Robert Kiyosaki is the Ann Coulter of Personal Finance
Dec 10th, 2009 by Nut
Robert Kiyosaki is at it again. In his latest article, he calls the 401(k) the biggest scam ever. I’ve written about 401(k)s, so I know a thing or two about them and I have to say that RK is talking out of his ass again.
Kiyosaki thinks the world is about to end, and it’s got nothing to do with war or global warming. It’s all due to the evil 401(k):
…the flaws of this retirement plan will grow into personal tragedies as the first of approximately 75 million baby boomers retire, leading to the biggest stock market crash in history.
Then he conveniently picks a time frame in which the stock market did terrible (1998–2008) to show that a sample 401(k) would’ve gone from $47k to $45k. But 10 years is way too short of a time period, especially when you’re talking about retirement. I mean, long-term investing might fall into the 10-year spectrum, but not retirement investing. And he conveniently fails to point out that employer matching kept that number higher than it should be.
He says that retirees will be taking their money out of these plans, causing the values of those funds to plummet. But he doesn’t take into account that the rules for 401(k)s have changed: employees are automatically being enrolled in these plans, which means the amount of money going into them will increase. Will they offset themselves? I don’t know, but he never mentions that.
Vintage Kiyosaki
I don’t know what happened to Kiyosaki or why he says what he says, but he says outlandish things for the sake of being outlandish. He has tons of people talking about him right now (some good, some bad), including myself. So he’s doing something right if his goal is to promote himself, which is something he’s really good at.
It’s like he’s trying to remind people that the guy that wrote a best seller a LONG time ago is still alive and kicking—which is kind of sad.
I do have to say one good thing about him: I have to give him credit for starting me on the path of financial responsibility. If it wasn’t for him and his book, Rich Dad, Poor Dad, I wouldn’t have found The Simple Dollar and would never have started this site.
But after his book became a worldwide phenomenon, he’s taken to these wild assertions that are meant to do one thing: shine the spotlight on himself.
What are Your Alternatives, Robert?
Back to his latest article on the 401(k) issue.
He tears 401(k)s a new one, but he doesn’t propose an alternative. Let’s say he’s right and the 401(k) is the biggest scam in the world. Great, we’re all on the same page.
Now what? How are you supposed to build enough wealth to retire? What other way is there to realistically save money and have it compound over time?
He never gives one, and that’s why he pisses me off so much. It’s really easy to point out things that don’t work (I’m a master at it!), but proposing an alternative that will actually work is much harder.
And that is why Kiyosaki is nothing more than a rabble rouse: he stirs the pot and sits back to watch the havoc he’s caused. And the only reason why anyone gives a damn is because he once wrote a book that became a worldwide phenomenon. Apparently, that’s an automatic pass to say and do whatever you want without being held accountable.
I better get writing.
wow. you went too easy on Bobby (I still matter!) K. His article was drivel. With proper asset allocation, rebalancing, and the company match, 401ks are much better than (dare I say it bob?) real estate! Bobby k should stick to real estate as that is the only thing he can repeatedly tell the world he is the master of…truth be told, self-promotion and bookselling may be his only true talents…this moronic article by Bob. K. attacking 401ks should never have been published on a “real” website. It is bunk.
Yahoo Finance knows what’s it doing though. I linked to it, hundreds of other people have too. They get the views and that’s pretty much all they’re interested in. All those nasty comments are still comments from people who hit the site, unfortunately….
I am of the belief that if you want to get certain results out of your life (in this case financially), simply find somebody who’s getting the results that you want and imitate them. It’s hard to argue that RK hasn’t produced positive results for himself which are worth imitating. Rather than dismissing, I’d dig deeper to fully understand. Disclosure: I don’t own a 401(K) because I have very little control over it and it requires me putting money into it every month, whereas I do own real estate which has produced wonderful results and increases my income every month.
Trent: let’s be realistic though. Can your average person make real estate their main source of retirement funds? Do they have the time? Retirement accounts allow you to make your picks (say a life-cycle fund) and then forget about it. Automatization makes it work.
RK is vague because his idea of investing: investing is a plan, not a product, not a procedure. This investment plan is the function of your current financial and personal environment; the current and potential economic, social, and political environment; as well as your intended financial goals. This means that each investment plan is individual and the accompanying advice will also be individual. This sort of planning and advice is the specific duty of your financial advisors, so you should visit them if you want personal advice. As a result of this idea, RK will not give specific financial advice until he understands your investment plan.
Anyway, the point of this piece is to inform the unlearned that there are four expenses that keep people struggling financially and the 401(k) investment is not something to depend upon. that millions depend upon are probably going to be struggling or even wiped out.
So what’s his general advice about this? “With a more sophisticated financial education, rather than have taxes, debt, inflation, and retirement accounts as drains on a person’s wealth, a person can convert those government-sponsored expenses into elements that work in one’s favor. By using the same rules of money the rich use, those four expenses will make you richer. In other words, taxes, debt, inflation, and not needing a retirement plan can make you richer if you use different rules of money.” Again, this ties into his idea of investing: investing is a plan, not a product, not a procedure. The silver lining is that there is still time to get a financial education, and that you should use this education to get ahead rather than be left behind.
I personally find that while his supporting evidence is questionable (I don’t agree with his presentation of the facts), I do agree with the general point that you shouldn’t rely on the 401k if you’re uneducated about it (just like the millions of employees that diligently invest into it every paycheck).