Is Network Marketing the Answer to Your Too-Small Nest Egg?

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There's no getting around it: Too many older Americans just haven't saved enough for the retirement lifestyle they hope to enjoy. They add up their anticipated Social Security payments, their investment income, pensions and other sources, compare that sum to their expected expenses and -- there's a gap.

You can fill that gap by continuing to work, of course, but retirement isn't really "retirement" if you're still cranking away for a hovering boss. But there are alternatives, and one that is gaining popularity among those looking to pad their retirements is joining a direct sales enterprise. These businesses are also called network marketing, multilevel marketing, networking, direct sales and the not-so-flattering pyramid scheme.

In essence, you sell a product line or group of services to your "affinity groups" -- in other words friends, friends of friends, family, and colleagues, past or present. You get a straightforward commission on your sales, and you can also invite people you know to sell the products as well -- and you earn commissions on their sales. These sales structures can -- and often do -- go on for quite a few levels. Hence, the name multilevel marketing.

"In the United States, approximately 16 million people are involved in direct selling, accounting for almost $30 billion in annual sales," the Direct Selling Association says. That averages out to $1,875 per person a year.

How It Works

Some people believe that since the people at the top of the distribution chain make the bulk of the money, that the term "pyramid" is appropriate. I'd respond to that by encouraging you to look at any large corporation; they all pay their top people significantly more money than their lower-level employees. Yes, it's true: The company you work for is probably also one of those dreaded "pyramids."

Multilevel marketing is merely a different way to promote and distribute products and services. Instead of spending large amounts of money on traditional marketing and advertising, it uses that money to pay commissions to its distributors or agents.

Distributors get to tie into an existing product line, and it takes minimal capital to get started. The key is to represent a product or service that you believe in, and one that has a good, true story of how it is helping people. Let's say a certain brand of weight management products has been a huge help to you. Why not tell other people who have similar goals and earn a commission if they try the product?

Before You Get Involved

Here are seven tips to a successful network marketing experience.
  1. Make sure you love the products and that there is a true story you can to tell to your prospects about what the products have done for you or someone you know. Don't get involved with any company just because of a compensation plan and its promises of riches. Passion is important to be successful selling anything.
  2. Understand how much you can make if you just sell the product and don't recruit new sellers below you. Members of the association are required to give out "fact-based information about the company's compensation structure and earning potential."
  3. Look for a company that has been around for at least five years -- and 10 would be better. Launches and failures of networking companies are common. Don't worry about getting in on the ground floor -- focus on dealing with a solid company with a track record.
  4. Investigate marketing support. You will most likely get a replicated website that you can use. How else does the company bring help distributors?
  5. Be wary of seminar companies in network marketing clothing. If you are forced or strongly encouraged to buy the CD of the month and a ticket to any and all events, that is the best sign that more money is being made on those items than on the actual product. Gatherings are a good thing in moderation. There has to be more than just hype and training materials.
  6. Be patient. It might take you a year or two to achieve that income goal -- or more if you have bigger goals. Steady, persistent action is the key.
  7. Ask about if there are monthly minimums for personal production to qualify for commissions and if there are monthly personal points to be maintained.
Don't judge direct selling by just the numbers. Judge by how it would work for you, with your own solid plan of action. One of my business ventures is a real estate brokerage, working with out-of-area investors. Realtors average a little over $14,000 a year. This encompasses everyone with a license -- even if they don't sell anything. Many friends and colleagues -- and I -- make many multiples of that amount. So don't let an average scare you.

Do your homework, and look before you leap. Then be patient, persistent and refine your marketing campaign and sales skills. If you succeed, it could be just the boost your retirement needs.

John Jamieson is the best-selling author of "The Perpetual Wealth System." Follow him on Facebook and Twitter.

10 Ways to Reduce the Cost of Retirement
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Is Network Marketing the Answer to Your Too-Small Nest Egg?
Eliminating your mortgage is one of the best ways to make retirement more affordable because it removes a sizable monthly bill. While you'll still have to pay taxes and maintenance costs for your home, those expenses are likely to be a fraction of your mortgage payments.
Once your children are independent, you will likely no longer need a several-bedroom house in a good school district with a large yard that can be expensive to maintain. Consider downsizing to a smaller home in a less-expensive neighborhood, and add the proceeds of the sale to your nest egg.
Where you live plays a big role in how much you pay for food, taxes and a variety of other services. Moving to an area where the cost of living is significantly less could allow you to spend down your retirement savings more slowly.
If you and your spouse commuted to separate places each day, it is likely that you each needed a car. In retirement, you might be able to get by with one car, thus eliminating the insurance, gas and maintenance costs of the second vehicle. In walkable communities with good public transportation, you may even be able to get by without a car in retirement.
In retirement, income tax will be due on withdrawals from traditional 401(k) and individual retirement accounts, but you can space out your withdrawals to avoid a hefty tax bill in a single year. Prepaying income tax on some of your retirement savings using a Roth IRA or Roth 401(k) allows you to avoid a big tax bill in retirement.
Investing in high-cost funds reduces your return. Minimizing investment costs is especially important for retirees who are living off income from their portfolio. In this case, selecting the lowest-cost funds that meet your investment needs translates to more money in your pocket.
There are significant penalties if you withdraw money from your retirement account too soon or too late. There is also a reduction in benefits if you sign up for Social Security early, and a late enrollment penalty if you delay signing up for Medicare Parts B and D. Pay attention to important retirement deadlines to avoid paying more than you need to.
Health care is likely to be one of the biggest and least predictable costs you will face in retirement. But there are some things you can do to control your health costs. Consider purchasing a supplemental policy to Medicare to fill in some of the gaps and cost-sharing requirements traditional Medicare doesn't cover. Also, shop for a new Medicare Part D plan every year to make sure you are getting coverage for your medications at the best price.
Retirees have the luxury of being able to travel whenever they want. Traveling is often less expensive if you avoid major holidays and school breaks, and most tourist destinations will also be less crowded.
One of the major perks of growing older is getting discounts at movies, museums and restaurants. While some senior discounts are well-publicized and open to everyone old enough to have an AARP card, others are available only to those who ask. A little research can add up to big savings if you’re willing to admit your age.
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