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

May 23, 2023

In this highlight, we discuss why Americans are so bad with money and how it affects the country.

For more information, check out our free resources here.


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.

Want to know what to do with your next dollar, you need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.



Most Recent Episodes

The Best and Worst Types of Life Insurance!

No matter how much you know about finance, you’ve definitely heard about life insurance: maybe from commercials pitching it as something to buy your baby, or a family member or friend that got into the industry. Is life insurance worth getting or something you should...

How to Recover From 4 HORRIBLE Financial Mistakes!

In our nearly four decades of combined experience managing money, we’ve seen some horrible financial mistakes - here are the four worst we’ve seen first-hand and what you can do to avoid making a similar mistake. In this episode, you’ll learn: The worst financial...

New Data: Active Investments Are Better Than Index Funds?

A new research paper is out that claims active funds from two large providers, Vanguard and Fidelity, beat their own index funds. Are active funds beating index funds? What’s going on here? Let’s find out! For more information, check out our free resources...

Why Americans Are Actually Broke! (2023 Edition)

Americans might be bad with money, but you don’t have to be. In this episode, we discuss the underlying reason why Americans are so bad with money and how you can do it better. In this episode, you’ll learn: Common financial pitfalls you should avoid Practical steps...

Build Wealth With the 3 Bucket Strategy! (By Age) 2023 Edition

We believe there are three distinct taxable buckets you have the option of investing in for retirement. We’ll talk about how to balance those buckets by age and show a case study by age that shows what your buckets may look like! In this episode, you’ll learn: The...

Debt Ceiling Crisis: World’s Financial System at Risk?

Should you be worried about the debt ceiling crisis? Although political leaders have so far been unable to come to an agreement, we'll tell you what history says will happen and what it means for your finances. For more information, check out our free resources...

Financial Advisors React to INSANE Money Advice on TikTok!

Is financial advice on TikTok all bad or is there some good advice out there? Check out our brand new TikTok react show where Brian and Bo give their honest reactions to trending financial advice. Enjoy the Show? Sign up for the Financial Order of Operation (FOO)...

How to Save Thousands of Dollars in Taxes in 2024

Tax season is over for most of us, but that doesn’t mean it’s time to stop thinking about your taxes! Planning out your tax strategy in advance can save you time and money on your taxes. In this Q&A, we’ll discuss the line items on your return to pay attention to...

Average 401(k) Balance by Age (2023 Edition)

Are you doing better than the average American at saving in your 401(k)? We'll talk about basics of a 401(k), including new limits, employer matches, and vesting schedules, how many millionaires are created by 401(k)s, and of course the average 401(k) balance by age....