Six Reasons Your 401(k) is a Scam

I’m going to make a very bold statement that’s sure to get me some nasty blowback. But as a financial investigator who’s exposed the truth about the conventional financial wisdom, I’m used to that, so here goes…

401(k)s are a scam. Want proof?

Here Are Six Reasons Why 401(k)s Are a Scam…

Reason #1: The Tax-Deferral Scam

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

But when the tax man eventually comes calling, he won’t ask you to pay what your tax liability would have been if you’d been paying taxes all along. He’ll tell you what your tax liability is at the time your taxes are due.

So let me ask you a question: Can you tell me what your tax rate will be 30 years from now? Didn’t think so.

And 89% of the people we’ve surveyed believe tax rates can only go up over the long term, due to our country’s unsustainable debt and aging demographics. Unfortunately, if tax rates do go up and you’re successful in growing your nest-egg, you’ll only be paying higher taxes on a bigger number.

Oops! That destroys the whole “tax-deferral” argument.

Reason #2: The “Free Money” Scam

Who doesn’t love getting “free money” in the form of the 401(k) employer match? Do you really believe your employer is giving you something for nothing? (If you believe that, I’ve got a Rolex watch I’ll sell you for $10.)

The Center for Retirement Research did a study based on tax data and found that for every dollar an employer contributes to your 401(k) match, they pay 90 cents less salary to men and 99 cents less to women on average. Whoa! Doesn’t sound like such a good deal now, does it?

That’s why one of the Bank On Yourself Revolutionaries had no trouble convincing his boss to pay him the money that he was getting as an employer match in salary instead, so he could use it to fund his Bank On Yourself plan.

Plus, you don’t even get all of the employer match during the first 4-6 years you work for the company – you need to be “vested” first. If you leave your job before that, you typically don’t get the full match.

And according to the Bureau of Labor Statistics, the average time a person stays on the job is only 4.2 years.

Oops! There goes the employer match “carrot.”

Reason #3: Fees that Devour Your Hard-Earned Money

In spite of the rules passed a few years ago requiring better 401(k) fee disclosure, surveys show most participants still have NO clue how much they’re actually paying.

But according to Brightscope, participants in small plans pay 1.9% in fees annually, and participants in large plans pay 1.08% per year. If those fees sound like “small change” to you, then here’s a wake-up call: Fees of only 1% per year can slash the value of your savings by 28% over the next 35 years, according to the Department of Labor.

Poof! There goes nearly one-third of your hard-earned dollars. I can assure you somebody is getting rich on this, but it’s not you!

Reason #4: Funding a 401(k) is Like Putting Your Money in Prison

It’s like a trade with the devil: Give me all your savings in return for tax-deferral (a scam as we’ve seen) and an employer match (another scam), and I’ll keep it under lock and key for you until you’re 59.5 years old.

You have to beg for permission to use your own money! There are all kinds of restrictions and penalties for accessing your own money.

Reason #5: The Myth of Market Returns

You’re told that over the long term, you can do well in the stock market. But over the last three decades, the average equity mutual fund investor has earned only 3.66% per year, beating inflation by only 1% per year, according to the DALBAR studies.

Yet Wall Street has brainwashed us into believing we have to risk our money in order to get any kind of decent returns. And so we continue to blindly fund our 401(k)s like lemmings following each other off a cliff.

My investigation into more than 450 different financial products and strategies revealed you don’t have to risk your money to get a decent return. You can reach your financial goals and dreams without taking any unnecessary risk.

Request a free Bank On Yourself Analysis here to find out how you could benefit from a custom-tailored plan.

Yellow-Button-FREEanalysis-trans

Reason #6: After Decades of Being Lab Rats in the Great 401(k) Experiment, Most Pre-Retirees Still Don’t Have Enough Saved

Even the “father” of the 401(k), Ted Benna, has called it an “out of control monster” that should be blown up.

How much more evidence do we need that 401(k)s are not the solution they’re touted to be? The more accurate name for a 401(k) is a hope and pray plan.

So are there any good alternatives to the 401(k)? The answer is YES, but of course you won’t hear about it from Wall Street.

