RICH DAD PROPHECY book review

Editor: Crass Cash

I read this book so that you don't have to.  Here's the simple gist of the book: Starting around 2016 there could be a long prolonged stock market crash.  Why?  Because the Baby Boom generation will start doing the mandatory minimum retirement withdrawals as underlined by federal law.  For almost all retirement plans, except for Roth IRA's, you need to start taking mandatory minimum withdrawals starting at the age of 70.5 years old.  

This starts to happen for the Baby Boom generation in 2016.  Since they're the largest generation and also hold a huge amount of securitized investments, then I believe this to be a very real threat.  I've read a number of other articles that take the opposing view and haven't really found them to be that legit.  Sometimes the math and assumptions are entirely wrong, which worries me greatly.  

There's an even bigger problem.  The stock market and bond markets are currently very expensive and will probably become even more so over the next two years.  I think the Federal Reserve will continue to hold down interest rates until 2016 and the stock market will continue to head higher (with short term dips, maybe even full bear markets) until the yield curve becomes inverted.  That in turn will cause a recession and then you could easily see a 50% decline, which could possibly not recover for a decade or more.  If you're relatively young like me this is great because stocks will be on sale, but if you're close to 10 years from retiring, then you need to take money off the table now.  

I know returns for the bond market suck, but they don't suck as bad as losing half your net worth.  As a general rule you should move money to bonds as a proportion of your asset allocation that corresponds to your age.  So if you're 50, then 50% of your securities need to be in bonds.  If you're 60, then 60% needs to be in bonds.  70 years old, then 70% and so on...

Kiyosaki is a big advocate of real estate and home based businesses.  He wants people to move into this area instead of the stock market.  I agree with this if you feel comfortable with doing so.  As always though, don't over pay for any investment, especially real estate.