Across the country, American workers share similar money worries, from keeping up with the cost of daily essentials — rent or mortgage payments, car upkeep, fuel, and groceries — to planning for long-term financial security.
The thought of retirement looms in the background, and people are concerned about their savings and Social Security’s role in their future stability.
Motivational speaker and personal finance author Tony Robbins offers some insight on Social Security and also points to a key detail regarding Americans’ 401(k) plans about which many people are unaware.
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Social Security was never designed to cover all the financial obligations retirees encounter.
Robbins emphasizes the fact that, while the federal program’s monthly paychecks play a role in retirement income, they should only be a small portion of a person’s overall financial plan. He warns that depending solely on monthly Social Security benefits could lead to serious financial struggles in retirement.
Many Americans avoid calculating the exact amount they’ll need to retire comfortably, much like the reluctance to step on a scale after the holiday season, Robbins explains.
Related: Scott Galloway sends strong message on Social Security
Health care is also a significant factor in retirement, with Medicare requiring payments in the form of premiums, copayments, and deductibles.
Additionally, decisions about housing — whether to rent, own, or relocate — come with financial considerations that retirees must navigate.
Robbins’ advice underscores the importance of proactive financial planning to avoid unpleasant surprises down the road.
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Tony Robbins has a major warning about Social Security and 401(k)s
Robbins goes as far as to warn Americans that relying too much on Social Security to cover costs in retirement can be a “disaster.”
He encourages people to contribute to employer-sponsored 401(k) plans and tax-advantaged IRAs (Individual Retirement Accounts).
A study conducted by the Employee Benefit Research Institute revealed that 72% of American workers feel assured about their ability to maintain a comfortable lifestyle in retirement. However, 58% admit that thinking about retirement finances causes them stress.
Robbins highlights an even more critical insight from the research: Only half of American workers have taken the time to estimate how much money they’ll need beyond their Social Security benefits to support themselves in retirement.
More on retirement:
- Scott Galloway offers bold opinion on Social Security
- Dave Ramsey bluntly warns Americans about retirement
- Tony Robbins sends strong message on 401(k)s
But Robbins explains one fact about Americans’ 401(k) plans that he believes should be more widely recognized.
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Robbins explains 401(k) fees that many do not understand
The 401(k) has been the go-to retirement plan since the early 1980s, with over $3.5 trillion invested today.
While it seems baby boomers should be financially secure after decades of compounding, many are far from it. The culprit is hidden fees, Robbins explains.
The Vanguard Group’s founder John Bogle calls it the “tyranny of compounding fees,” according to Robbins.
Most people don’t know what they’re paying, and many mistakenly believe their plan has no costs. Yet, one person may spend 10 to 15 times more than their neighbor for the same product, buried under layers of confusing charges and fine print.
Hidden fees add up, with more than 17 buried in the fine print, Robbins said. Most plans rely on actively managed mutual funds aiming to outperform the stock market, yet 96% fail over a decade. Mutual funds average a 1.5% expense ratio, while low-cost index funds — 96% more effective — charge just 0.14%.
“If you’re investing $100 in a fund like that, it costs you 14 cents,” Robbins said. “On the average fund, it’s $1.50. That doesn’t sound like it, but it’s a thousand percent difference in fees. And those fees compound every year as you reinvest.”
“See, ignorance is not bliss,” he added. “And what you don’t know in the financial area will hurt you.”
Robbins mentions Bogle again, this time explaining an analogy he has made.
“Imagine that you’re in a business where you put up all the money. You take all the risk. If you lose, you lose,” he said. “But your investment partner, the person who’s handling the funds for you, gets up to 70% of your profits over the lifetime of your investing.”
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