The Retirement Conspiracy [Part 4]

This is Part 4 in a 6 part series called “The Retirement Conspiracy The Retirement Conspiracy [Part 4] [By Jon Lewis] By Jon Lewis Monday, May 24, 2021 Note: This is Part 4 in a 6 part series called “The Retirement Conspiracy.” Go to [www.RetirementConspiracy.com]( to read the full series. Part 4: STOCKS & INDEX FUNDS Greetings! In [Part 1]( [Part 2]( and [Part 3]( of this series I went over the conspiracy against your retirement. I showed you how, essentially, monetary policy is geared toward creating an incentive for you to NOT save your money. They do this by making it harder and harder to see any benefit from saving your money. From inflation, to record low yields on savings accounts, to record low interest rates – those methods of saving are pointless. Now, in this issue, I want to address stocks and index funds. Because the common thought process today is that this is the ONLY option you have for preserving and growing your wealth. Two Options – Take It Or Leave It If saving your money under the mattress is useless, but you can’t get any yields in a savings account and Bonds don’t even begin to keep up with inflation. Then other than Real Estate, which is at record highs right now as you can see from the chart below, where are you supposed to put your money? [The Retirement Conspiracy [Part 4]] The only other option, of course, is stocks (particularly index funds). In other words, economic policy is designed to close all other doors and leave only two open. You can buy real estate or you can buy stocks. As you can imagine, because there is literally nowhere else for people to put their money as they desperately try to find some mechanism in which they can preserve it or grow it, they are just throwing it into the only two options they have. This is causing Real Estate prices to rise and rise. In fact, people are getting so desperate, they’re paying ANY price just to get in fast even if it means paying above listing price. [The Retirement Conspiracy [Part 4]] Of course, the same is true for stocks. Rather than seek out value in the stock market by finding companies that are trading for less than they’re worth, people have just stopped caring about value all together. All they want is to put their money somewhere – so prices of stocks no longer matter, valuations no longer matter, natural price discovery no longer matters. Which is why the Price-to-Earnings ratio of the S&P 500 is at its highest point since the Dot Com Crash and its second highest point since the 2008 financial crisis (or another way to put it is…it’s at its second highest point in 140 YEARS). [The Retirement Conspiracy [Part 4]] Of course, who can blame them? If you sit around on a pile of cash waiting for a better opportunity in Real Estate prices or stock prices, who knows how long you’ll be waiting around? In the meantime, keeping that money in cash, due to rising inflation, the value of your cash just withers away. So you better just put it into these investments NOW rather than keep cash and watch it lose another 4% or more in purchasing power over the next year. To Prevent Selling, The Biden Administration Also Wants To Make It Too Painful To Realize Gains Make no mistake, the Government knows this whole situation is a house of cards. One wrong move and the whole thing could collapse. More than anything, they want to prevent a mass exodus of capital out of the markets. If your policies are directly responsible for effectively forcing people into only two options for savings / investments, then the LAST thing you want is for those two last remaining investment mechanisms to crash. Because that might cause social uproar and unrest not seen in over a century. And because the richest investors are typically the most knowledgeable and well-connected – they’re the ones who would be first to quietly head for the exits before everybody else catches on. Therefore, the Government is trying to preempt the kind of disaster that would create by reducing their incentive to sell and realize any gains. Under the Biden administration’s new proposed capital gains tax hikes, if you make $1 million or more per year, then selling an investment for a gain will have you pay up to 48% taxes! That’s up from an average of 20%. That’s nearly HALF of what your investment earned! Of course, the idea being presented throughout the major news outlets is that this is supposed to help pay for all the stimulus and all the new social programs Biden is proposing. And, after all, it won’t effect “most people.” But that’s not really the “play” here by the “Powers That be” – they aren’t imposing these tax hikes because they think they’ll get paid a whole bunch more money by rich people selling their investments for a gain. They’re doing it so that the richest investors – who have the most amount of money in the stock market – DON’T sell! They are absolutely terrified of capital flight and a crashing stock / housing market – so they are trying to lock the richest investors’ funds into those investments by making it too painful to sell. That way, they’ll just hold and the top-down panic selling that might occur if those who have gained the most in the market start taking profits might be avoided. Stocks & Index Funds Are Good Investments, But They’re Not Good For Short-Term Cash Flow [The Retirement Conspiracy [Part 4]]( I’m not saying stocks and index funds are bad investments. I also believe you can find plenty of value if you look hard enough. But here’s the reality of the situation – the valuations of stocks (and Real Estate for that matter) are rapidly detaching from reality due in large part to economic polices that have punished savers. By forcing people to put their money in either stocks or real estate – natural price discovery has evaporated. If you have a long-term time horizon, it really shouldn’t matter to you. You’re putting money into an index fund or a basket of strong stocks and you’re holding them for the long haul. That’s fine. It’s good. It’s a tried and proven strategy. The issue for retirees and those who want to retire is CASH FLOW. You could argue that Real Estate could provide this cash flow if you buy enough rental properties, and you’d be right. But that’s a lot of money to spend to begin generating that cash flow. You’ve got to find low-priced properties in a high-priced market, probably renovate them and fix them up, and