Joe Withrow's Blog, page 13

Real Assets in a Virtual World: The Key to Breaking Free from Financial Illusions

Yesterday we talked about America’s declining “exorbitant privilege”. Now we stand at a crossroads.

The narrative of personal finance as we’ve known it for decades is beginning to unravel. The Age of Paper Wealth is over.  That means the days of dwindling interest rates and rising stock prices across the board are behind us.

The world has changed. And our understanding of wealth and financial stability must evolve with it.

I often ask myself, why do so many of us place blind trust in virtual numbers on screens, often far removed from tangible realities?

We’ve been conditioned to see wealth as a constantly fluctuating balance in our bank and brokerage accounts. Something that depends solely on the health of the financial markets. But what if we could step away from this illusory chase and root our financial future in something more solid… something real?

In the realm of personal finance, real assets are often overshadowed. But let’s peel back the layers.

Unlike paper wealth, real assets have lasting value. Whether it’s real estate, precious metals, or commodities, these assets don’t just represent value—they are value. And in uncertain times, they can offer a bedrock of stability and predictability.

What’s happened since 2022 in the financial world should serve as a wake-up call for all of us. No longer can we afford to cling to the Retirement Myth that has dominated our financial airwaves for so long.

Why resign ourselves to a future of uncertainty when the tools for financial independence are within our grasp right now? Real assets offer not just a hedge against financial instability. They are an avenue towards sustainable passive income.

I’ve had countless conversations with people who’ve experienced the  power of real assets. Time and again, they echo the same sentiment: “Why didn’t I do this sooner?”

The answer is simple: lack of knowledge and access. Retirement Inc. doesn’t want us to go down this path.

And that’s where The Phoenician League comes in.

Our investment membership isn’t just another information product. It’s a doorway leading to a world of opportunities grounded in real assets. We get our members connected to both investments and vetted financial professionals. That way reclaiming your financial sovereignty becomes as simple as plugging into the network.

And a new chapter is beginning…

We are creating a future where financial independence isn’t a distant dream. Instead, it’s a tangible reality. And at the The Phoenician League, we have a seven-part success path for getting there.

As I mentioned yesterday, we’re going to open our doors to the general public next month. When we do, we’ll have no choice but to raise our membership rates.

Before we do, I’d like to extend one final invitation to you. In a week or two we’re going to invite those on our wait list to join us at our current membership rate. This is lowest price we’ll ever be able to offer.

Are you ready to create financial security and start building truly passive income streams? We can help.

Secure your spot on our waitlist today. Your journey towards a robust financial future starts here: The Phoenician League Membership Platform

More to come…

-Joe

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Rethinking Wealth in the Age of Deception

Our financial world has dramatically shifted. America’s “exorbitant privilege” is fading…

Starting in 1944, the US was allowed to print money in exchange for real goods from other countries. And the only limit on this privilege was the dollar’s convertibility into gold.

Then, in 1971, President Nixon closed the gold exchange window. From that moment on, the US dollar became a floating abstraction based on one thing… People’s willingness to use it.

This is what French Premier Charles de Gaulle called America’s exorbitant privilege. Because the US dollar acts as the world’s reserve currency, only the United States could print money at scale to buy real goods from overseas.

That dynamic created what I call the Age of Paper Wealth.

From 1982 until 2022, there was one primary megatrend in the financial markets. Interest rates only went down… and stocks only went up.

Given this dazzling era of paper wealth, our views on financial security and wealth-building centered around the financial markets. That gave birth to the Retirement Myth—the idea that we should all pour our savings into stocks and funds to work up to our magical retirement “number”.

And sure, that approach to personal finance worked okay for a while. But everything changed when interest rates began their climb in 2022.

Now we have to ask – what if the primary megatrend has reversed? What if interest rates continue to trend higher? Will the standard approach still serve us?

To me, the Retirement Myth is a snaky notion. It preaches a life of labor with the promise of relaxation in its twilight. I look at that and I wonder – where’s the meaning? Where’s the purpose?

