, and I’ll say it to you as well, if your financial plan is working in the way that you want it to be working, then don’t listen to me. There’s nothing to learn from me if what you’ve got going on is going to get you to where you want to go, and you’re happy with that, then don’t listen to me. If it’s not broken, don’t try and fix it. But for most people, it’s not working, the vast majority. Per the Department of Health and Human Services, it’s failing 95% of our population. Yeah, this whole concept of retirement plan based on the investing strategy of work, work, work and then save, save, save, and put as much as you can in there, so by the time you reach the age of 65, hopefully, there’ll be a pile of money big enough to where it will spit off a residual income that’s going to allow you to live the rest of your golden years in luxury and happiness and comfort. Okay? But it’s failing for 95% of the people.

Those are the numbers I’m talking about. That’s not an emotional decision, however, it’s probably pretty emotional for those 65-year-olds once they reach that point and they realize what they were told their entire life didn’t work. That’s pretty emotional. But it doesn’t have to be that way if you take your emotions out of your financial decisions and you just do the math. Look at where you are right now, how much you’re investing, how you’re investing it, what vehicles you’re doing. Project that out until you reach the age of 65, and then if that’s going to work for you, great, if it’s not, it’s time to make some changes.

For most of you, for just most people, you don’t make enough money for that plan to work, you don’t have the discipline to put the money away every single month for that long of a period for it to work. Most of us, we don’t have a good fortune, at some point in our life we’re going to reach some sort of financial emergency. You know, the cause of most fortunes lost is a medical emergency. So we’re really hoping that luck is going to be on our side for that plan to work, and obviously, it’s not, the numbers say so, the stats say so.

If you look at, I pulled up just a few articles because I did I did my research before I even made this video, and nothing’s really changed since, and I just pulled up some articles right here. I didn’t go to your mom and pop’s blog post either, I didn’t go to the crazy conspiracy theorist guy either. I just went to regular conventional media sources. I don’t know, you might think those are conspiracies as well. But here, Huffington Post, Why Your 401(k) Is A Scam. And it’s the NBC, Four Reasons Why Your 401(k) May Be A Giant Ripoff. Here’s on Forbes, Why 401(k)s Have Failed. This is at USA Today, 401(k)s Are Broken, Here’s How To Fix Them. Let’s see, Time Magazine, what’s it say, Why It’s Time To Retire Your 401(k). Let’s see, this one’s on CNBC, For Millions 401(k) Plans Have Fallen Short. Where’s this? This is the Fiscal Times, The Retirement Revolution That Failed: Why The 401(k) Isn’t Working.

I really like this one, this is from the Wall Street Journal. It says The Champions Of The 401(k) Lament The Revolution That They Started. What that means is the people, the original advocates of the 401(k) in hindsight are like, “Oops, we made a mistake. We got the world into a little bit of trouble.” In fact, the article even concludes, it’s been a while since I read the article and now it’s concealed from me. But at the end of the article, if you want to go look at it, that’s the title. But one of the original architects of the 401(k), he was telling his story, they were telling his story of how, I think he’s in his 70s, and he’s still working, the 401(k) didn’t even work for him, and he’s one of the guys that originally created it.

Then what’s this? This is the Los Angeles Times, Bad News Your 401(k) Won’t Give You A Decent Retirement. From Bloomberg, The 401(k) Crisis Is Getting Worse. So there’s plenty of evidence out there to support what I’m saying. I’m not crazy, right? This one I like a lot too, this is from LA Times, Your 401(k) Won’t Give You A Decent Retirement. Let’s talk about the actual numbers. First of all, you’ve got to decide, what is a decent retirement to you? So, I don’t know, that’s a personal question, and that’s going to be different for each and every one of you. But if we just look, say a decent retirement would be the median salary in the country, well, the median salary is right around 40,000 bucks, I guess depending on which source you look at, it could be somewhere between 35, 45. Let’s just say $40,000.

Now, how much do you need to save in your 401(k) for that to spin off a residual income of $40,000 a year? Well, if you go by the number that most financial planners and most financial experts will give you when they tell you the return that you can expect by the time you reach the age of 65, when you can actually start withdrawing from your 401(k) or your retirement vehicle, say you can count on 5%, I think that’s kind of tough today to find something really conservative at 5%, but we’ll give them the benefit of the doubt, let’s say that’s so 5%. If that’s the case, what you’re going to need to save into your 401(k) is $1.2 million just to live at the median salary in the country, the median income.

So let’s look at what the average balance of 401(k)s are for people that reach the age of 65. I’m talking about 401(k)s, and I’m talking about all retirement vehicles. The average balance by the time the average person reaches the age of 65 is only $180,000. They’re just a little better than 10% of the way there, to just live the median income in this country.

So let’s look at today’s top income earners. So the top income earner is $100,000 or more. What’s the average balance of their 401(k) by the time they reach the age of 65? Well, it’s just under $400,000. I think it’s 380, 382 and some change. So even the top income earners in this country, it’s not working for them either. They’re only a third of the way there. So that’s what I mean, it’s failing this country. It’s probably what these articles are referencing as well. It’s been a while since … I mean, I didn’t go through and read every one, I just had to find headlines, because when I originally made this video, I went and read a bunch of stuff, and all this stuff, it’s all still being reported, nothing has changed.

So what’s the solution? What’s the alternative? Well, rather than taking this old antiquated retirement advice or working, working, working, saving, saving, saving, and being very disciplined, making sacrifices, clipping coupons, avoiding all debt, all the traditional advice that we get, and then hopefully by the time we reach the age of 65, that’s high enough, that pile of money is high enough to give us that residual income, to give us the life that we want.

Instead of doing that, let’s just flip the equation. Rather than saving the pile to create the income, focus on creating the residual income first and then let the residual income create the pile. Just reverse it in the priority of which you go about it. There’s a lot of different options. You know, especially in this advancement of today and the internet and all the different options of what that’s given us to create residual types of income. You know, there’s a big push and movement on the Amazon stores, and the Spotify stores, there’s all kinds of success stories. There’s the eBay thing. And then you go to brick and mortar, you look at automatic car washes or laundry machines. You could write books and create the residual income, maybe you’ve got a hit song in you. Those are all different types of residual income we could go after right now.

I mean, this is Epic Real Estate, we’re partial to real estate. And we are partial to real estate because it’s just when you look at the numbers again, it’s created more wealth and more financial freedom for anyone ever, for more people, than any other industry, any other investment vehicle. So we just looked at the stats, that’s why we do what we do, and that’s why we started to show people what we do, is because it’s really the final frontier where the average person has a legitimate shot at creating real wealth. The average person has the legitimate shot at creating real wealth by reversing that equation, going after the residual income first, and letting that residual income create the pile.

What’s great about it, even better is, you don’t have to wait till you’re 65 years old to enjoy it. You know, your wealth and your finances will still be there when you’re the age of 65, but you can start living life a lot sooner, during your more and more vibrant years that you have. You know life is short, it’s going by quickly, isn’t it? I can’t believe where I am with my life right now. I mean, it seems like just yesterday I was graduating high school. I don’t know what that feels like for you, but that’s what it feels like for me, and it’s been a long time since then.

So all that to say, you have options. I’m partial to real estate. There are other options out there. Do you. But the two things I’d want you to take away from today’s Financial Freedom Friday is, one, don’t invest with your emotions, invest with your math. The second thing is, focus on creating the streams of income before creating the piles of income. Do those two things and you’re going to watch the odds flip in your favor. All right, I’ll see you next week in another episode of Financial Freedom Friday. Take care.