Smart Couples Finish Rich, Revised and Updated: 9 Steps to Creating a Rich Future for You and Your Partner by David Bach

Author:David Bach
Language: eng
Format: epub
Publisher: Currency
Published: 2018-01-09T00:00:00+00:00

YOU CAN’T BUY AN IRA!

By now, I hope you’ve recognized the importance of contributing to a retirement account—and figured out which type of account makes the most sense for you and your partner.

As I noted earlier, how the two of you invest the money in your retirement accounts may be the most important decision you make concerning your financial future. Unfortunately, many people don’t really understand what they are doing when they make this decision.

All too often, here’s what happens. A couple gets motivated to open an IRA, so they head down to the local bank. There, they are introduced to the on-site financial advisor, who says, “Mr. and Mrs. Jones, do we have a great IRA opportunity for you! It pays 6 percent for 24 months.”

“Is it safe?” Mr. and Mrs. Jones ask.

“Oh, yes,” the advisor replies, “it’s very safe. In fact, it’s insured and guaranteed.”

So Mr. and Mrs. Jones sign the papers, write a check, and leave the bank smiling, thinking they have “bought” an IRA account that pays 6 percent for two years.

Well, that’s not really what happened. The fact is, you can’t “buy” a retirement account! What Mr. and Mrs. Jones did was open an IRA account. Once that was done, the bank’s representative put the money they gave him to fund the account into a 24-month certificate of deposit that pays 6 percent a year.

Remember, whether you’re dealing with an IRA, a 401(k), or any other kind of qualified retirement plan, the process is always the same: you open the account and then you decide where to invest the money. That’s what Mr. and Mrs. Jones were doing, even if they didn’t realize it. You have to tell the bank or brokerage firm that’s administering your account how you want your money invested! If you don’t, the money could wind up literally just sitting there, earning little or no interest!

I always explain this in seminars, and virtually every time I do, there are people who are stunned to hear it. Sometimes they get mad. I recall one seminar where an older fellow named Peter stood up and told me flat-out, “You are obviously new to the business, young man. My wife and I have been buying IRAs for years at our bank and the rates are great! We’re getting 7 percent.”*

“Terrific,” I said. “It sounds like you’ve invested your IRA contributions in a certificate of deposit with a 7 percent annual return.”

Peter shook his head angrily. “You don’t know what you’re talking about. I would never invest in a CD for retirement.”

“Really?” I said. “So what do you think you’re invested in?”

“I told you,” Peter replied. “A bank IRA account.”

At this point, Peter’s wife started looking concerned.

I went to the chalkboard and led Peter through the steps: you open an IRA account, your money goes into the account, you decide how it is to be invested.

Still, he wouldn’t give up. “I really don’t think that I invested in a CD,” he insisted.

“Well,” I said, “don’t

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