Then I have to ask—why wait for an uncertain future when you can achieve financial independence now?

And we do that by leveraging real assets that produce passive income for us. As the era of paper wealth fades away, real assets will become more and more important.

And here’s the thing – building passive income with real assets is simple. This is something anybody can do. It’s just that most of us aren’t aware that it’s even an option. Retirement Inc. crowded out all other alternatives.

That’s where our investment membership The Phoenician League comes in.

We’re not just another financial advisory club. We’re a beacon of financial independence with a focus on real assets.

At The Phoenician League, we connect our members to a robust network of financial professionals. These are people who are experts in their field. We also bring our members incredible investment opportunities designed to drive passive income from day one.

I see our membership as the best kept secret of the financial world. We haven’t done any marketing. And we’ve kept our doors closed to new members for the better part of the past twelve months. But that’s all about to change.

We are going to officially open up to the general public next month. The only downside is that we’ll have to raise our membership rates significantly to accommodate a larger group.

And that’s why I’m bringing this up to you today. We are going to give everyone on our wait list the opportunity to join The Phoenician League ahead of our public launch… before our membership rates rise.   

Are you ready to transition from ephemeral paper wealth to real assets and passive income? The Phoenician League holds the key. Join our waitlist today and in the coming weeks we’ll give you the opportunity to join us at the lowest price we’ll ever be able to offer.

And I promise, our current rate is insanely low. Our members recoup their entire membership fee within the first few months of implementing our passive income strategy.

So if you’re ready to unlock your path to financial independence, please join our wait list right here: The Phoenician League Membership Platform. We’ll be in touch very soon…

-Joe Withrow

The post Rethinking Wealth in the Age of Deception first appeared on Zenconomics.

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What comes next…

Today I’d like to share one final excerpt from my new book with you. It’s titled Beyond the Nest Egg, How to Be Financially Independent Outside of a Broken System.

Yesterday we set the stage for the book’s macroeconomic discussion. Today we’ll set the stage for the book’s suggested approach to personal finance.

The thing is – to manage our own finances successfully, we have to understand how all this macroeconomic activity impacts us personally. Here’s excerpt #3:

The Fed has spent the last thirty years consistently pumping cheap money into the financial system. By “cheap,” I mean money that it created from nothing.

In total, the Fed has created at least $8 trillion. That’s what we can verify. And there’s a good chance the Fed engineered even more new dollars through back-channels.

This onslaught of money created from nothing drove interest rates down to near-zero.

Then the commercial banks pyramided credit on top of these trillions of dollars by roughly ten-to-one. In other words, for every new dollar created, the banks could lend out ten dollars against it. And remember, this necessarily creates new money from nothing as well.

This all served to create a massive financial bubble in the US and many developed countries around the world.

Meanwhile, major western governments used this funny money to spearhead massive spending programs… for pretty much anything and everything.

The most obvious spending circled around military and welfare-state programs. But a quick search on the private search engine Brave (search.brave.com) for “most ridiculous government spending programs” will reveal all kinds of other shenanigans. It’s mind-blowing what these people have done.

As a result, many regular folks have been conditioned to see the government as this great cornucopia. Whenever there’s a problem, somehow our society has adopted the idea that it’s the government’s job to fix it. And given its seemingly infinite resources, the government has been quick to acquiesce.

That’s why all western governments are now drowning in debt.

Name any major western country and you can be sure that its debt-to-gross domestic product (GDP) ratio has ballooned in recent decades. In fact, many countries now service a debt that’s near or greater than 100 percent of their GDP.

These numbers are unprecedented historically. Never before have so many countries run up a debt that equals or exceeds their gross domestic production.

This is only possible in a world where central banks can create new base money from thin air. And that world has only existed since 1971. That’s when US President Richard Nixon removed the dollar’s final link to gold.

