How Qualified Plans Fail Us – Episode 099

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have reached out to our Prosperity Economics advisors to bring additional value to you, our listener. And today we’ve got John Commuta, who is with Smartest Wealth Systems, that’s his company. And he is an expert on why qualified plans are failed and continue to fail. And you know, most of us, that’s our first real exposure to investing is getting signed up for the company pension, 401k, something like that.

[00:56] So these qualified plans have become part of our lives, and they really haven’t been around that long and their track record is not that great. And that’s what John’s going to talk to us about today. Hi, John. Hi, Todd. Thanks for having me with you. Well, super. Well, why don’t you kind of give us an idea of how you got interested in this topic and a little bit about you. You know, that’s actually an interesting question, because I’ve been helping people with their personal finances for more than a quarter century now. I started out just writing books and well, I started out making every financial mistake you can make and then figuring out that that didn’t work and digging myself out and then saying, you know what, maybe other people would like to know what I just found

[01:41] out. And it was mostly about getting out of debt. That’s where I started. I was teaching people how to get out of debt. And I wrote a course that I ended up publishing through my own company. The company grew so fast. We were selected to the Inc 500 Inc magazine’s list of the top 500 private companies in America three times, which is really hard to do. And then I had an updated version of that called Transforming Debt into Wealth published by Nightingale Conant, who is a world class publisher of audio learning programs. And everybody’s on their list from Tony Robbins to, well, you just, you know, anybody you want to think of that did an audio program. They got published with Nightingale Conant.

[02:22] So my Transforming Debt into Wealth program became their number one bestseller ever. And that got me, speaking of Tony Robbins, Tony called and said, hey, how would you like to join my wealth mastery team and go around the world teaching this to people at my gatherings? And so I did for three years, did 13 programs around the world with Tony and company. And so that was good. But I was teaching people the basic financial stuff, how to, you know, how to not be used by the credit system and not how to dig a hole so deep they can ever get out and basically how to get out. Well, the problem started when after people were out of debt, I was basically telling them the conventional wisdom. Like you said, max out your 401k.

[03:07] You know, once you’re out of debt, just use this money, throw it into qualified plans. 2000 happened, the dot com bubble popping. And then 2008 was almost a mirror of that. Just a few years later, eight years later, basically. And I saw people I knew personally who thought they were going to retire in 2008, who quite frankly are still working. And what I saw there was that the game had changed. Before 2000, the stock market kind of behaved like it was supposed to. It was based on the underlying value of the companies and all the things, you know, the fundamentals that we talk about when we think of investing. But the game’s rigged now. It’s all run by computers and Wall Street banks. And I won’t go into that.

[03:48] But now the common investor is just the cannon fodder. They’re just they supply the money that everybody else uses and then scoops off the table every once in a while. And so I started realizing I cannot tell people to use a qualified plan to build wealth they can count on. Just like in 2008 and any moment now, because we’re overdue statistically for another big correction, we’re going to watch them just take it all off the table again. It’s like Las Vegas. So I realized I couldn’t do that anymore. And I started digging around for an alternative for people to do to build something they could count on for their for their ultimate future. And that’s where I came across insurance as particularly whole life for me,

[04:33] insurance as the best possible platform for saving and deploying money into investments and growing your wealth that you can count on for your future. And now when I compare it to qualified plans, it just slaughters qualified plans. I still can remember 2008 vividly myself because so many of us wanted to find someone to blame. And certainly there was corruption, no doubt. But if you took out the corruption and you took out the people who were doing something illegal, you realize that it was completely legal and the system itself was broken. And that is what most people, I don’t think, understand is that, you know, it’s not how you play the game now. It’s stepping away from the game and finding a game to play.

[05:25] Yes, it’s not saving for, you know, when the government cooked up the 401k and other stuff back in the 70s, they were what they were doing was changing the game. People were getting pensions back then to find benefit type plans, something they could count on. And they were saving in accounts like at banks where the money just every time you added to it, it was more. It never went away. Maybe you didn’t make a lot, but it never went away. Well, the government changed that to saving. They use the same word through these qualified plans. But you’re now your money’s in the stock market. It’s not in a bank anymore. And that’s not saving. That’s gambling. And let me just quickly tell you something about John.

[06:04] He knows how to create value for his clients and for our listeners. So he is actually going to be giving away a copy of his book, Banker’s Secret to Permanent Family Wealth. And you can text Smartest Wealth, again, that Smartest Wealth, to 44222 and you will receive a complete course, including his book, at no charge, just for being one of our listeners. So again, thanks so much to John. That’s Smartest Wealth to 44222. So, John, you had some statistics and stuff you wanted to share with us just to demonstrate how bad these plans have gotten. Yes. And by the way, Smartest Wealth is all one word strung together. I’m not sure if the computer would fix it if you put the space in or not. But let’s not take a chance.

[06:52] So Smartest Wealth, like all one word, and 44222. Thanks for that, Todd. Now, the statistics, this study staggered me. It’s from the National Institute of Retirement Security. These are the people that look at how are retirements actually going and how is preparation. They’re mainly focused on preparation for retirement. Here’s what they found out. Americans are six point eight trillion dollars shy of what they’ll need to ever stop working. Now, if we look at just the people ages 50 to 64, which is you could say pre-retirement, they have on average just $12,000 saved. Now, think about how long could you live on $12,000 in retirement. It’s probably not very long. If we include the younger people and expand that from 25, aged 25 to 64,

[07:42] the average drops to only $3,000 saved. But what scares me even more is that almost half, 45% of Americans have nothing saved. They’re described as two paychecks away from insolvency. Altogether, the statistics show that 92% of Americans are short of what they’ll ever need to stop working and not by just a little bit, but by frightening margins. When I looked at that, I said, you know, what are they told? They’re told that if they just get into this 401k at work, it’s going to get you there. And the fact is these statistics prove it is not getting people there. It’s not working. And so we’ve got to find a better way. I think, you know, good news, bad news. We’ve also found out that, you know, we’re not going to die at age 80.

