5 Ways Your 401 (K) Benefits Can Ruin Plans To Retire Safe and Wealthy

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Originally Posted On: https://smartwealthsolution.com/5-ways-your-401-k-benefits-can-ruin-plans-to-retire-safe-wealthy/

Before we get started talking about 401 (K) benefits and the Government Sponsored Plans. This article is to inform you of the myths, costs, and consequences of following “conventional wisdom”… And will test some of your beliefs.

Let’s get started!

Here’s a quick 5-way test of making wise and prudent savings decisions

1. Guaranteed liquidity
2. Guaranteed safety
3. Guaranteed rate of return
4. Guaranteed tax benefits
5. Guaranteed exit strategy

Unfortunately, the 401(K) government-sponsored plan fails all 5 aspects of the wise and prudent savings test.

We spend all of our working life turning earned income into accumulated assets.

But have you ever stopped and thought.

When I reach my Golden Years, how am I going to turn those hard-earned assets into retirement income, in the most optimal and efficient way possible?

The best way to save for retirement is to diligently stock away dollars. Starting with your very first paycheck and stopping once the champagne is served at your retirement party.

…Too bad, it doesn’t always work out that way.

On the road to a comfortable retirement, many folks hit detours, job loss, divorce, illness, disability, your kid’s education expenses.

There’s a large number of reasons why distant goals like retirement are often put on hold. While important ones, like paying the mortgage and car payments take precedence.

Market volatility and the “do-it-yourself” aspect of the 401(K) has failed many Americans. If I were starting from scratch today with what I now know, I’d blow up the existing structure and focus on how money is allocated” Ted Benna, 78 – Owner of a 401(K) – who continues to work because of what he lost in 2000-2008.

One thing is for sure.

When your retirement time comes, it’s not going to be your parents’ retirement – rewarded with a guaranteed pension and health insurance for life.

Earlier generations of workers could rely on employer-provided pensions. But now most workers will need to rely on their own work-related and personal savings, plus Social Security benefits.

These savings have to last longer because Americans are living longer, often into their 80’s, 90’s and yes, even 100 plus.

If you saw this advertisement. Would You Invest?

These are all features of the traditional 401(K), 403(B), 457 plans, SEPs, and IRAs…Your government-sponsored plan.

In our immediate gratification society, deferring your taxes by funding your 401 (K) sounds good.

But when the taxman comes calling in your non-earning years, he’ll tell you what your tax liability is as soon as you begin taking withdrawals…

Most people believe tax rates will only go up over the long term, due to our country’s unsustainable debt and aging demographics.

What do you believe your tax rate will be in 20, or 30 years time?

If higher… Then why shovel as much money as possible into your 401 (K) to get the 401 (K) benefits and delay your tax liability at an unknown rate, while currently, Taxes are on sale?

It doesn’t make mathematical or logical sense!

We love the idea of getting FREE money in the form of the 401 (K) employer match.

However, do you think companies really pay you something for nothing?

The Center for Retirement Research did a study based on tax data and showed that for every dollar an employer (on average) contributes to a 401 (K) match, they pay 99 cents less in salary…

As the Innkeeper in Les Miserables sang, “Nothing gets you nothing, everything has got a little price”

The 401 (K) is a rotten repository for retirement reserves – TIME Magazine “Why It’s Time to Retire the 401 (K) -Oct 2009

In addition, employers don’t always give you all the money at once.

They can spread it out over 4-6years vesting. If you leave before the 6yrs, you often don’t get the match.

So, employers actually save money in the long run by installing a 401 (K) retirement plan.

How many employees stay at their jobs for six years?

Not that many…

The median number of years that wage and salary workers had been with their current employer was 4.2 years in January 2018, unchanged from the median in January 2016, the U.S. Bureau of Labor Statistics reported.

Transferring funds to your 401 (K), is like sentencing your money to a prolonged period behind bars.

You have this money in your hand for a moment, then it’s whisked away into the retirement prison cell that cannot be accessed prior to 59.5yrs… Without paying a severe penalty.

With the inevitable ups and downs in life. Are you satisfied having your money handcuffed to Uncle Sam?

You worked hard for your money. Why let Wall Street devour it?

Many participants don’t have the first clue of how they are paying in Mutual fund fees.

There are:

• Legal fees
• Transfer fees
• Transactional fees
• Stewardship fees
• Bookkeeping fees
• Finders fees, etc.

In fact, a research report from Demos shows that 401 (K) nest eggs end up nearly 30% LOWER over a lifetime of saving thanks to fees alone.

A median-income, two-earner household will pay nearly $155,000 over the course of their lifetime in 401(k) fees, according to a new analysis by national public policy center Demos

That’s nearly one-third of your pre-tax assets, eaten up by wall Street.

Market Volatility

At this point…

• You’ve lost control of taxation,
• You’ve lost control of access,
• You’ve lost control of the fees you’re paying.

Well, Market Factors and Timing also control your final balance.

These include:

• Decisions, policies, and elections within our Government and Foreign Governments
• Currency and commodity prices
• Terrorism and geo-political unrest around the world
• Mega-crimes like Madoff and Enron schemes to Big Bank price-fixing scandals
• Disruptive technologies that make yesterday’s successes obsolete – Netflix, Amazon, smartphones
• The weather and natural disasters from forest fires to floods and earthquakes…

The list goes on and on.

“Where your money resides is far more important than what it earns” Bryan S. Bloom, CPA. Book: “Confessions of a CPA”

The results of any savings plan depend heavily on when you withdraw the money.

You could earn the same money, save just as much for just as long as your neighbor. But if you reached retirement in the depth of a Bear market and he reached it during a Bull – He’d be going on cruises, and you’d be eating cat food.