then find renters. Furthermore, you need to make sure you’re in a high-growth area that will improve over time. And there’s a lot of responsibility that comes with being a landlord (it’s a full-time job in and of itself). Even a good property management company won’t be able to handle all of it for you. You could also argue that you could create cash flow from index fund investments, but let’s look at that scenario for a moment. The Problem With The “4% Rule” There’s an entire movement out there gaining traction especially among older Millennials in their mid 30s called “FIRE” or “Financially Independent, Retired Early.” And it’s basically a Jon Bogle type of strategy for retiring with passive index fund investing based on the “4% rule.” This investment strategy was actually created 27 years ago by a financial planner named William Bengen. And the basic formula goes like this: First, you decide how much money you want to live on each year. So let’s say your goal is to live on $60,000 a year in retirement. That’s the amount of money that you think will give you a good standard of living in retirement with plenty of money left over to do the things that you want. Under this strategy, you’d then want to multiply $60,000 by 25. That’d be $1,500,000 – that’s the amount of money you need to invest into an index fund. The idea is that, if you put this into an Index fund, you’ll receive a 5% net average annual return on your investments (that’s after taxes and inflation are factored in). That means you can safely withdraw 4% per year as income. Here are the problems: - First of all, $1,500,000 is a lot of money. Many people may simply not be able to achieve that goal. And, if they were to achieve it, they’d likely have to start incredibly early. What if you’re already 40? Or 50? - It relies on too many assumptions – the assumption that the market will provide a clean, reliable gain year after year. In fact, if the market DOES NOT provide this reliable gain – the entire strategy falls apart. First of all, when William Bengen created this strategy nearly 30 years ago, Bond Yields were hovering around 6%. The idea was that having some of your investment in Bonds would offset any potential market downturns. As I explained in [Part 3]( of this series – bond yields are not only at record lows, they’re likely never to rise to out-pace inflation ever again. Secondly, the market wasn’t trading at record high P/E ratios – the second highest point in market history. Thirdly, if we do happen to enter into a high inflationary environment, what’s not to say history will repeat itself? For example, during “The Great Inflation” of the 70s – the Dow did absolutely NOTHING for 18 years. It returned ZERO. [The Retirement Conspiracy [Part 4]] It literally just chopped sideways for two decades. At an average 76.1 year lifespan for the American male that’s nearly 25% of your entire life. And if you happened to have retired at – let’s say the age of 60 – then you’d be long dead by the time the DOW ever actually started producing a gain for your retirement portfolio again. So much for a “reliable 5% net gain a year.” The higher rates of inflation alone would have eaten directly into that as well. And what about the periods between 1996 and 2011? That’s another period of about 15 years where the DOW basically returned nothing at all: [The Retirement Conspiracy [Part 4]] Imagine working your entire life, living frugally, being responsible and finally reaching that $1.5 MILLION investment goal. You phone in your boss and tell them you’re retiring. Then? For the next 15 to 20 years all the things you bet on happening….just don’t. Your index fund doesn’t return the 5% you’re looking for, inflation doesn’t stay at 2%, bond yields don’t rise, and interest rates on savings accounts don’t either. Then what? Again – I want to emphasize that I’m not telling you “don’t” put your money in an index fund. What I’m saying is, putting all your eggs in one basket and “hoping” it turns out the way it’s “supposed to” isn’t a smart strategy no matter what way you look at it. I 100% believe you should put money into an index fund and that index funds will perform better than most active strategies over time. But, what if you could add on another strategy that didn’t depend so much on a certain set of pre-defined rules working out such as inflation staying at a certain rate, the stock market returning a certain percent, or interest rates rising a certain amount…. [The Retirement Conspiracy [Part 4]]( Not only that, what if you could generate that same $60,000 a year income for $1,225,000 LESS than an index fund strategy?* Let me put it another way – what if you could make $60,000 a year in retirement income with 81.67% LESS money saved?* Finally, what if you could do it REGARDLESS of what happens with the markets? Whether they’re going up, down, or sideways? How To Generate $60,000 (Or More) Per Year of Retirement Income With 81.67% Less Savings Than Traditional Retirement Plans Let’s take “hope” out of the equation. If you have a dynamic, adaptable strategy, you can pull income out of the market like clockwork REGARDLESS of whether we see a 20 year sideways market, or some kind of big 50% selloff (like we say in the March 2020 Coronavirus selloff). And you can do it with LESS money saved. I’ve been doing this for over 25 years now. And I’d like to show you how. [Go Here To Join The Waiting List For My 70/30 Cash-on-Demand Income Formula.]( In part 5 of this series – tomorrow – I’ll talk about cash flow from dividends and the pros and cons of using this strategy during The Retirement Conspiracy. Trade Wisely, [Jon Lewis] Jon Lewis ** Figures are based on all trades signaled in Jon Lewis’ 70/30 Cash-on-Demand Income Formula strategy between 5/06/20 – 5/06/21 based on a $275,000 account size allocating a 5% risk per trade for a total 21.55% account return over that time period. [Read more on DailyProfit.com]( [Take a 7 day break from these emails]( [Unsubscribe from these types of emails]( [Manage your email preferences]( [Wyatt Investment Research] Disclaimer & Important Information [Wyatt Investment Research (“WIR”)]( owns and publishes the website WyattResearch.com, other web sites, and, through its subscription services, various investment newsletters, trade alerts, and other investment-related educational materials. 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