There are a number of financial gurus and charlatans who espouse one strategy or another because – as they say – that’s what millionaires do.
Bunk! Not to one or a few, but to all.
First of all, being a millionaire isn’t all it’s cracked up to be. Let’s say you’re about to retire and you own a home worth $350,000.00 and it is paid for, you have $500,000.00 in 401(k) and IRA accounts, $100,000.00 in savings and investments and $50,000.00 in other assets; a million dollars. Sounds pretty good until you translate that into income and lifestyle.
Your home equity could be converted into income through a reverse mortgage. That would generate about $900.00 per month. Your retirement accounts could safely produce about $2,000.00 each month. Social Security would guarantee you another $1,200.00. That’s about $4,100.00 each month – before taxes. The savings would be preserved to take care of emergencies and the other assets are the items you use every day – furniture, jewelry, etc. and cannot easily be converted to either income or cash.
This seems OK. It isn’t. The average retired couple will spend over $200,000.00 out of their own pockets on medical expenses after retirement according to Fidelity Funds annual study (2007). In addition, statistically speaking, one of the two retirees will require long term care services at home and eventually in a nursing home at a current cost of over $75,000.00 per year and $350,000.00 over their post retirement years. You can imagine what these expenses do to income.
Secondly, what the gurus tell you is that you should do what millionaires do. Then they pull out charts and graphs and illustrations of financial products to demonstrate why. It’s a shell game.
What the shell gamers don’t tell you is that what millionaires do is NOT what made them millionaires. They are describing strategies that some of the wealthy use AFTER they have become wealthy. They are selling fantasies. You should not follow these practices to become a millionaire yourself. In fact, if you follow these paths you will be putting what you have accumulated at great risk and your chance of success is severely diminished. Wealth creation and risk management are two sides of the same coin – like “love and marriage…you can’t have one without the other.”
There is a better way. Read The Four Pillars page of this blog. You’ll discover a template that lets you manage and measure your true wealth. Read Money for Life and you’ll discover how to apply that template to your personal economy – you may ever discover that you can become a millionaire – the right way.
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