Before you put another penny in a 401(k), find out what the government and your employer aren’t telling you that will scare the living daylights out of you! Here are seven frightening facts you should know about 401(k)s…
Frightening 401(k) Fact #1:
Your employer can – and probably is – making risky decisions on how to invest your money for you – without your knowledge or approval.
Many employers are now automatically directing more of your pay into your 401(k)… and automatically moving it into more risky investments – even if you had previously chosen your own investments!
And most of that money is being re-directed into “target-date” funds, which lost so much money during the last market crash, it sparked scrutiny from lawmakers and regulators. Many funds for people who pinned their hopes on retiring in one year had losses far exceeding 20%, and some funds suffered losses of 32 to 41 percent, according to Morningstar.
Shockingly, stock allocations among those funds were found to be 26%-72% of assets!
Not to mention that the fees charged by target-date funds are “significantly higher than those charged by other funds on plans’ investment menus”.
(Source: “Companies take reins of workers’ 401k’s”, MoneyCentral.msn.com, October 10, 2009)
The growth in a Bank on Yourself policy is both guaranteed and exponential. You can predict the minimum guaranteed value of the plan on the day you want to tap into it, and every point along the way.
Frightening 401(k) Fact #2:
The important decisions about your 401(k) are made by someone with no training or education in most companies.
90% of the country’s employees’ 401(k) plans are watched over by people who “need no special qualifications and no investing expertise or experience”, according to the November, 2009 issue of SmartMoney Magazine (“The Accidental 401(k) Planner”).
While many managers hire brokers to suggest funds, brokers are not legally required to pick funds with low fees, so “401(k) plan managers who sign off on pricey funds could cost their workers tens of thousands of dollars over the long haul”.
Frightening 401(k) Fact #3:
Most 401(k) participants vastly underestimate the impact of plan fees.
They “can eat up half the income in some 401(k) plans over a 30-year span,” according to an exposé on 60 Minutes. (“The 401(k) Fallout,” April 19, 2009)
With a Bank on Yourself plan, like buying a couch or TV, all costs are already included in the price – in this case, the premium. There are no extra, additional or surprise fees. Which means that when you request a free, no-obligation Analysis, you will see the bottom-line numbers and results you could get, if you added Bank on Yourself to your financial plan.
Frightening 401(k) Fact #4:
The closer you get to retirement, the more your money is at risk.
According to a cover story in Time Magazine (“Why It’s Time to Retire the 401(k)”, October 9, 2009):
During the market downturn, the 401(k)’s of 55-to-65-year-olds lost a quarter more than those of their 35-to-45-year-old colleagues. That’s because in your early years, your 401(k)’s growth is driven mostly by contributions. But the longer you hold a 401(k), the more market-exposed it becomes. It’s a twist that breaks the most basic rule of financial planning.”
Frightening 401(k) Fact #5:
Don’t try using the money in your 401(k) as an emergency source of funds in tough times!
If you borrow money from your 401(k), and you lose your job or leave your company for any reason (and you’re not age 59½ yet), in most cases, you’re required to pay any loans back in full – with interest – in 30 to 60 days, or you’ll have to pay income taxes on it, plus a 10% penalty.
There are no such restrictions when you Bank On Yourself. A very unique feature of this kind of policy is that when you borrow your equity, your money in the policy can continue growing as though you never touched a dime of it.
Only a few companies offer this feature, in addition to meeting all the other requirements for a Bank On Yourself-type policy. You can get a referral to a Bank On Yourself Authorized Advisor who has advanced training and certification in this method, and who works with the companies that offer the best products, when you request a free Analysis here.
Income taxes will take a huge bite out of your 401(k) withdrawals.
Many people believe they’ll come out ahead tax-wise by deferring taxes. However, deferring taxes could actually result in your paying a whopping 118% more tax – and that’s assuming the tax rates don’t increase at all.
It’s possible to access both your principal and growth in a Bank On Yourself policy with little or no tax consequences, under current tax law.
Frightening 401(k) Fact #7:
The government controls how much you can put into your 401(k) or IRA, and when and how much you can take out. And they can change the rules any time they want.
If they want to make you wait until you’re 68 or 75 to be able to take withdrawals without paying a penalty, they can do it.
When you Bank On Yourself you’re in control. You can take an income from your plan when and how you want, without penalty or restrictions.
Is it any wonder so many people are redirecting money they were putting into 401(k) plans that they can’t count on or control into Bank On Yourself plans that they can?
Tell us what you think below.