Take the Retirement Challenge. Is Your 401K or IRA Vulnerable to Losing Half?

Author: Bureau of Engraving and Printing. Photo credit: National Numismatic Collection, National Museum of American History. Wiki Commons. Used with permission.

Add up everything you have in your retirement accounts (401K, IRA, insurance, annuity, savings, etc.) and in your home equity (the difference between the value of your home and what you owe on it), and then divide that by half.

$250,000 401K
$ 50,000 IRA
$200,000 Equity in Home
$500,000 TOTAL

$500,000 divided by half = $250,000

Then ask yourself these questions:

“Are you willing to risk losing half of your wealth?”
“How would you feel if $250,000 vanished over the next twelve to eighteen months?”
​
That's what is at stake. In the last 2 recessions, investors lost more than half of their liquid assets. The Dow Jones Industrial Average dropped 55% in the Great Recession. The Nasdaq Composite Index sank 78% in the Dot Com Recession. Over 10 million homes have changed hands since 2007, and 3.5 million mortgages are still underwater (the loans are 25% or more higher than the value of the home). 

During the Great Recession, the Dow Jones Industrial Average dropped to a low of 6547 on March 9, 2009.

During the Dot Com Recession, the NASDAQ Composite Index sank to a low of 1,114 on Oct. 9, 2002.

Investing in the 21st Century requires a new strategy. Last Century ideas, like Buy & Hope, haven’t worked since 2000 and are unlikely to work until we cycle through the astronomical debt we’ve amassed, so that economic growth can kick in again. On January 30, 2020, the Bureau of Economic Analysis will release the advance estimate of 4th quarter 2019 GDP growth in the U.S. This report is expected to be under 2%. The Atlanta Federal Reserve Bank is forecasting 1.8% growth, while the New York Federal Reserve Bank believes the number will be closer to 1.2%.  

2% GDP growth is nowhere near enough to pay for the tax cuts of 2017. (Americans were promised GDP of 3%, as a conservative estimate.) Rather, the massive increase in public debt, which has soared to $23.2 trillion, is slowing, rather than growing, the economy (as was promised). Below are the projections from the Federal Reserve Board for 2020-2022, and the GDP growth rates for 2017-2020. 

GDP Growth in the U.S. 2017-2022

Source: Federal Reserve Board and the U.S. Bureau of Economic Analysis.

​Yes, real estate prices and stock prices are back to an all-time high, while unemployment is at a historic low. That’s really great. However, that was the case in 2000 and 2007, too, before the last two catastrophic downturns.

The pundits tout high stock prices and low unemployment as evidence of a great economy, without including the red flags that are clearly seen in the chart above. When asset rallies are fueled by low interest rates, rather than by economic growth or an increase in wages, bubbles form, just as they did in the previous two recessions. If you are too young to remember what happened in the Dot Com Recession and the Great Recession, the charts at the beginning of this blog offer a dire warning.

According to AttomData, the average wage earner cannot afford to buy a home in 74% of U.S. housing markets. According to Nobel Prize winning economist Robert Shiller, the only two times that the historic CAPE ratio of stocks has been this high was in 2000 and 1929, before the Dot Com Recession and the Great Depression, respectively. The Asset Bubble chart (above) reveals that the amassed debt, and the underfunded pensions, along with other historically high leverage, makes us more vulnerable today than we were in 2000 or 2008.  

When prices become unaffordable, asset bubbles tend to pop. As you can see from the chart above, Asset Bubbles were all inflated before they popped in 2000 and 2008, even while unemployment was low and the economy was still growing.

However, interest rates this time around are starting out much lower than they did before the previous two recessions. That means that even the “safe” side of your retirement plan is at risk because the Federal Reserve doesn’t have any room to cut rates to boost growth. On November 13, 2019, when Federal Reserve Chairman Jerome Powell testified before the Joint Economic Committee of Congress, he warned, “The current low interest rate environment may limit the ability of monetary policy to support the economy.”

