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Is a 401K or an IRA a Path to an Impoverished Retirement?

Here’s a very important question from Vince:

I’ve been thinking…. I’m 31 with a retirement fund that my employer contributes to.  So where is my retirement money better invested over the next 35 or so years? Stocks, bonds, etc? Or am I willing to take a 10% tax hit and make major upgrades to my soon to be purchased house so that my multi-generational family is more resilient? I’m thinking resiliency is the better retirement plan.

It touches on a central question many of us have.  What’s the better way to invest for retirement?  Is it in:

  • resilience (the production of food, water, energy, etc.) or
  • financial assets (stocks, bonds, real-estate, or gold).

Although I’m not a financial adviser and everyone’s situation varies slightly, I think we can answer this.  

Let’s start with the core assumption behind all investments in financial assets:  

Global financial assets, as a group, will be more valuable in 20-30 years than they are today.

This assumption is very unlikely to be true.

Why? Wall Street Sign

We are living through an era of decline and turbulence.

The global system is failing and the magnitude, scale, and frequency of future disruptions (due to inevitable financial, environmental, etc. trends) will be greater than anything we have ever experienced historically.

As a result, it’s very unlikely that global scale financial assets will be more valuable in 20-30 years than they are today.

 

An Investment In Resilience

In contrast, what does an investment in resilient production provide you over the long term?   To understand this, let’s zip forward twenty years.

Imagine a future where you’ve selected a good location for a home and invested in its productive capacity.   This resilient home:

  • Provides you with protection against price gouging, supply panics, corruption, and rationing.
  • Reduces your cost basis, which in turn reduces your potential of failure due to a loss of income.  Lower costs also speed up your savings rate.
  • Provides income (in a pinch) and an asset that will become more valuable over time.

 

What does this mean?

Resilient assets increase in value the worse things get, relative to everything else.

As a result, it’s the single best asset class to use as a hedge against inevitable global disruptions.

So, when you are thinking about putting money away for the future, consider this:  You would be smart to think about putting some money into a resilient home and community before you gamble your funds away on financial assets that rely on volatile global markets.

 

Your never behind the power curve analyst,

 

JOHN ROBB

 

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Comments on this entry are closed.

  • pragmatic sustainability

    Where are all the customer’s yachts is a great old book that pretty much covers it.

    If you have funds locked up in IRAs, consider a self-directed IRA through a custodian to invest in more resilient things than bits in a computer.

    There are some IRS headaches, no self-dealing but it is better than buy and hold equity returns over the last decade.

    http://en.wikipedia.org/wiki/Self-Directed_IRA

    • johnrobb

      PS, A self-directed IRA is a great option. JR

  • Wendy Kilpatrick Laubach

    We moved out of the city to a small community almost ten years ago and have put much of our free time and spare cash into improving our soil and cultivating fruit-bearing trees along with the seasonal crops. (Not to mention drilling wells, installing on-site sewage treatment, and building large rainwater cisterns.) We’re nowhere near off the grid, but every little bit helps. It’s not a bad idea to cultivate skills that your immediate neighbors want and need, too, and get used to asking and returning favors from them right now. Do they need help with a construction project? Do you share meals with them regularly, and take them food when they’re sick? Watch their houses and pets when they’re gone? If they yelled for help, do they know you’d come running, armed? Do they believe you’d pull them out of a burning building? (I don’t list all these things as accomplishments of my own, but as aspirations.)

    I couldn’t agree more about a debt-free life. Almost everyone thinks he can’t live on less, but he’s wrong. There are people around him doing it all the time. There’s no substitute for living within your income, whatever it happens to be, and saving. No mortgage, no car loans, no credit-card debt. What’s more, you can’t be both resilient and dependent on distant government assistance of any kind, and that includes Medicare and Social Security. You’d better have a family and community that take care of each other.

    • johnrobb

      Wendy, Thanks. Great advice about trust.

      In the current social and economic system, trust is highly discouraged. Why?

      Trust enables people to interact with each other without worrying about the contractual requirements of the relationship.

      JR

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