February 25, 2021

Is There a Magic Bullet to Retirement Planning? Ep #34

18 minutes

Is a certain stock tip or investment the “holy grail?” Is there a magic bullet that will make you millions? The money you invest in your retirement needs to be there for the next 30–40 years—so how do you make smart decisions with your future? In this episode of Retirement Made Easy, I share the best way to invest your hard-earned money. Don’t miss it!

You will want to hear this episode if you are interested in...

[3:01] There is NO magic bullet
[5:16] The #1 wealth-building vehicle
[7:50] Mutual funds are the name of the game
[12:18] The biggest contributing factor to success

Sorry, there’s NO magic bullet

You can’t put all of your eggs into one basket like an annuity or single stock. I have clients that have a family member, coworker, or friend that told them to invest in something. From bitcoin to real estate, annuities to marijuana stock—I hear it all. The vast majority of these ideas are speculative at best. But I will do my due diligence and report back with my honest opinion.

You need to invest wisely with the money that is earmarked for your retirement. If you make a mistake, you might run out of money in the middle of retirement. Do you really want to bet your money on a speculative investment where you could lose everything?

The #1 wealth-building vehicle

In 2017, Ramsey Solutions completed a study on over 10,000 millionaires. How did they make their money? 80% of the millionaires in the study built their wealth through their 401k or retirement plan (457, 403B, 401k, Roth IRA). 74% invested outside of work into IRAs, mutual funds, ETFs, and stocks. Gold, silver, and real estate were far down on the list.

I have reviewed the investment choices for hundreds of 401ks. Each plan will have different investment options, typically from 20-40 choices. What do most 401k plans allow individuals to invest in? Mutual funds.

Mutual funds are the name of the game

95% of 401ks only allow you to invest in a small menu of mutual funds. That is the recipe. Some allow investing in money market funds and short-term bond funds. Others allow more aggressive investing in stock mutual funds. Anytime a client I meet with $1 million in retirement savings, 9.9 times out of 10 it’s from investing in mutual funds in their 401k or IRA.

I’ve never had a client that had a magic bullet that they’ve attributed to being the biggest factor of their wealth-building. This study proves that the greatest investment vehicle is investing in mutual funds in your 401k. It’s simple—but it’s not easy. Investment success is dictated by your behavior.

The biggest contributing factor to success

The #1 contributing factor that millionaires reported was the key to their success was financial discipline. The second contributing factor was investment consistency. They had the discipline to stick with their investments and the consistency to keep contributing paycheck to paycheck, month in and month out.

Whenever we plant an apple tree, it doesn’t produce apples the first year. It doesn’t produce apples the second year. Sometimes we don’t even get apples the third year. It can take 5–6 years to see apples. If I had chopped down the tree after three years, I would never see the benefit of a harvest. It takes patience and commitment to let the apple tree grow into something that’s fruitful.

Investing is a marathon—not a sprint. If you don’t give up, you’ll be rewarded. Don’t be fooled by a magic bullet. You can’t have all of the upside and none of the downside. If it sounds too good to be true, it normally is.

Resources & People Mentioned