However, it appears we’ve reached the limit. We’ve come to the point where the economy simply cannot handle any more debt and cheap money.

The problem is, there’s no easy fix to this mess. The great Austrian economist Ludwig von Mises spelled out the dilemma very clearly in his great work Human Action: A Treatise on Economics.

Here’s Mises:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

What Mises was saying is this…

Once you go down the path of manipulating interest rates lower and printing new money from thin air, you necessarily sow the seeds of a future crisis.

If you keep going down that same path for too long, you’ll destroy the currency and wreck the economy beyond all recognition. This is the worst-case scenario. But if you recognize that your current trajectory is unsustainable, you can make the decision to reverse course.

This will result in a painful economic contraction. Artificially low interest rates and funny money fuel all kinds of malinvestment, and that malinvestment must be liquidated.

That’s what the necessary recession does. It clears out the bad debt and gets rid of unproductive companies. It’s not fun to go through, but it’s far preferable to destroying the currency and the entire economy…

-Joe Withrow

P.S. The new book just hit the shelves at Amazon. You can find it right here: https://www.amazon.com/Beyond-Nest-Egg-Financially-Independent/dp/B0CGG5G6XH/nch

The post What comes next… first appeared on Zenconomics.

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Was George Carlin right??

We’re going beyond the nest egg all week long.

That is to say, I’m sharing excerpts from my new book Beyond the Nest Egg, How to Be Financially Independent Outside of a Broken System.

Yesterday we covered the introduction. Today we’ll set the stage for the book’s macroeconomic analysis. Here’s excerpt #2:

I spent about eight years in the world of corporate banking. That was my first career. After that, I spent nearly a decade immersed in the world of high-end–investment research. That was my second career. That’s the lens through which I am writing to you today.

The focus of this book is how to get our personal finances right, in lieu of the shifting macroeconomic climate we find ourselves in. My passion is financial independence, but I don’t approach this from a consumerist mindset. To me, it’s all about living a purpose-driven life.

That said, there are forces at work out there that have an outsized impact on the economy and the financial system. And as I’m sure many of us have noticed, these forces have been pushing substantial changes over the last few years.

We are living through an incredible point in history. The sequence of events that take place over the next several years will shape the order of the new world.

I suspect most of us already know this to be true. We can “feel” it. We’ve probably felt it for several years now.

In the next few chapters, I’ll summarize what I think is happening on the world stage… who the major players are… and what it means for us. There are some important actions each of us should take right now to get ahead of what’s coming.

I suspect many of us realize now that the world is not as simplistic as the mainstream news presents it to be. There are power structures working behind the scenes to deliver carefully scripted narratives.

For the last several decades it certainly appeared as though those power structures were uniformly aligned. I’m speaking from an American perspective here.

Fiscal policy (Congress) worked hand-in-hand with monetary policy (the Federal Reserve). They each seemed to align with international interests.

That is to say, what happened in the US appeared to be in line with what the United Nations (UN) and the European Central Bank (ECB) wanted as well. Global policies often appeared to be coordinated. This was especially true when it came to monetary policy and interest rates.

And here’s the thing—this seemed to be the case regardless of which political party happened to be in power at any given time. Political campaigns made all kinds of lofty promises, but nothing seemed to change much once the elections were over. This fueled a belief in some circles that there must be a shadowy, unified organization operating behind the scenes.

Comedian George Carlin would talk about this in his skits. “It’s a big club and you ain’t in it,” he would say.

But it has become clear that this isn’t exactly true…

-Joe Withrow

P.S. If you would like a little more information on the book ahead of its launch this week, just go here: Beyond the Nest Egg Book Launch

The post Was George Carlin right?? first appeared on Zenconomics.

The post Was George Carlin right?? appeared first on Zenconomics.

Let’s go beyond the nest egg…

As I mentioned yesterday, I’m putting out a new book in the coming days. It’s titled Beyond the Nest Egg, How to Be Financially Independent Outside of a Broken System.

