Rich Dad-Wrong Dad: The Case For and Against 401 (k) Plans
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Big fan of Robert Kiyosaki here.
I believe the underlying message of his books is that there’s a difference between wealth creators and wage earners. I also think that society conditions us to spend and earn ourselves poor, not rich.
But, the key to financial independence is that there’s no such thing as a guru. Generation X Finance says that the author of Rich Dad/Poor Dad is guilty of over-reaching when he attacks the 401(K) system as “the biggest scam ever.”
Gen X Finance certainly makes a case, but is a little less generous than my allegations. I say the article is an over-reach. Gen X Finance claims Kiyosaki is off his rocker. (Again.)
Ouch.
Let’s look at both sides.
Kiyosaki wrote this in his Yahoo Finance column.
If you are unsure as to whom (and what) to believe, the “Time” article made two more statements worth considering. They are:
1. “The older you are the riskier a 401(k) gets.”
2. “Forty-four percent of all Americans are in danger of going broke in their post-work years.”
Gen X Finance takes two major swipes at the article. First, it is not necessarily true that the older you get, the riskier the 401 (k) is. Most 401 (k) programs offer ways to balance the portfolio and manage risk as the worker ages. (I’ll add that the 401 (k) program shouldn’t be blamed because 44 percent of all Americans are in danger of going broke, either. There are so many more factors that have put Americans in this bind.)
Second, GXF adds that Kiyosaki doesn’t offer an alternative to the 401 (k). That’s definitely a problem.
To defend Kiyosaki, I will say that the 401 (k) is often depicted as a magic bullet in the mainstream financial media. Financial companies pump the notion that no matter what you do, the 401 (k) money will be there. That’s not true. You still have to watch over your investments and you still have to take responsibility for your own wealth creation.
Another point that perhaps Kiyosaki was trying to make is that companies often stuff their 401 (k) plans with their own stocks. That buoys their stock price. But, if the company falters, i.e. Enron, the investment can be worthless.
Again, this isn’t the plan’s fault. If you have a 401 (k) plan that matches with company stock, by all means, diversify.
To sum it up, whether you’re a rich dad (or mom) or poor dad (or mom), treat the 401 (k) as another tool in your toolbox. Use it wisely. Use it safely. And recognize it as merely a tool, not the finished product.
Related posts:
- Rich Dad, Poor Dad Complaints
- Why Being Cheap Doesn’t Mean Being Rich
- Uncovering The Conspiracy Of The Rich
- The First Book of Financial Education: Rich Dad Poor Dad
- Conspiracy of the Rich
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is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
