As I watch the stock market slowly dive after the downgrade of the U.S. credit rating, I have realized something. We can survive if the stock market crashes. We can even still retire if the stock market crashes. All we have to do is stop relying on the stock market.
First, a disclaimer. I am not a financial advisor. I am not a fortune teller. What I am is a person who believes in hard work in pursuit of your dreams. I’m not going to try to tell you how to get rich with my “secret investment strategy” while offering you a free lunch. In fact, I’m going to do something radical. I’m going to tell you to limit how much you invest, and possibly not invest at all. And I’m also going to tell you, there’s no such thing as a free lunch.
Ever since obtaining my first job out of college, I have contributed to 401(k) plans, and heard the investment advisers proclaim during a “free company lunch” how you should “invest as much as you can early, and diversify! Diversification will keep a positive balance in your retirement account!” The financial advisor went on to tell us how we should periodically redistribute our assets evenly across a diverse number of funds. It was only after reading the plan carefully that I realized that while we’re contributing to the 401(k), the company managing the plan for us is skimming a small fee off the top of each transaction. If the market goes south, we lose our money, but the company managing the plan, since they don’t have any money actually invested, is unaffected. It’s like paying someone to go to a casino, let them pocket some of your money before they play, then you might get something back if they played their cards right. But they really don’t have any risk themselves because they’re gambling with YOUR money! The one flaw with diversification is that if the entire market crashes, no matter where your money is invested, it’s still gone.
Believe it or not, the ideas of a “stock market” or a “retirement fund”, or “social security” is relatively new, and mankind survived for thousands of years without them. Life expectancies were shorter, and many people worked until they died. However, those who became older than expected still survived because they owned property and/or were cared for by their children. Those who did not have children or property were cared for by the local community. While “poorhouse” conditions for those without children were not ideal in the beginning, over time communities worked together to improve these conditions. You did not have to invest in a 401(k) to save for retirement, your family and community were your retirement plan.
I would like to propose a not so new retirement investment strategy. Invest in your family. Invest in yourself. Plan to work longer, possibly until you can’t work anymore. Don’t just go to work every day, then come home like a zombie. Do something good with your life, volunteer to help the community, volunteer to help your family. If you invest your time in your family and community, when the time comes, your investment will pay off, and people will be willing to help you. I’m not saying stop contributing to your 401(k). Just contribute what you can afford to lose. Don’t rely on your 401(k) or social security to be there when you turn 65.
We stand on the edge of a new economic era. How that era is defined is up to us. Perhaps it is time to redefine what retirement means, and go back to the old ways of living, before Wall Street was becoming rich off our attempts to save for retirement. And perhaps it is time to become a little less self centered, and start giving to family and community, instead of just saving.
About the author:
Ken B runs a discount automotive parts coupon site, http://www.discountauto.tk
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