Ford was downgraded to speculative bond status in 2019. General Electric has lost 2/3rds of its value over the past two years. These are not one-off events. Over 50% of corporate bonds are at the lowest rung, just above junk bond status. In fact, corporate bonds have lost money over the past few years.

This is a long way of saying that, rather than celebrating or being complacent that your home and retirement plan have gained back the losses they suffered in the Great Recession, it’s a good idea now to make sure that you keep those gains this time. Buy & Hold is really just riding the Wall Street rollercoaster, up and down. It’s a far better idea to fix the roof while the sun is still shining. There are certain years when protecting what you have could be your biggest payday (and not doing that could be your biggest nightmare).

So What Works?
Our easy-as-a-pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. They cost less time and money, while allowing you to sleep at night knowing your assets are protected, and you are earning money while you sleep safely. Click to watch Nilo Bolden talk about just how easy protecting your wealth is. Scroll to the end of this blog for additional, true testimonials, some from economists and VIPs, others from Main Street.

So, how can you learn The ABCs of Money that we all should have received in high school? You can read about these strategies in my bestselling books. You can call our office at 310-430-2397, or email [email protected], to receive an unbiased 2nd opinion on your current plan. Or you can join me at an upcoming Investor Educational Retreat, where you can learn this time-proven system, implement it in 3 life-transformational days and go home with a plan that works immediately and for the rest of your life.

Investor Educational Retreats
We are having a Florida Beachfront Retreat Feb. 8-10, 2020, an Earth Day Retreat in England April 24-27, 2020, an iconic Santa Monica Beach Retreat June 5-7, 2020 and a Wild West Arizona Adventure Oct. 10-12, 2020. Visit NataliePace.com for additional information on these retreats. Register by Jan. 31, 2020 and you’ll receive a complimentary coaching session, valued at $300. Call 310-430-2397 or email [email protected] to learn more and to register now. 

Be the Boss of Your Money
Nobody cares about your money more than you do. It’s important for you to be the boss – to know what you own and why, and to adopt a strategy that is right for you at this stage of your life. Do not have blind faith that someone else is doing this for you, particularly if their plan lost you 25% or more in the last downturn. Wisdom is the cure, and is critically important at this late stage of the business cycle, as we enter the 12th year of the current bull market.

Testimonials
“My husband spoke with Natalie Pace, and after a brief discussion, she charted a plan on the back of a napkin. I decided to take her advice. Soon after, we had the big crash. I was one of the few and lucky people who actually made money (instead of losing). So, thank you Natalie, for saving my retirement!”
Nilo Bolden, executive director at a law firm in Century City, CA
 
We asked Natalie Pace for a second opinion on our investment portfolio. She researched and reviewed each stock and fund. She then explained to us in plain English how we were positioned in the market and how high our risk exposure was. Her knowledge was so profound that we decided to take her retreat in Arizona. My husband was still quite skeptical, but 20 minutes into the retreat he turned to me and said "Thank you." Stocks and investing are no longer rocket science. We are finally able to take control of our money. We give thanks just about every day that we met Natalie. I feel like I live on a different planet. I'm so grateful. Thank you for changing our lives, our peace of mind, our future and our vision of what is possible - not to mention our stomach acid. We made a tectonic shift with you.
AC & AM

"College students need the information before they get their first credit card. Young adults need it before they buy their first home. Empty nesters can use the information to downsize to a sustainable lifestyle, before they get into trouble."
Joe Moglia, chairman, TD AMERITRADE
 
“Many people, including educated men and women, often get into trouble when they neglect to follow simple and fundamental rules of the type provided in [Natalie Pace’s] book.  This is why I recommend it with enthusiasm.” 
Dr. Gary S. Becker.  Dr. Becker won the 1992 Nobel prize in economics. 
University Professor, Department of Economics and Sociology and Professor, Graduate School of Business, The University of Chicago

“Provides almost fool proof methods for growing wealth over the long haul.” 
Success magazine.
 