As such, I thought I would share a few excerpts with you this week. And I suppose it makes the most sense to start with the introduction. Here it is:

The world has fundamentally changed.

It used to be that a lack of information was one of our biggest challenges. Prior to the internet, finding information was much more difficult and time-consuming. It could take days, weeks, sometimes even months. Today, however, we have the opposite problem. We are inundated with incredible amounts of information all day, every day.

The problem is, most of this information is just noise. Much of it is nothing more than junk. And if we fill our heads with junk, we’re far more likely to make bad decisions.

The advent of the internet and the over-availability of information is just the beginning of how our world has changed, significantly and permanently.

Like me, I suspect many can “feel” that things aren’t going back to the way they used to be. At first, that’s an unsettling thought. What does that mean for us? And by us, I mean the regular folks.

Should we keep doing things the way we always have and hope for the best? Or should we make changes? And if it’s the latter, what changes should we make?

To answer this question, we must understand what’s actually happening on the greater world stage. And to gain this understanding, we must cut through the smoke, the mirrors, and the biases that pervade the information we take in every day.

We must understand that there is a big difference between information—which is common—and insight—which is not. The more we can sift through the information surrounding us and focus only on the insight, the better.

And one of the best ways to do this is to learn how to cut through the fluff and analyze what really matters—incentives.

If we can get a good feel for a person or an institution’s incentives, we are much better able to understand and project future actions. Then we can make our own decisions accordingly.

That is what this book is all about. Over the course of the next several chapters, we’ll talk about exactly what’s happening in the world today.

We’ll discuss the big economic changes that are brewing right now, and then we’ll dig into the various factions that have an outsized influence on both the monetary system and the economy. We’re also going to take a dive into exactly how we can structure our finances accordingly.

But first, let me give you a fair warning…

I’m going to provide you with my independent analysis. It’s not going to look like anything that will ever be presented on television or in mainstream news articles. And I don’t self-censor.

Those who automatically reject anything that doesn’t immediately conform to their pre-existing beliefs and worldview may be a bit uncomfortable with my analysis. But if you’re willing to give it a hearing, you will find that the incentives I have uncovered are hard to refute.

So, if you’re willing to accompany me, let’s carry on. But please buckle up. There are no paved roads where we’re going…

-Joe Withrow

P.S. If you would like a little more information on the book ahead of its launch this week, just go here: Beyond the Nest Egg Book Launch

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We are creators in this world…

“I write because I don’t know what I think until I read what I say.” –Flannery O’Connor

I love this quote. It comes from early 20th century American novelist Flannery O’Connor. Perhaps ironically, I’m not familiar with any of O’Connor’s books. But someone shared this quote with me years ago and I find it to be 100% spot-on.

The act of writing is both therapeutic and insightful.

It’s therapeutic in the sense that we all carry around a bunch of information in our head all day, every day. Our brain expertly processes this information for us. It instantly goes to work trying to filter out the “noise” so we can focus only on what’s important.

This gives us a greater understanding of the information we’ve taken in. And the act of putting that information to paper feels something like a release. It’s like a weight’s been lifted from our shoulders. As a writer, we feel like we’ve done something important when we put out what we consider to be quality content.

Writing is also incredibly insightful. As we sit down and try to communicate our understanding of the information we deem important… our understanding grows. To me, this magical. I can’t explain it.

There have been plenty of times when I’ve been writing up my analysis of a certain event or theme – analysis that I thought I knew inside and out – and then even deeper insight came to me. I realized there was even more to the story than I had thought… and suddenly my writing went in whole new directions. Like a self-driving car, it just started steering itself. I had no choice but to simply go along for the ride.

Then when we finally stopped, I read what I had written and couldn’t help but be impressed. Somehow, like magic, I discovered that I had even more nuanced thoughts and analysis on the topic. On occasion, these thoughts and analysis were things I couldn’t find anywhere else. My pen had birthed them by itself.

