If You Could Know the Future, Would You Invest Differently?
Rich Dad's Prophecy is the book by Robert Kiyosaki that is subtitled:
Why the Biggest Stock Market Crash in History Is Still Coming …
and How You Can Prepare Yourself and Profit from It!
This book was written (with Kiyosaki's co-author and partner, Sharon Lechter, CPA) in 2002. All of the predictions made in this book are right on track – if not ahead of schedule.
The primary "prophecy" is that a MAJOR stock market upheaval is coming in 2016. This is the year when an estimated 2,282,887 "baby boomers" turn 70 – and are required BY LAW to make mandatory withdrawals from their 401 (k) accounts. In 2017, the number of people turning 70 jumps by 700,000 to 2,928,818, and keeps increasing every year thereafter.
What does this mean? Since the creation of the pre-tax retirement funds, Americans have been given incentives to place / spend their savings on stocks and mutual funds. Markets move up ONLY when more people are buying than selling. 2016 is the year when an astronomical bubble of retirees are forced to make withdrawals. This is stipulated in the law that created 401 (k) accounts specifically so that taxes would be due and payable to the Federal government NOT LATER than beginning at age 70.
Kiyosaki tells the story of his "Rich Dad's Prophecy" based on the enactment of "ERISA" (The Employee Retirement Income Security Act of 1974.) What his "rich dad" foresaw were the problems of passing control of retirement funding to individuals. These problems include:
1. Most people do not save anything, or way less than needed for retirement and medical expenses – which continue to increase.
2. Those who created 401 (k) accounts were forced to become "investors", an activity previously reserved for wealthy (and educated) speculators. In the process, the stock market was flooded with funds.
This is exactly what happened:
– Most people without corporate pensions – replaced by optional 401 (k) plans – went right on spending their money on material goods and saving little or nothing (in fact, racking up record amounts of consumer debt.)
– The minority of workers who created investment accounts (still numbering in the millions) injected billions into stocks and mutual funds. The stock market surged to record levels with the inflow of cash.
Note: it is no coincidence that the passage of ERISA in 1974 is the bottom of the market, following a crash in 1973-1974 to less than 600 Dow Jones Industrial Average. 1974 was also the center of a recession brought on by the Mideast "oil embargo" and the "Nixon Shock" following the removal of the dollar from the gold standard.
As Kiyosaki's Rich Dad predicted, " Always watch for changes in the law. Every time a law changes, the future changes."
All this background sets the stage for the predicted crash in 2016. With more than 2 million retirees forced to sell stocks (and pay taxes on any gains) the market MUST contract – or implode!
Kiyosaki wrote this book that foresees the impending crash in 2002. This is BEFORE the financial collapse of 2007-2008 (which is continuing today.) During this crash, the market lost 50% of its value from a high of 14,000. (It has since regained 85% back to 12,000.)
Americans continue to have pitiful savings rates. In addition, record unemployment brought on by the current recession has forced many who DID save and invest to drain their retirement accounts. The number of new wage earners will not offset the number of people retiring. After years of recession, there are actually fewer people employed, they are making less and investing less.
Combine theses problems and you have a market in an irreversible decline. As millions of other workers watch the value of their investments and retirement accounts decline and they will also start selling – trying to salvage what value remains even if they have to pay penalties.
The process continues, and the market spirals downward at an accelerated pace! In the process, the retirement savings and investment accounts of millions will be wiped out.
Bottom Line: the prediction of a 2016 crash is likely optimistic! It may be here sooner since retirees can withdraw funds earlier – they will only delay withdrawals until age 70 if they do not need the cash earlier!
Kiyosaki balances the dire prophecy with optimistic advice, specifically how to build your "financial ark". He writes, "Sometimes your greatest opportunities come at the greatest times of crisis. And for those that have positioned themselves well, it's not about surviving disaster but rather achieving financial independence and wealth."
He continues, "But this is not something to fear. Rich Dad's Prophecy reveals not only the best ways to safeguard wealth but how to actually prosper from the events to come. The fears, dreams and actions of the baby boomers will control our economic future . you should consider building your own personal financial ark to stay afloat in the turbulent waters ahead. in Rich Dad's Prophecy, you'll discover how to prepare to prosper from the coming financial disaster. It's a must-read for those who want to maintain and grow their wealth in the coming years. "
Rich Dad's Prophecy will do more than educate you about the predicted stock market crash. You will learn how to build your own personal "financial ark" that will assure that you not only survive the storm, but profit from the coming turbulence. To learn more about Rich Dad's Prophecy – as well as Kiyosaki's other books, resources and seminars – please visit the Rich Dad website at RichDad.com.