“Our CFP manipulated us into investing in private placement REITs. I now know that these are very high risk. Many of these companies have been cash negative for years, borrowing from one investor to pay off another, and paying brokers a high commission to do that. We put in the paperwork last year to cash out of these. Nothing!!! Then we redid the paperwork in August, so we could get the next payout for December. They say that you can only get out of these things twice a year. If you miss the window you have to wait again. We did everything by the book. Once again trusting this would be taken care of.  Waiting…waiting…nothing. David, the salesman who put us into these investments, is not even returning our calls!!!!  We both have called every week for several weeks now and nothing!!!
D&T
(read more of this story by clicking here)
 

Join me at an upcoming Investor Educational Retreat to learn the ABCs of Money that we all should have received in high school. Be the boss of your money. Natalie Pace

Other Blogs of Interest
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
Win a Seat at a Retreat
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes? 
Are Health Care Costs Killing Your Budget? 
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities. 
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion. 
Counting Blessings on Thanksgiving.
Real Estate Prices Decline. 
Hong Kong Slides into a Recession. China Slows. 
They Trusted Him. Now He Doesn't Return Phone Calls.
Beyond Meat's Shares Dive 67% in 2 Months.
Price Matters. 
Will There be a Santa Rally? It's Up to Apple. Will JP Morgan Implode on Fairy Tales and Unicorns.
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Tesla's 3Q 2019 Deliveries Could Hit 100,000.
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
​The Winners and Loser of a Clean Energy Policy. 
Make the Climate Strike Personal. 
Ford is Downgraded to Junk.
From Buried Alive in Bill to Buying Your Own Island.
The Manufacturing Recession. An Interview with Liz Ann Sonders.
Gold Mining ETFs Have Doubled. 
The Gold Bull Market Has Begun. 
The We Work IPO. 
The Highs and Hangovers of Investing in Cannabis. 
Recession Proof Your Life. 
China Takes a Bite Out of Apple Sales.
Will the Dow Hit 30,000? A Check Up on the Economy
Red Flags in the Boeing 2Q 2019 Earnings Report
The Weakening Economy. 
Think Capture Gains, Not Stop Losses. 
Buy and Hold Works. Right?
​Wall Street Secrets Your Broker Isn't Telling You. 
Unaffordability: The Unspoken Housing Crisis in America. 
Are You Being Pressured to Buy a Home or Stocks?
What's Your Exit Strategy? 
Will the Feds Lower Interest Rates on June 19, 2019?
Should You Buy Tesla at a 2 1/2 Year Low? 
It's Time To Do Your Annual Rebalancing.
Cannabis Crashes. Should You Get High Again? 
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth
The Zoom IPO. 
10 Rally Killers. Fix the Roof While the Sun is Shining.
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
Tesla Delivery Data Disappoints. Stock Tanks.
Why Did Wells Fargo's CEO Get the Boot?
Earth Gratitude This Earth Day. 
Real Estate is Back to an All-Time High. 
Is the Spring Rally Over?
The Lyft IPO Hits Wall Street. Should you take a ride?
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
Drowning in Debt? Get Solutions. 
What's Hot in 2019?
The Debt Ceiling Was Hit (Again) on March 1, 2019.
How Bad Will the GDP Report Be?
2019 Investor IQ Test
The State of the Union
CBD Oil for Sale.
The High Cost of Free Advice. 
Apple's Real Problem in China: Huawei. 
2019 Crystal Ball.
2018 is the Worst December Ever. 
Will the Feds Raise Interest Rates? Should They? Learn what you're not being told in the MSM.
Why FANG, Banks and Your Value Funds Are in Trouble.
When the Santa Rally is a Loser, the Next Year is a Bigger Loser. 
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production. 
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.