Trillions of Dollars Evaporate Without Warning

Dear Money & Crisis Reader,

“The bestlaid plans of mice and men often go awry.” —Robert Burns

Once upon a time, you could rest easy knowing that if you put a certain amount into an account every paycheck, your retirement was safe and secure.

But these days — post-2008, that is — you no longer have that certainty.

Inflation is eating away at our savings…

The estimated cost of retirement is skyrocketing…

And the next wave of retirees is woefully unprepared for another financial crisis.

In fact, the reality is that our retirement was never really as “safe” as we thought it was.

We just had a spell of good luck… and the other shoe just hadn’t dropped yet.

All it took was one financial crisis — and the heap of personal debt that followed — to scupper millions of retirement plans.

And it’s not just folks who had half-baked retirement plans that were affected.

The Decade-Long Retirement Recovery

Savvy spenders who invested wisely… and planned their retirement meticulously… watched as their retirement savings took a colossal hit.

During the crisis, trillions of dollars evaporated from the 401(k) accounts of American workers.

If you had been on the job for 20 years at the time, the average loss to your savings was a massive 25%.

It’s taken nearly a decade for the country’s 401(k)s to fully recover. But the folks who retired before then — especially those who clocked out between 2008 and 2011 — took an enormous hit.

In one of our regular strategy meetings, Currency Wars author Jim Rickards pointed out that the 401(k) is great as a savings incentive… But it isn’t as bulletproof as everyone thinks.

“The tax benefits of the 401(k) are fine,” says Jim. “The idea that you can put in pre-tax dollars and possibly get a match from your employer, let it compound tax-deferred for decades… that’s all good.

“There’s no reason not to take free money from the government.

“But the problem is often that the choices are quite limited. They steer you into either money market funds, which of course pay nothing, or stocks, which are doing very well for years but in my view are unduly risky.”

But the folks who had to defer their retirement because of the financial crisis weren’t those who were hit the worst.

You’ve probably heard that 8.8 million people lost their jobs during the Great Recession.

But did you know that 60% of the folks who lost their jobs were working mid-wage jobs paying between $14 and $21 per hour?

Many of them worked in financial services and construction. They never imagined they’d lose their job — let alone be out of work for six months… a year… or even longer.

Most of these folks had never even heard of an emergency fund… let alone actually had one.

In their desperation, they turned to the only place they could — their 401(k)s.

Some folks took out loans against their 401(k), which took them years to pay back.

But almost half of the workers who lost their jobs cashed out their 401(k) accounts altogether.

As you can imagine, this devastated their retirement plans.

Many of these folks will never get back on track. And will have to make serious lifestyle changes once retirement rolls around.

The hard truth is… you can prepare for your retirement all you want… But if you’re not ready for crisis, all that preparation isn’t worth a hill of beans.

So what could they have done differently? How could they have safeguarded their finances against this disaster? And what can you do to make sure it doesn’t happen to you?

Like Kevlar for Financial Calamity

These folks needed an emergency fund.

This is simply a stash of money set aside to act as a financial cushion when times are hard.

According to Forbes, you’re six times more likely to take out a loan against your 401(k) if you don’t have an emergency fund.

Most financial experts recommend that you save three-six months pay for your emergency fund.

But as we’ve seen in the past, the time it takes to find a job is drastically increased during a financial crisis.

For that reason, I recommend trying to save eight months to a full year of pay for your emergency fund.

That way you’re covered if you lose your means of earning for an extended period. And you won’t have to dip into your retirement savings.

Trust me. You won’t regret it.

All the best,

Owen Sullivan

Owen Sullivan
Editor, Money & Crisis

Editor’s note: The strategies you read in Money & Crisis were developed with the help of Jim Rickards, the best-selling author of Currency Wars and The Death of Money.

For a limited time only, Jim is sending readers a FREE copy of his brand-new hardcover book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis.

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