This stuff makes my blood boil.
Last weekend, I came across an article on Business Insider.
Its title was, “How much money you need to save each day to become a millionaire by age 65.”
I imagine the authors think they’re providing sound advice…
But basically, they’re just repeating the same old story we’ve been hearing for decades:
Get a job, work hard, put a little money into the stock market each month — and by the time you retire, you’ll have a comfortable nest egg to live on.
It’s a simple story with a happy ending, so millions of us have followed this “advice” for years.
There’s only one problem:
It’s a big fat lie!
Today, I’ll prove it to you…
And then I’ll show you the real steps to take if you’d like to retire comfortably.
By the Numbers
The article I’m referring to states that, by saving just a few dollars each day, investors can retire with $1 million.
More specifically, it says that if you’re 40-years-old and you save $20 per day (that’s $600 per month), you’ll reach $1 million by the time you’re 65.
How’s that possible?
It’s based on an estimated return of 12% per year.
The thing is, over long periods of time, the stock market has never returned 12% per year.
Long-term stock returns are closer to 6% to 8% per year.
But maybe you’re still tempted to give this article the benefit of the doubt…
I mean, even if you only earned 6% per year, as long as you saved $40 a day instead of $20, you could still retire a millionaire, right?
You see, this investment strategy fails to take into account something I call “The Three Retirement Killers.”
These three factors eat away at your savings, year after year. And these are the reasons — even though you’ve been following all the rules — that you’re still not rich.
Let me quickly go over each one.
Retirement Killer #1 — Inflation
Inflation is a measure of how much the cost of goods and services increases over time.
Each year, inflation is about 3%.
That might not sound like much, but at 3%, prices basically double every 18 years.
That means, by the time you retire, your nest egg will buy just half as much…
And will last just half as long as you need it to!
Retirement Killer #2 — Fees & Commissions
But inflation isn’t the only thing hurting your retirement…
Your savings are being drained by Wall Street brokerages and financial advisory firms, too!
Between sales commissions and hidden fees, the folks that manage your money are earning more than you do. For example:
You pay commissions to buy or sell stocks...
You pay 1% per year to the financial advisors that “manage” your money (even though nearly all of them underperform the market)...
And don’t even get me started about funds! Those are the biggest rip-off of all.
In fact, a recent study showed that 84% of a fund’s profits go into the pockets of the fund manager. Investors like you are left with just 16% of the gains.
Retirement Killer #3 — Taxes
And finally, most of these studies fail to take another big factor into account:
When you liquidate your holdings, you need to pay taxes.
Your tax rate will vary based on how long you’ve held your positions, and what type of investment vehicle you have…
But make no mistake:
Uncle Sam will always take his pound of flesh, and it comes right out of your bottom line.
Your REAL Returns
Half your returns get eaten up by inflation…
Another chunk goes up in smoke, thanks to Wall Street fees and commissions…
And a final piece goes into the pocket of Uncle Sam.
So, by the time you’re ready to retire, your “$1 million nest egg” is worth far less than half that amount.
Angel Investing to the Rescue
If you do the math, there are only two ways you can hit that $1 million number:
Either you need to save four times the amount Wall Street recommends….
Or you need to invest somewhere that can deliver returns that are four times higher than the stock market.
As long-time Crowdability readers already know, historically, there’s only been one asset class that’s consistently delivered those types of returns:
Early-stage private equity.
Early-stage investments have returned about 27% per year.
27% per year is roughly four times higher than the stock market averages.
With a diversified portfolio of early-stage investments, you could realistically have the chance to retire wealthy.
For more than 80 years, these investments have been off-limits to most folks, so Wall Street hasn’t given investors like you the chance to get into them…
But now the rules have changed.
That’s why we founded Crowdability:
We’re here to educate you about the market for early-stage investing…
And we’re here to help you reach your goals.