An equitable retirement system should not be a retirement lottery based on your age and factors beyond your control.

Depending on timing, your 401 (K) could potentially become you 201 (K). How do you feel about that?

You’re told that over the long term, you can do well in the stock market.

However, over the last three decades, the typical equity mutual fund investor has earned only 3.98% per year, beating inflation by just 1.3% per year, according to DALBAR studies.

We have been sold a bill of goods, stating we must take more risks to acquire more returns.

But who taught us that?

Answer: Wall Street and the media.

Remember. When you invest, it’s not your advisor, or financial institution, or Government, or Wall Street taking the risk.

It’s YOU.

On Summary. Your 401 (K) benefits are virtually guaranteed to let you down when it comes to the income on which you’re relying for retirement.

Conventional wisdom has led us down a path where we’ve read the 401 (K) is enough.

Ironically, these so-called ‘qualified plans‘ are in reality, very well designed future stream of income – for the treasury department – not YOU!

It’s a classic bait ‘n switch play!

It’s time to declare the 401 (K) a failure. As the default retirement plan of America, it just doesn’t measure up… too much rick… If risk can be insured away, it ought to be done. Eric Schurenberg, Editor-in-chief CBS Money watch – May 2016

The Seed or the Harvest?

When would you be the most prudent time to pay taxes…

A DEFERRED TAX is nothing more than a compound tax at an uncertain rate in the future.

Do you believe future taxes will be Higher, Lower, or Stay the Same?

To understand the future of taxation on your 401 (K) benefits, it is important to have an appreciation of the past.

What was the average Top Marginal Rate from 1913-2013? 30%, 40%, 50%

In fact, it was, 59%…and that’s the average!

The High was over 90% in the 1940’s-1960’s… we are currently at historic lows.

We have the lowest tax bands in living memory.

But that is not going to last long.

There is a ‘sunset provision’ that will raise taxes back to pre-2017 levels, in 2026.

The future: It is not a huge leap to believe taxes will be higher in the future.

140 million baby boomers and generation x-ers will be turning 65 over the next 25 years.

With little savings, people living longer, and the national debt continues to grow with rising Social Security and Medicare costs, will the IRS need more revenue?

Yes or No?

It’s simple MATH!

If interest rates increase to 5%, interest payments on that debt will increase to almost $2 trillion.

That is HALF of our current national budget.

Where will the Government get the money to fund these requirements?

Wage Statistics for 2016

Of 340 Million Americans 163,520,606 paid social security taxes – the working population.

42.8% had net compensation less than or equal to $25,000

70.1% had net compensation less than or equal to $50,000

84.1% had net compensation less than or equal to $75,000

90.0% had net compensation less than or equal to $100,000

The Critical Question: If you are married with two children and make $100,000 per year or less, are you rich?

Of the 9% who do make more than $100,000. When the Government needs more revenue in the future, will they generate that revenue from the 91% who really don’t have enough, or will they generate that revenue from the 9% who do? Is that you?

As the 91% have the votes to change tax laws in their favor, do you think it’s fair that the 9% who were responsible, built their savings, did what they had to do, will be the first people the IRS and Government will call on – to take care of the 91% who were unable/unwilling to act in the same responsible manner?

So, it begs the question…

Should you build a tremendous pile of taxable money for the government to access in the future or should you build a legal, moral and ethical pile of money for yourself, your family, your business, and your charitable ainterests, that the government and IRS will never have access to again.

“You don’t need a retirement plan to retire. You just need a more productive and efficient way to access money, with no Government strings attached” – Phil Bodine

Chances are you are reading this knowing:

• You have a 401 (K) retirement plan
• Your employer is matching
• You will need to withdraw at some point
• You will have to pay an uncertain tax rate to withdraw
• You can’t predict the future market condition at that time
• You don’t know if you will have enough to live on…..

At the start of the article, you read about the 5-way test of making wise and prudent savings decisions.

All 5 are elements of an investment you want…

1. Guaranteed liquidity
2. Guaranteed safety
3. Guaranteed rate of return
4. Guaranteed tax benefits
5. Guaranteed exit strategy

But the chances are, none of your current investments can check all 5 boxes…Correct?

Plus after reading all the way down to here. You’re thoughts and comfort levels about your 401 (K) benefits may be some what skeptical…And rightly so.

The IRS revenue code gives us little-known legal rescue strategies to harvest penalty-free monies from your 401 (K), even if you are younger than 59.5 years old.

Don’t let your employer hold your retirement assets hostage.

So let’s talk about how we can use a new strategy to build your wealth …and get you guaranteed liquidity, guaranteed safety, guaranteed rate of return, guaranteed tax benefits and a guaranteed exit strategy…All in one!

PLUS…

It’s called Wealth in OverDrive. It’s a proven concept our company has implemented with all our customers over 30yrs.

Here’s how to get started.

Start by completing your FREE Wealth Analysis here.

There is no real one size fits all with this process.

So what separates us from other financial institutions and advisors is we invest time to gain a thorough understanding of your situation, needs, and future vision. We do this by asking good questions and then simply listening intently to your answers.

The best part is … if you’re interested, keep your money.

I don’t want you to think of sharing a dime until you and I are both 100% certain this is the best thing for you to do right now.

And there’s no way either one of us can really know that unless we talk and get to know each other.

So if you’re interested, let’s set up a time to talk ASAP buy completing your FREE Wealth Analysis here.

We’ll answer any questions you have, and we’ll ask you a few as well.

And if we all decide we’re a good fit, then we can move forward.

And if we don’t, that’s fine. If you’re happy, we’re happy. It really is that simple.

So with that said, Click Here, fill out your info we’ll schedule a time to talk.