Here Are 8 Reasons Bank On Yourself Makes an Excellent Alternative to Conventional Retirement Plans…

  1. Guaranteed, predictable growth and retirement income – with no luck, skill, or guesswork required.
  2. No volatility. Your plan doesn’t go backward when the markets tumble. Your principal and growth are locked in. It’s not subject to market risks.
  3. You’re in control. You have control of your money without government penalties or restrictions on how much income you can take or when you can take it.
  4. Tax advantages. You can access your principal and growth with no taxes due, under current tax law.
  5. Liquidity. Your cash value can easily and immediately be tapped for any purpose at all, and your plan can continue growing as though you never touched a dime of it.
  6. Fees don’t compound against you. Studies show that the fees in traditional retirement plans can consume as much as one-third to one-half of your savings over time. With a Bank On Yourself plan, all fees have already been deducted from the bottom-line numbers and results you’ll get.
  7. Income tax-free legacy. The death benefit is likely to be many times larger than the total amount you’ve paid into your policy. This passes to your loved ones and/or favorite charities income tax-free and without going through probate. If you die prematurely, the death benefit allows your plan to finish funding itself. That won’t happen with traditional retirement plans.
  8. Peace of mind. Perhaps the best reason of all: You’ll know the minimum guaranteed value of your plan on the day you plan to tap into it – and at every point along the way! So request your free Analysis here now:

Get a FREE No-Obligation Analysis from an Authorized Advisor

You can easily find out what your bottom-line numbers and results could be BEFORE you decide whether to add the Bank On Yourself method to your financial plan. Just request your free Analysis.

Take the first step to a lifetime of financial security right now, while you’re thinking of it:
Yellow-Button-FREEanalysis-trans

SuperMoney Interviews Personal Finance Expert Pamela Yellen on Savings and Investing Strategies

Pamela Yellen, Founder of Bank On Yourself

Pamela Yellen, Founder of Bank On Yourself

I was recently interviewed by SuperMoney, a website that rates various financial products and the companies that provide them.

In this wide-ranging interview, I answered questions like these:

Why did you decide to start Bank On Yourself?

I reveal the frustrations my husband and I experienced following the conventional wisdom about investing and retirement planning. Maybe you can relate…

If someone were to say to you, “I don’t have the expertise to handle my finances. I’ll just hire some investment firm to deal with them,” how would you respond?

Here I discuss how and why 80% of all mutual funds, financial advisors and investment advisory services underperform the overall market. If the experts can’t even do it well, how can we regular folks be expected to? [Read more…]

7 Reasons the Economy is Worse than it Seems

Do you believe the economy has improved significantly since the Great Recession?

Or do you feel like we’re staring down the barrel of a cannon whose fuse has already been lit?

The stock markets should be down considerably by plenty of measures, but many investors appear to have been hypnotized to believe that nothing can go wrong.

I believe things are worse than they may seem on the surface, and extreme caution is warranted, for the 7 reasons I spell out here.

I’ll also give you some tips on how to protect yourself and have a “Plan B” in place in case the you-know-what does hit the fan.

Here Are 7 Reasons the Economy is Worse than It Seems…

1. Addiction to Stimulus and Low or Negative Interest Rates

[Read more…]

Do You Have As Much Saved for Retirement As the Average Person?

How do you think you compare to other people when it comes to how much you’ve saved for retirement?

The results of a new survey from the Employee Benefit Research Institute (EBRI) reveal some surprising insights into America’s preparedness for retirement.

Read on for the highlights of the 2016 Retirement Confidence Survey and a 6-Step Action Blueprint to make sure your money lasts as long as you do…

The survey revealed that 54% of all workers report less than $25,000 in household savings and investments, excluding the value of their primary home.

That includes 26% who say they have less than $1,000 in savings.

10% have between $25,000-$49,999 saved, 10% have between $50,000 and $99,999 saved, and 12% have between $100,000-$249,999.

And how many have saved $250,000 or more? Just 14%.

Are people close to retirement any better prepared?

[Read more…]

The Ticking Tax Time-Bomb of Conventional Retirement Plans

One of the biggest selling points of 401(k) and IRA retirement plans is that the money you put into them isn’t taxed right away. Bring out the bubbly to celebrate, right?!

Not so fast.

