“Rich Dad Poor Dad” author Robert Kiyosaki recently sounded the alarm about a looming crisis for baby boomers’ retirement savings.
In a social media post, he warned that the “biggest bubble in history will wipe out baby boomers” because they are “the first generation with flimsy 401(k)s.” Kiyosaki advised his followers to “buy real assets: gold, silver, Bitcoin before the biggest bubble in history goes bust.”
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Kiyosaki’s dire predictions about the potential collapse of the U.S. dollar and the stock market may seem extreme, but new research suggests that he is not entirely off base when it comes to the precarious state of baby boomers’ retirement savings.
A recent study from the Center for Retirement Research at Boston College found that many younger baby boomers and subsequent generations who rely solely on 401(k) savings accounts risk outliving their funds. The economists compared the drawdown speeds between those with traditional pensions and those with only 401(k) accounts, which have become the norm in recent decades.
The economists compared the depletion rates of 401(k) accounts against traditional pensions. According to senior research economist Gal Wettstein, retirees with pensions historically have maintained or grown their nest eggs after retiring. However, this “sanguine idea from the past” doesn’t apply to the 401(k) reality most face now.
The analysis revealed that 401(k) balances drain significantly faster than pensions. By ages 70 and 75, retirees with just a 401(k) had far less savings compared to their pension counterparts. As Wettstein told CNBC, “People spend a large share of what they have when they have a 401(k).”
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This accelerated spend-down means many 401(k) investors could fully deplete their funds by age 85, despite around half likely living longer. Lacking a pension’s guaranteed income, retirees must rely heavily on withdrawing from dwindling 401(k) balances to cover expenses.
Wettstein noted the key advantage of pensions was guiding sustainable spending rates by ensuring a steady payment. “A 401(k) doesn’t give you that,” he said.
While Kiyosaki’s call to abandon traditional retirement accounts and invest in alternative assets like precious metals and cryptocurrencies may be extreme, the study highlights the very real challenges facing baby boomers in ensuring their retirement savings last. As the first generation to rely primarily on 401(k) plans, many may find themselves in a precarious financial situation in their later years.
To avoid running out of money in retirement, it is crucial for all generations to regularly review their savings and make adjustments as needed. Consulting a qualified financial adviser can help determine whether your nest egg is enough to support your desired lifestyle throughout retirement. An adviser can provide personalized guidance on prudent withdrawal rates, investment allocations and strategies to make your savings last, such as incorporating an annuity or reverse mortgage.
Proper retirement planning is essential to avoid the grim scenario Kiyosaki warns about. With life expectancies increasing, baby boomers must ensure their 401(k)s and other savings can go the distance. While his calls to invest in nontraditional assets may be controversial, Kiyosaki’s core message highlights the importance of taking your retirement security seriously.
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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.
Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.
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This article ‘Rich Dad Poor Dad’ Author, Robert Kiyosaki, Predicts Catastrophic ‘Baby Boomer Bust’ Is Looming — ‘Biggest Bubble In History Will Wipe Out Baby Boomers’ — Is There Any Truth To His Claims? originally appeared on Benzinga.com
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