[08:34] We’re probably going to make it to age 100. And in fact, on life insurance policies now, they now illustrate out to 120 because they believe that’s a realistic goal in our lifetime. Yep. Yep. I agree with that. And, you know, look at medical science. I mean, we’re just one little DNA strand away from cancer being cured and a lot of things that would change the game. So, yes, you’ve got to plan for a long retirement or a different definition of retirement or post-employment or, you know, whatever you want to call it. And, you know, I understand you might want to stay active, but what we call it is you want to build job optional income. And by that, I mean your job is optional. You’ve got enough guaranteed income coming in

[09:18] that is enough to cover your expenses. So if you love your job, stay there. If you want to go work at some nonprofit that you feel, you know, is valuable and you really want to give time to that, go do that because you don’t have to stay at your job. What breaks my heart is like when I walk into Costco or Sam’s Club, and I see these elderly people handed out food samples and stuff. And I’m like, you know, some of those folks probably have the job because they just want to be with people and they don’t want to, you know, just be sitting alone someplace. But a lot of them, I would argue the bulk of them are there because they cannot live on Social Security, which the average check is like eleven hundred and something a month.

[10:00] You know, that’s not much of a lifestyle. And they just never they’re in this 92 percent. They never put it all together. So they’re they’re struggling to stay alive. And the odds of the Americans continuing to get that Social Security that they’re counting on now, you know, the statistics with the number of people retiring just indicate the numbers don’t work. So I think we have to be prepared for that as well. So, yes, why don’t you give us an idea of why you feel these qualified plans have failed? Well, there are there are a few things that are just kind of should be kind of obvious at this point. And the number one thing is market risks. I mean, how many times driving into work, you know,

[10:41] I’m talking to the person listening to us right now, Todd, how many times driving into work or whatever. And you hear the news and you hear the stock market dropped a thousand points today. And what happens? You get a knot in the pit of your stomach because stock market means 401K or IRA or five five to nine plan or four five seven plan or whatever, four or three be whatever you’re in. They’re all the same thing. And you just know it went down. It just went down and it went down significantly. And is this the big one? You know, you’re always wondering that market risks are always there. You just never know. It’s like, when is lightning going to strike me? Not will lightning strike me? When is lightning going to strike me?

[11:22] Which brings me to the next risk, which I call timing risk. Timing risk is the people who thought they were going to retire in 2008 and their 401K became a 201K because the market cut it in half. They had saved up enough to retire. And then within months, it was half enough to retire. And they had to make the decision to keep working and hope they could ride it out till they got back to a place where they could actually retire. And it’s taken the better part of a decade just to get back to where it was. And if you take inflation into, we’re just really now getting past where it was. So timing risk, the market could just take it away from you. This is not saving. This is gambling. It’s just taking that thing.

[12:12] And then the true cost of fees. Here’s one that most people don’t think about and only a few people I’ve ever heard talk about it. And that is the fees. You know, when you put money in your 401K, it doesn’t go into some magic bucket someplace. It gets passed down through layers of people. Your program, the fund manager or the program manager for your 401K from your HR department. And then it goes down to the plan manager down to the and they distribute it out to mutual funds or they distribute it to a brokerage that’s managing the mutual funds. OK, so now we’re about four levels down. And these people don’t care about you. They don’t know you. And so they’re sitting there saying we’re going to make our best guess.

[13:01] And by the way, I just thought a statistic that more than 60% of the fund managers of growth funds underperformed the S&P 500 average, which means the people who are the high paid experts managing these funds to pick the stocks that will beat the market underperformed the average or which means nobody picking anything, just taking the average of all 500 stocks in the S&P 500. So these magic stock pickers are really bad at their job. OK, so that’s one problem. So they’re out there picking stocks, but at the same time, they’re taking these little fees out. And the fees, you know, they might only be two, two and a half percent. But what people don’t realize is they’re taking that out quarterly.

[13:47] And what they’re doing is taking money off the table. They’re taking the money out of your what’s invested. And so that money will never grow for you again. So that’s called opportunity cost. You didn’t just have the two and a half percent fee. You’re losing all the money that two and a half percent might have made between now and your retirement time or whenever that time is, you would want to start taking money out. So the growth over a 40 year working life, the lost fees and the lost growth on those fees can actually total more than the total contributions the employee put into the plan. Think about that. Realize you have a deck that’s stacked against you because you have an industry that is compensated

[14:37] based upon when money moves, not whether or not it’s profitable. So to keep it circulating is to create more fees regardless of whether those fees result in good or bad performance. So they’re not compensated to grow your money. They’re compensated to move your money. And again, before we kind of get done today, I just want to mention to anybody who’s still listening here that didn’t write down the text to 44222. You want to text smartest wealth, all one word, no space in between. Text that to 44222. And you’re going to get John Commuta’s Banker’s Secret to Permanent Family Wealth. You’re going to get the book. You’re going to get some videos. You’re going to get some great information from him.

[15:27] And John, before we wrap up here today, anything you want to leave our listeners with? No, just God bless you. You’re out there and you’re working hard and you’re trying to put something together for yourself. And there is a better way than qualified plans for saving for retirement, for college, for all the things we use them for. There is a better way. And I’d love to send you that information, smartestwealth to 44222, and we’ll get it out to you, no strings attached. Super. Well, this is No BS Money Guy, Todd Strobel for the Prosperity Podcast. Special thanks to John Commuta and we’ll see y’all later. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you,

[16:05] visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.