Why Are Americans Bad With Money if the Country is Wealthy?

Transcript

But you may be wondering, “Okay, well, why is this the case? How can the country be so wealthy, how can it do so well, and yet savings rates be so low?” We’re going to walk you through some of the reasons why, maybe the deck is stacked against us a touch, and again, how you can combat it, how you can fight against it. So let’s jump right into these.

Number one, I thought this was quite interesting: our retirement accounts are quite leaky. Yeah, when you think about retirement accounts, the way that retirement systems are set up in other countries across the world, they make it very difficult to get to your retirement dollars. Very hard to access those dollars that are supposed to be saved for the future. However, here in America, we make it a little bit easier to get to. When this came up in the content meeting, I had a double take. I was like, “Wait a minute, say what?” Because according to the research we found from the Atlantic, 40 cents out of every dollar that goes into retirement accounts actually leaks out before people reach retirement. That’s right, 40 cents out of every dollar is actually being distributed before people actually reach retirement. This is specifically referring to 401(k) plans, but we know we even talk about with Roth IRAs. Even those are easy for us to get to. We always say that we can get to our basis, the contributions we put in, tax-free and penalty-free.

So I think a lot of Americans are doing that, whether it’s tapping into the Roths or tapping into their IRAs or tapping into their 401(k)s. We’re just not leaving the money there to work for us in the future. So Bo, how do we do it better? Let’s talk about, because we’re gonna go through each of these, how do we actually do this better? Yeah, the first thing is never take money out of your retirement accounts. Now look, we know that life happens, and sometimes emergencies come up, and sometimes things happen outside of our control. But here’s what doesn’t have to happen: if you leave a job and you go change jobs and you have an old 401(k), that doesn’t mean, “Oh great, a bonus! I’m just gonna cash out my old 401(k).” That’s not what you want to do. You want to make sure that you let your retirement dollars stay in retirement accounts, whether it’s at the old 401(k), the new 401(k), or in an IRA rollover. You don’t want to take those dollars, you don’t want to consume them. That needs to be an absolute last-ditch thing that you do in your financial life. I’m even gonna make a bold statement that even though the provisions of our retirement rules and so forth, whether it’s you can pull first-time home money out, you can pull money out for college expenses, don’t do it. I mean, I will tell you, your future self is going to need this money for retirement. So take it with the weight and the responsibility that that moment in the future calls for, because you will, despite the YOLO consumption life that is pushed upon us by the financial media and all the social media people out there and the influencers, you will likely live to a ripe old age, and you’ll need this money for the future. Another thing that you can do to protect yourself, to do it better, is earmark all your money for specific savings goals. Meaning, let your retirement dollars be for retirement. If you want to buy a vacation home, have a savings goal for that. If you want a new car, have a savings goal. Make sure you understand the purpose behind your dollars and try not to cannibalize those purposes. If you’re saving money for retirement, don’t let those be the dollars that put the pool in the backyard. You are not going to set yourself up for future financial success.