There’s something about this act of creation that is immensely satisfying. And I think that’s true of all forms of creation – not just writing. I think that’s embedded in the human experience.

Years ago I read something that really resonated with me. Like O’Connor’s quote above, I felt in my heart that it was true. A guy was trying to communicate some interesting nuances around moral philosophy. And he pointed out that the Bible has been translated many times.

The Old Testament was written in Hebrew and Aramaic. The New Testament was written in an early Greek dialect. Then it was translated into “Old Latin”. And in the 4th century St. Jerome translated it into a modern form of Latin.

Then throughout the Middle Ages various people translated the Bible into several European languages. And it wasn’t until the 14th century that people started to translate the Bible into English. Now there are well over twenty English versions of the Bible that are readily available today. And it’s been translated into numerous other languages as well.

Here’s the point…

This gentleman was researching the oldest translations of the Bible. And he felt very strongly that Jesus of Nazareth told his disciples that humans are “one step removed” from angels. That we are living creators in this world.

That comment has been lost in translation, but I found it incredibly profound. Then I look at the world around me and I can’t help but notice – we are indeed the only creatures on Earth capable of creating at will.

As best I can tell, all other creatures have very specific purposes. Bumble bees take nectar from flowers and use it to make honey. That honey creates a highly dense source of energy that fuels life. Meanwhile, this same act pollinates the flowers and helps them spread. Those same flowers produce oxygen which all land-based creatures need to breathe in order to live.

There are plenty of other examples of creatures having a very specific purpose. But the thing is – that’s all they can do. They can’t create new purposes. We can. That makes us creators in this world… just as the Nazarene pointed out per this ancient translation.

So why am I sharing all this with you?

Well, over the past few years I’ve been working on a passion project. It’s a new book titled Beyond the Nest Egg, How to Be Financially Independent Outside of a Broken System.

When I sat down to write the book, my goal was threefold. I wanted to de-mystify what’s been happening in the economy. Then I wanted to propose a step-by-step approach that anyone can use to create true financial security for themselves and their family. And lastly I wanted to lay bare a tried-and-true process for building passive income streams. If we want to be financially independent, we need passive income.

I’ve spent considerable time researching all these items. And I’ve applied this approach to personal finance in my own life with great success. We launched our investment membership The Phoenician League to help others implement these same systems as well.

So I figured I already had all the knowledge I needed to write a book. Then I started writing and found that I had even greater insight into these matters than I thought.

When I passed the finished manuscript on to my editor, she was more complimentary of it than anybody has ever been complimentary of anything I’ve ever done. She told me that she knew nearly nothing about the matters we discuss in the book, but she walked away feeling like she had a firm grasp on everything. She told me that I did a wonderful job breaking down complex topics into easy-to-read, highly digestible material. As a writer, that’s exactly what you strive for.

We’re going to publish the book on Amazon this week. It will need to go through their review process, but it should be live by Wednesday. When it’s up, I’ll provide a link if you’re interested in checking it out.

I’d also like to share with you a few excerpts from the book this week. That way you can get a feel for if this is something you might be interested in. I know we all stay busy… so the decision to buy a new book is a major time commitment. I’ll pull back the curtain for you this week so you can make an informed decision.

More to come tomorrow,

-Joe Withrow

P.S. If you would like a little more information on the book ahead of its launch this week, just go here: Beyond the Nest Egg Book Launch

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The New Age of Financial Freedom: It’s Not About Retirement

We’ve been talking all week about the origins of modern personal finance… and why it’s time to rethink our approach. Today let’s talk solutions.

To me, everything drives towards financial independence. Or financial freedom. Whichever you prefer.

Now, I realize these are often used as buzz words. And the people promoting them pitch the idea that they can enable a life of leisure and luxury. I’m not interested in any of that.

When I talk about financial freedom, what I’m interested in is the ability to live a purpose-driven life. For many of us, working a nine-to-five on the hamster wheel just isn’t satisfying.

