June 22, 2021
Hi, Trish Regan here…
Longtime American Consequences readers are familiar with the name Dr. David “Doc” Eifrig… Doc has written for us many times before on how to improve your health and wealth.
Doc has one of the most impressive resumes of anyone we know in this industry… After spending a decade on Wall Street, he quit his vice president position to become a doctor – earning his MD with clinical honors and becoming a board-certified eye surgeon.
Then, retiring a second time, Doc brought his incredible health and wealth expertise to Stansberry Research.
One thing that Doc repeatedly advises that I fully agree with is you need to look out for yourself when investing… no financial planner or fund manager is going to have your best interests at heart the way you do.
And you can’t trust other people to look out for your retirement dollars…
As Stansberry Research’s No. 1 retirement expert, Doc’s goal is to empower retirees to take control of their finances… and sleep better at night in the process.
He’s hosting a free event tomorrow that he’s urging anyone over the age of 50 must attend. Doc says your hard-earned retirement money could be in jeopardy. You can register for free here.
I hope you all sign up for this event… I know I’ll be tuning in to see what Doc has to say.
In the meantime, we’re sharing an essay from Doc on three easy things you can do to pump up your retirement savings.
Three Simple Ways to Boost Your 401(k) by Six Figures
Investing for retirement is difficult…
Keeping a constant eye on the markets, studying economics, staying on top of every trend without a misstep… that’s time-consuming and confusing.
Worse, a lack of guidance, poor websites, and limited investment options make most individuals’ first foray into investing overwhelming.
But you can’t hide from it. No one is going to rescue your retirement for you.
The good news is it doesn’t have to be so tough. As you’ll see today, there are just three keys to understanding your retirement account. Learn these, and you will truly change your quality of life in your retirement…
Let’s get started…
There are three big things you need to earn an extra six figures in your retirement plan…
- Asset allocation
- Low fees
- Index funds
Allocation: Your Best Asset
Asset allocation means how you divvy up your capital among several categories of assets. Changes in the market get smoothed out by the diversified nature of your portfolio… leaving you to sleep well at night.
The key is doing it from the start and sticking to it.
I’m not sure if you remember books, America, but it’s what people used to sink their faces into to avoid dealing with family and strangers. Our editor-in-chief, P.J. O’Rourke, has written a few in his time, and he’s re-releasing his bestselling Eat the Rich, complete with a new chapter to take on the absurdity of 2021 economics. And as an American Consequences subscriber, you can have access to the newly released edition for free! Claim Your Copy Now.
First, you should set aside some cash for emergencies… Then, start with a simple allocation: Decide between stocks and bonds. If you have a longer-term view and a high tolerance for risk, you might make your allocation 80% stocks and 20% bonds. If you are closer to retirement and don’t like volatile returns, you could do 30% stocks and 70% bonds.
Most of us fall somewhere in between those extremes. When someone is starting off, I suggest using a “middle of the fairway” asset-allocation plan: 60% stocks and 40% bonds. It ensures you will harness the proven wealth-building power of stocks… while also using the conservative, income-producing power of bonds.
The point is to combine assets, like stocks and bonds, that are not perfectly correlated (meaning their price movements are not closely related to each other). Blending them in a portfolio smooths out your total returns.
As you get closer to retirement, you can adjust your allocation to match your risk tolerance. For example, you can use the “60/40” asset allocation while you are in your 40s, 50s, and 60s… and then start increasing your allocation to bonds when you reach your 70s.
Once you are comfortable with that basic stock-bond allocation, you can start to get more complex, dividing your categories among, say, domestic and international stocks. Or you can divide your bond allocation among corporate, federal, and municipal bonds. You can also add a small allocation to precious metals, or what I call “chaos hedges.”
With allocation, we’ve protected your portfolio from deep swings and ensured you’ll have money until the end.
Find the Hidden Fees
Now let’s move on to Step 2… Hidden fees pervade the financial industry.
For example, the fees on fund investments always look small to the untrained eye. A mutual fund can easily charge 2%-3% of assets without looking too expensive.
When the percentages are that small, it can seem like it’s not worth your time to fret over fees.
Don’t fall for this Wall Street trick…
Remember, these aren’t one-time fees. It’s a 2% hit every year. Over time, that 2% adds up substantially. And it’s particularly egregious considering you can easily find funds with fees as low as 1%, or even 0.25%.
Even more troubling, each year you pay a fee, you lose decades of compounding that would grow on top of that money.
The results add up…
Consider an investor who saves $5,000 a year, earns 8% in returns on investments, and pays a 2% annual fee. Over 40 years, he amasses $786,000.
If he cut that fee to 1%, he would finish with $1,045,000.
Think of how hard you work to save $5,000 every year for 40 years. It’s not easy. No matter how much you earn, life gets expensive. Over all that time, you set aside $200,000.
But here’s the catch: You can earn an additional $259,000… by just spending five minutes controlling the fees on your funds.
That’s easy money.
Step 2 of boosting your 401(k) is figuring out what fees you’re paying… and lowering them if possible. You should be able to get your fees to less than 1% if your retirement account has reasonable options.
And you can do even better than that.
Skeptics might wonder… When we switch to cheaper funds, aren’t we going to get worse performance? Don’t bargain prices mean bad funds?
Nope. The truth is the exact opposite…
The wealth gap in America has never been wider — we’ve still never fully recovered from the Great Recession of 2008, and it’s only going to get worse from here. But the effects of the Big Con are going to devastate those who don’t take action. So do something now while you still can.
Choose Wisely: Index Funds
This is Step 3: Picking the right funds.
The cheapest funds in the game are index funds.
Index funds don’t have a Wall Street trader behind them, trying to outcompete everyone else and beat the market. (The majority of these “smart guys” fail.) Rather, index funds follow simple rules designed to help them track the overall performance of a particular asset class, like U.S. stocks or Treasury bonds.
Most “actively managed” funds (those with a manager trying to pick the best stocks) underperform the market year after year. In fact, 96% of actively managed mutual funds fail to beat the market over a sustained period.
That means you don’t have a 50-50 chance of picking a “good” fund or a “bad” fund… It hardly even matters which one you pick. The vast majority are bad and won’t beat the market.
On the other hand, index funds don’t need to pay superstar managers or an army of analysts. Ironically, they keep costs extremely low and provide better performance.
Investors are finally catching on. The index-fund industry is growing…
In 2015, Vanguard’s Bond Index Fund surpassed PIMCO’s Total Return Fund as the largest bond fund in the world.
Vanguard’s low-fee index fund offerings and Fidelity’s “Spartan” brand of index funds are great places to start. (On a side note, while at Goldman, I helped Fidelity set up its Spartan funds decades ago. My group spent time teaching it ways to use derivatives to streamline its money-management processes.
It’s likely your plan offers a few mutual funds that track an index.
By following these three simple steps, you can fix your retirement account and boost your lifetime returns by hundreds of thousands of dollars… in just a few minutes.
Take the time to review your 401(k) today with these three steps in mind… It will be the easiest money you make in your entire life.
P.S. Don’t forget to sign up for Doc’s free event tomorrow. The pandemic – and subsequent recovery – accelerated a trend that was already chipping away at your hard-earned money… The retirement situation in America has undergone a dramatic shift. And Doc is worried about the effects on your life savings. Tune in to see what he has to say.
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Publisher, American Consequences
With Editorial Staff
June 22, 2021