First of all, some people – hopefully not you! – mistakenly believe money placed into these retirement plans is “tax free.” It isn’t. It is “tax deferred,” meaning that you will pay tax on that money when you withdraw from your retirement plan down the line.

Deferred taxes might sound good, but deferring your taxes is like putting off a visit to the dentist. The problem compounds and will only get worse.

Deferring taxes creates a dangerous potential tax time bomb because you don’t have the answers to two critical questions…

First, what will the tax rates be when you retire? And what will they be 20 or 30 years later?

[Read more…]

Is Your Money Frozen in Your Retirement Plan?

One of my biggest beefs with government-controlled retirement plans, such as 401(k)s, IRAs, 403(b)s and Roth Plans, is the total lack of liquidity. The money you’ve socked away in your conventional retirement plan is about as solidly frozen as the iceberg that sank the Titanic! And because of this, if your financial ship hits rough waters, you might end up sinking as well.

Here’s the critical question: How quickly and easily can you get your hands on all the money in your retirement account if you need it before age 59½?

We all know life happens. Cars break down. Roofs need replacing. A tough medical diagnosis can create mountains of unexpected bills to pay.

Every year many participants in employer-sponsored government-controlled retirement plans make early withdrawals for a number of reasons. And every year, the IRS collects penalties related to those early withdrawals.

In fact, in the last year for which statistics are available, the Internal Revenue Service collected $5.7 billion dollars in penalties from Americans who took out $57 billion from their retirement funds before they were supposed to. [Read more…]

Who’s Got Control of Your Retirement Plan?

Do you remember playing with that kid in the neighborhood who set up a game, and then changed the rules as the game went on to suit himself? Just like those games, you’ll never come out winning with your retirement plan if someone else sets – and constantly changes – the rules!

Here’s one of those inconvenient truths: When your retirement savings are in a government-controlled plan sponsored by your employer, your employer can change the rules at any time. And so can the government.

Despite the mass of paperwork your employer handed you when you first began your retirement plan, your employer’s retirement plan rules are not set in concrete. Employers can change their rules, even in midstream.

For example, not too long ago, IBM decided to change its retirement plan rules. Up until that time, IBM gave employees their 401(k) match with each pay check. But some smart bean counter pointed out that Big Blue could save a bundle if they waited to give the match until the very last day of the year instead of throughout the year.

So what’s the big deal?

[Read more…]

What Infinite Banking and Nelson Nash Missed

I am infinitely grateful to Nelson Nash for introducing me to the Infinite Banking Concept®. It’s a very powerful concept that brings to the table Nelson’s life-long study of the Austrian School of Economics.

In this article, I described what Nelson got right about this concept, and my own life-changing experience of how it lets you “Become Your Own Banker.”

However, here are several things in his ground-breaking book that I take issue with, and that have caused unnecessary confusion for readers…

1. His first book, Becoming Your Own Banker®, was copyrighted in 2000.

[Read more…]

What Nelson Nash and Infinite Banking Got Right

My introduction to Nelson Nash and the Infinite Banking Concept® was a major turning point in my life.

Up until then, I was a business-building consultant to financial advisors. The advisors I coached were always bringing financial products and strategies to my attention, and over the last 25 years, I’ve investigated more than 450 of them.

Unfortunately, most turned out not to be worth the paper they were printed on.

Finally, one financial advisor asked me if I had ever heard of Nelson Nash, and the book he wrote, Becoming Your Own Banker: The Infinite Banking Concept.

I had not, but it sounded very intriguing, so I called and talked to Nelson and ordered a copy of his book. [Read more…]

Who’s the Bozo Administering Your Retirement Plan?

When you have a plumbing issue, you call in a qualified plumber, right? When you need a medical procedure, don’t you want a qualified doctor? When you go to get your car fixed, aren’t you going to hand it over to a qualified mechanic?

So why would you turn your retirement plan over to an unqualified administrator?

Wait! You didn’t know that you’ve placed your hard earned retirement money in the hands of someone who very likely doesn’t know what they’re doing? It’s one of the common retirement planning traps I’ve been covering in this blog.

According to SmartMoney magazine, 90% of the country’s 401(k) plans are watched over by people who “need no special qualifications and no investing expertise or experience.” [Read more…]