So how do we achieve financial independence? It’s really rather simple.

It’s all about the power of assets. Remember Monopoly? Owning assets… that’s the game’s main lesson.

Today, we are in the midst of a sea change. As the economic climate shifts, clinging to old notions can be a losing battle.

Take retirement, for instance. The old system pitched the “nest egg” model. Remember those commercials asking, “What’s Your Number?” The message was simple: Save enough, hit your “number,” then retire.

But let’s be frank. That model is as ancient as a rotary phone. In today’s world, it’s not about accumulating a retirement stash. It’s about acquiring assets that yield income. Assets and income should be on the same team. We shouldn’t have to choose between them.

Here’s my philosophy. If we focus on increasing our income by acquiring the right assets, we make the entire concept of retirement obsolete. Then age becomes just a number. Whether 45 or 65, if our assets generate enough monthly income to cover our needs, voila! We’re independent.

Now, you might wonder, “Where does tax fit in?” So many investing programs promise big returns… but they’re completely mum on the issue of taxes.

Enter real estate – the unsung hero of financial strategies.

With real estate, we aren’t just investing. We’re building a business. And guess what? This venture can be incredibly tax-efficient. Rental real estate brings in more than just money. It can be a source of tax deductions, thanks to expenses and depreciation.

To break it down: Imagine owning ten properties, each producing $600 monthly. That’s an annual income of $72,000. And that income comes in tax-free.

Compare this to the nest egg model where we need to accumulate well over $1 million in financial assets to provide us with an annual income of $72,000 in retirement. Then we will be taxed every time we make a withdrawal from our retirement account.

Plus, every withdrawal we make from our nest egg reduces our assets. That doesn’t happen with rental real estate. In our example above, that $72,000 rolls in year after year without cannibalizing our asset base.

Sound magical? It is! But this isn’t about hitting the jackpot overnight. It’s a calculated, deliberate journey.

While it sounds straightforward, I won’t sugarcoat it. Like any good thing, it requires effort. Real estate isn’t a sprint. It’s a marathon.

The goal is crystal clear: Create a system that leads to financial independence. With the right strategy and patience, we can achieve financial freedom much faster than most would think possible.

But the system is only as good as its components.

Allocating resources wisely and investing in the right markets is key. Once we master that, we unlock a life where our time isn’t tied to a paycheck. We live on our terms, dedicating ourselves to passions, loved ones, and communities.

Before I sign off for the week, let’s bust one last myth. Achieving financial independence doesn’t require a miracle. Nor does it require us to work sixty hour weeks. With the right tools, knowledge, and network, it’s within reach for anyone.

And here’s the thing – those tools, knowledge, and network are right within the grasp of anyone who wants them… if they know where to look. And the best place to look is my new book. It’s titled Beyond the Nest Egg: How to Be Financially Independent Outside of a Broken System.

My goal with the book is threefold. First, I want to de-mystify what’s happening on the macroeconomic stage right now. Then we’re going to spell out exactly how to create true financial security through proper asset allocation. And finally we’re going to map out exactly how to achieve financial freedom through rental real estate.

We’re putting all the finishing touches on the book design right now. Our goal is to publish it next week. If you’d like to be among the first to get a copy, just go right here: Beyond the Nest Egg Book Launch

-Joe Withrow

P.S. Don’t just settle for retirement. Aim for freedom. Embrace the art of financial independence. It’s more than just a dream… it’s a legacy in the making.

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On retirement, incentives, and perpetual growth

Sooner or later, we all sit down to a banquet of consequences. -Robert Louis Stevenson

We’re talking all things personal finance 101 this week, and this quote seems to fit.

For those just joining us, what we consider modern financial planning has its roots in the Employee Retirement Income Security Act (ERISA). That act passed in 1974.

This legislation created 401(k)s and Individual Retirement Accounts (IRA). And it laid out the framework for what we consider “retirement” planning today.

