Most investors fail because:
- They aren’t saving enough
- Money is needed for other things (e.g. emergency expenses, large purchases, term life premiums, etc) and;
- Behavior
This is something DALBAR has researched year after year after year.
On that last one… lots of folks get spooked when the stock market crashes and they do crazy things like, pull money out of the market at the bottom of the crash.
But to be fair, stock market crashes tend to correlate with economic slowdowns.
I once had the pleasure to meet this dood (back in the days when I made house calls) who had just been laid off from work. He was forced to tap into his 401(k) because he had drained all his savings because unemployment wasn’t enough to live on.
His 401(k) fees weren’t the problem. It was the lack of liquidity in his investments. It’s not that fees are totally unimportant. They can impact how much money you ultimately end up with, but… it’s a moot point if you’re forced to spend your savings before you retire. And that’s part of the problem with using an investing-centric approach. It’s not that investing can’t work. It’s that it leaves you with very little liquidity. Investments perform well when you hold them for long periods of time… like 30 years. Short holding periods kill investment returns. But… real life requires you to have cash for things like a new car when your old one dies or money to reshingle your roof when the damage isn’t covered by insurance or money to escape your crazy ex-husband (or ex-wife, as the case may be) or… money to supplement unemployment benefits.
Speaking of which, if your whole life policy is set up correctly, it does more than protect your family against your premature death. It also protects you from a variety of unforeseeable risks while you’re still alive.
If you want to learn more about how all this works, sign up to my email list and I’ll show you.