Tony Robbins Says This Retirement Move Is More Important Than 401(k) Plans and IRAs
Written by
Peter Burns
Edited by
Molly Sullivan
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If you come into good fortune and acquire some extra money, planning for retirement should be at the top of your list. Most personal finance experts will agree that saving up over the long term is a great tactic for securing your future financial health.
However, Tony Robbins, an author and professional motivator, urges you to take your retirement plans to the next level.
Getting Started
Most people agree that a good way to save for retirement is to put money into Roth IRAs and 401(k) plans. These tax-advantaged accounts help you invest your money over the long term so you’ll have more when it comes time to retire. For a Roth IRA, you contribute money you’ve already paid taxes on. This money can grow over time, and you won’t have to pay capital gains tax. When you reach retirement age, you don’t have to pay anything to the IRS when you withdraw your money.
A 401(k) is a bit different. The money you put into a 401(k) comes straight out of your paycheck before you pay taxes. Your employer may even match a certain percentage of what you put into the account, quickly adding to your investment. Then, like a Roth IRA, these funds can grow over time without capital gains taxes. Unlike a Roth IRA, when you withdraw funds from your 401(k), you’ll have to pay taxes.
When you put money into these accounts, you can build wealth that will become available when you turn 59 ½.
Spreading Out Your Assets
While Robbins agrees that putting money into retirement accounts is a solid idea, he also suggests taking an additional step to maximize your finances. In his new book, “Money: Master the Game,” Robbins touches on several money issues that people should consider.
One question relates to retirement savings. He poses the question of what you should do if you suddenly come into a large amount of money. Robbins goes through multiple suggestions, such as putting it into bitcoin, buying up stocks and putting it in a Roth IRA. While these options may be a good idea, he says the key to your financial well-being is spreading out your cash vs. putting it all in one place.
Robbins explains that asset allocation is the way to go when you receive a lump sum of money or are preparing for retirement. Asset allocation is dividing up your money and investing in multiple asset classes, such as stocks, bonds, real estate and commodities.
Many investors point to diversification as an important part of investing, but it isn’t exactly the same as asset allocation. Robbins explains diversification is spreading out your investments within only one asset class. For example, putting your entire lump sum of money into the stock market while buying different types of stocks, such as energy, technology and healthcare. Diversification is an intelligent way to reduce your investment risk, but investing in different asset classes takes protecting your finances to another level.
Growth vs. Security
Robbins explains that the asset allocation approach lets you take different levels of risk while protecting yourself. Certain amounts of money can go toward riskier investments with the possibility of great reward, while safer investments will keep your finances propped up if things don’t work out.
He simplifies the concept by breaking down potential investments into two categories: security and peace of mind assets vs. risk and growth assets. The security assets are the long-term investments that will help you build wealth in the long run. This may be investing in mutual funds, bonds or life insurance. These investments aren’t risky, and they best protect the principal investment so you cannot lose your money no matter what happens.
The growth assets are where you take a bit of a swing and hope things work out. With higher risk comes higher reward, so putting your money into currencies, collectibles or high-yield bonds can potentially make you a lot of money. However, it’s important to be smart about your investments, even if you’re knowingly taking a risk with a limited amount of your funds. Striking a balance between growth and security assets will help you protect and grow your wealth to enhance your retirement savings.
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