As we discussed yesterday, ERISA pushed millions of people into the financial markets for the first time. Then an entire industry grew up around the concept of “retirement”. This inadvertently set the stage for new challenges… the challenges we face today.

These challenges went unnoticed at first. But now that the Age of Paper Wealth has sunsetted, we’re entering an entirely new economic climate. Thus, we must ask – what are the unintended ripples of this seminal act?

ERISA was constructed as though the Age of Paper Wealth would last forever. That age saw plummeting interest rates and rising stock prices. This gave rise to the belief that perpetual growth was inevitable.

The financial markets today still operate under that assumption. If you’re not growing, you’re dying. That’s still a popular statement in the realm of investment research.

This leaves us with a modern quagmire.

Interest rates are now on the rise. And we’re seeing volatility around both the stock market and consumer price inflation. Everything is whipsawing back and forth because investors don’t know yet what to make of this new climate.

Plus, rising rates are putting a major strain on some very important budgets. Corporate bankruptcies are on the rise. And deeply indebted national governments are facing rapidly increasing debt service costs. Thatsets the stage for potential tax hikes in the near future.

With all these moving parts at work, the financial strategies once deemed foolproof now appear on shaky ground. And that’s not news. Many people already understand this. They feel it.

But ERISA and the retirement industry perpetuated the idea that there was but one approach to financial planning. They trained people to pour their savings in the financial markets for “growth”. And their idea of diversification is simply to buy stocks and funds across different industries.

Simply put, this approach won’t work well in the current climate. Yet, the retirement industry won’t let it go.

I don’t see this as malice. It’s understandable. It’s just their incentive.

The retirement industry gained tens of millions of captive customers over the last forty years. These customers collectively poured trillions of dollars into qualified retirement plans… and most of those plans generate billions in fees for the industry.

They need those billions to stay in business. That’s why they can’t let “personal finance 101” change. Their business model depends on the status-quo.

But the status-quo will leave a lot of people in a very difficult spot going forward. We’ll talk about some solutions tomorrow…

-Joe Withrow

P.S. The days of perpetual growth are over. At some point that will become evident even to the retirement industry. And that means the current model is broken.

Are you ready to create financial independence outside the broken system? If you are, it’s time to go Beyond the Nest Egg.

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The retirement industry and its ripple effect…

Yesterday we discussed the genesis of modern financial planning. It all stems from the Employee Retirement Income Security Act (ERISA) that passed in 1974.

ERISA was more than just legislation. It sparked a transformative wave in financial planning. In fact, it created the entire “retirement” industry.

That being the case, we need to ask ourselves an important question. How did this single act shift our perspectives and practices?

Before ERISA, employees didn’t have to spend much time planning for retirement. That’s because they could count on receiving payments from both Social Security and a corporate pension plan after they retired. These programs guaranteed a steady stream of income for life.

Many people supplemented these items with personal savings. That became known as the “three-legged stool” concept. As long as all three legs were in place, retirement planning was simple.

However, as we moved into the 1970s and 80s, it became very clear that corporate pensions just weren’t sustainable. That leg of the stool was starting to teeter.

That’s why ERISA created 401(k)s and IRAs. They were to be a replacement for guaranteed pension plans.

With this shift, employees suddenly were responsible for their own retirement investments. Financial planning was no longer a distant concern. It quickly became a pressing necessity.

And that’s when the floodgates opened.

As we discussed yesterday, Wall Street very rapidly gained millions of new captive customers. They responded by creating all kinds of funds designed to go into 401(k) plans. These funds were laced with hidden fees. That made them quite lucrative for the funds’ creators.

Of course, these fees ate into the funds’ performance. Many 401(k) plans consistently underperformed the market year after year. Fees were one reason for that.

In addition, many of these funds chose their investments based on “optics”. That is to say, the fund managers moved in and out of positions based on what they thought looked the best to the companies they were pitching their funds to. In other words, the fund managers had incentives that weren’t always aligned with those of normal investors.

Still, this approach to personal finance worked reasonably well during The Age of Paper Wealth. From 1982 to 2022, interest rates consistently fell and U.S. stocks consistently went up… taking even the most mediocre of 401(k) funds up with them.

But as we’ve been discussing, that age is over. Rates are now on the rise… and investors are still grappling with what that means for the stock market.

That’s why we’ve seen so much volatility of late – big swings down followed by big swings up. Nobody under the age of 70 has been an adult in a world where rates didn’t constantly fall and stocks constantly rise.

Yet, personal finance 101 has refused to change. The retirement industry is still peddling the same advice as it has for forty years now. And that’s led to some unexpected reverberations. We’ll talk about those tomorrow…

-Joe Withrow

P.S. Personal finance 101 may not want to change… but it will have to. Sooner or later the world will realize that it’s broken. And that means it’s time to rethink our thinking.

Are you ready to create financial independence outside the broken system? Well my friend, it’s time to go Beyond the Nest Egg.

The post The retirement industry and its ripple effect… first appeared on Zenconomics.

The post The retirement industry and its ripple effect… appeared first on Zenconomics.

The Genesis of Modern Financial Planning

Financial independence is the ability to live from the income of your own personal resources. –Jim Rohn

Many years ago I made the decision to pursue financial independence. That is to say, I wanted to create a situation where I was in full control of both my time and my money.

With that goal in mind, I began reading books on personal finance. Personal Finance for Dummies… The Truth About Money… Financial Peace – I read all the popular personal finance books at the time.

What jumped out at me was how uniform each book was in their suggestions. They were all reading from the same script.

I figured that was a good thing at the time. If all these popular books agree, they must be on to something—right?

Well… yes and no. It turns out there was a very specific reason why the top personal finance books each peddled the same advice.

The United States Congress passed legislation in 1974 that would shape the future of personal finance in America for decades to come. That act was the Employee Retirement Income Security Act, otherwise known as “ERISA”.

In the early 1970s, corporate bankruptcy storms blew through America. They left workers without the pensions they’d been promised. Retirement dreams turned to nightmares. This fueled public outrage throughout the country.

ERISA was Congress’s answer. The legislation passed in 1974. Then it was expanded in 1978, 1980, 1982, 1984, and 1986.

ERISA created qualified retirement plans like 401(k)s and individual retirement accounts (IRAs). Then it detailed all kinds of rules, limits, and requirements for these plans.

What’s more, Congress designed the legislation to appease the general public’s desire for security.

ERISA demanded that those at the helm of retirement plans act in the best interests of participants. Congress said the act would provide a shield against mismanagement. And they told workers it would provide them with safeguards.

The legislation also mandated regular, transparent disclosures about retirement plans to participants. The idea was that this would keep employees in the loop. The reality, of course, is that nobody actually reads any of these legal disclosures.

Regardless, its proponents could only regard ERISA as a tremendous success. That single piece of legislation completely reshaped retirement planning in America. And it set the stage for The Age of Paper Wealth.

That’s because the act herded American savings into the financial markets. Employees with no investment experience began funneling their money into funds of various types.

Naturally, Wall Street loved it. The Wall Street firms creating these funds suddenly had millions of new customers. Captive customers, even. And that meant their fees went through the roof.

This institutionalized retirement planning as an industry unto itself. And as with any industry, self-preservation became a prime objective.

This created a ripple effect that has an impact still to this day. More on that tomorrow…

-Joe Withrow

P.S. I know sharp-eyed readers can see where we’re going this week. ERISA paved the way for an institutionalized personal finance industry… but that industry is broken. Today, it exists not to serve customers, but to serve itself.

The Age of Paper Wealth has ended. And that means it’s time to rethink everything we thought we know about finance.

It’s time to go Beyond the Nest Egg.

The post The Genesis of Modern Financial Planning first appeared on Zenconomics.

The post The Genesis of Modern Financial Planning appeared first on Zenconomics.