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?

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The good, bad and the ugly of the new myRA

You’ve probably been hearing about the new “myRA,” a new government-run retirement account that President Obama unveiled at his State of the Union address and plans to create with a stroke of his pen.
Obama State of the Union Address
Its primary purpose is to offer a savings option to the 50% or so of U.S. workers who have no access to employer-sponsored retirement plans and have little saved for retirement.

The appeal is that it “guarantees a decent return with no risk of losing what you put in,” according to Obama.

Sounds okay so far, right?

I did some digging into the details to understand more about how this program will actually work… and to help you sort through the pros and cons of programs like this.

Below I’ve listed the good, the bad, and the ugly about this new program. But really, most of the bad and the ugly points apply to all government-run retirement accounts, including 401(k)’s, 403(b)’s, IRA’s, etc. So if you have one of these plans, I urge you to read this today.

The good…

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Are you putting your retirement savings in prison?

Ted Benna, "Father of the 401(k)"

Ted Benna is known as the “Father of the 401(k).” In the late ‘70’s, he worked as a consultant to business owners whose main agenda was “How can I get the biggest tax break, and give the least to my employees, legally?”

Tax nerd that he was, Benna discovered an obscure part of the tax code – section 401(k). Voila! By 2012, nearly 75% of all company pension plans had disappeared!

What does Mr. Benna say about his beautiful 401(k) baby today?

If I were starting over from scratch today with what we know, I’d blow up the existing structure and start over!” 1

Uh oh.

Per the US Senate Committee on Health, Education, Labor, & Pensions: “After a lifetime of hard work, many seniors will find themselves forced to choose between putting food on the table and buying their medication.” The U.S. Census Bureau says the average value of 401(k) accounts of pre-retirees between 55 and 64 is only $170,645; the average value of their IRAs is only $147,345. And half of all those close to retirement age have less than $50,000 in these plans.

Something went horribly wrong. Actually, several things went horribly wrong, not only with 401(k)’s but also their kissing cousins: IRA’s, Roth Plans, 403(b)’s, SEP-IRA’s and so on.

And the problems with these government-controlled plans are in these five key areas:
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How will these 3 financial surprises affect you?

There have been three recent surprising revelations I urge you to pay close attention to, if you have any money invested in the stock market and/or you have an IRA, 401(k) or other government qualified retirement plan…

1. The ugly truth about the stock market’s new record highs

Take a look at the chart below which reveals how, when measured in real purchasing-power terms, the S&P 500 Index is nowhere near its March 2000 high. In fact, the index would have to increase by another 32% today, just to get you even (in real dollars) with where you were more than 13 years ago:

Your Retirement Plan Powered by Wall Street-Fast Graph

Even if you look at the total return of the S&P 500 (including reinvested dividends), the real (inflation-adjusted) purchasing power of your investment remains negative after 13 years. And this assumes you have no fees, commissions or taxes, which, of course, will take another big bite out of your savings.

2. Long-term investors received only HALF the return of the S&P 500

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Stock market hits 5 year high – what they’re not telling you

As the bull market that began in March, 2009 picks up steam, the Wall Street stock jocks are urging individual investors to jump back into the market with both feet. They boast that the S&P 500 has hit a 5-year high and is closing in on a new all-time high. But – somehow – they all forget to mention one pretty important fact: It also ended the year 3% lower than where it was 13 years ago at the end of 1999.

This chart tells the rest of the story you’re not hearing…


Your Retirement Plan Powered by Wall Street-Fast Graph
You’ll notice inflation was 36% over the past 13 years, which took an enormous bite out of the purchasing power of your savings.

Some readers may be wondering why I didn’t include the value of the dividends earned by the S&P 500 companies in the chart. So let’s do that now. The total return of the S&P 500 (including dividends) for the past 13 years was 22%, which is an average return of about 1.7% per year – and still lags inflation.

Don’t forget the fees and taxes…

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Bank On Yourself: The Ultimate Wealth-Building Strategy Video

Do you know what your retirement account will be worth on the day you plan to tap into it? If you’re like most people, you don’t have a clue. Well, here’s a reality check – that’s not a plan; it’s gambling.

Because people have blindly followed the conventional wisdom about investing and retirement planning advice, most baby boomers have been forced to postpone retirement an average of five years…and nearly half aren’t expected to have enough money in retirement to cover even basic living expenses, like food and medical care.1

At Bank On Yourself, we believe the decision of whether and when to retire – or not – should be a matter of choice, not necessity. If that makes sense to you, we urge you to watch this fast-paced video revealing seven reasons to consider using the Bank On Yourself method as a safe and proven alternative to traditional retirement plans.

Click the play button in the video below and see how many of these
seven advantages you’d like to have in your financial plan…

Bank On Yourself gives you guarantees, predictability, control, tax advantages and peace of mind missing from traditional financial planning

Want to find out how much money you could have – guaranteed – in 10 years, 30 years, and at any point along the way if you added Bank On Yourself to your financial plan?
Request Your Analysis Button
It’s easy to find out! Just request your FREE, no-obligation Analysis that will show you how a custom-tailored plan can help you reach your short-term and long-term goals and dreams in the shortest time possible.

1. Center for Retirement Research at Boston College, March 2012 Report

Fire Your Banker Video Contest Results

Wow! We received more than 150 terrific entries when we invited readers to tell us what you think about our unusual new video on “How to Fire Your Banker and Become Your Own Source of Financing”.


We want to thank everyone who took the time to give us such detailed and honest feedback, which is exactly what we need to be able to communicate the benefits of Bank On Yourself more effectively.

Five people on the Bank On Yourself team – myself included – poured through every single response, not just to pick the contest winners, but to also learn what questions and concerns you have about the Bank On Yourself concept.

At $1,000 per finished minute to film this kind of video, I was really glad no one said what they liked most about it was when it ended! Most people really liked the unusual video style and felt that it helped them better understand one of the most intriguing advantages of the Bank On Yourself method: How it lets you bypass banks, credit cards and finance companies and become your own source of financing.

If you haven’t watched the video yet, I encourage you to do that now…

There were many terrific insights and questions in the contest entries. It was tough to pick just five winning entries (we actually picked six), but you’ll find the winners listed below.
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Video: How to fire your banker!

We’re always looking for entertaining, easy-to-understand ways to explain key concepts of the Bank On Yourself method.  So we just completed a new – and very unusual – video that explains one of the most powerful features of Bank On Yourself – how it lets you bypass banks, finance and credit card companies altogether and become your own source of financing.

This video also addresses how purchasing things like cars, vacations, business equipment, or a college education through a Bank On Yourself plan beats financing, leasing and even directly paying cash for them.

Click the play button on the video below, then scroll down to the comments box and give us your feedback…


Request Your Analysis Button
To find out how much more money you could have when you fire your banker and become your own financing source, request a FREE, no-obligation  Analysis.

We’d really love to get your feedback on this new video and video “style”.  (You’ve probably never seen a video like this before.)

Here are questions we’d love to get your feedback on in the comments box below…

1. Do you currently use Bank On Yourself?

2. What was the best part of the video?

3. What is still unclear about the Bank On Yourself concept?

4. What topics could we address that you think would give people more confidence to consider Bank On Yourself?

5. If you do not currently use Bank On Yourself, did this video make you more likely or less likely to request a free Analysis and get a referral to one of the Bank On Yourself Authorized Advisors?

6. If you are currently using Bank On Yourself, do you feel that this type of video is something you could share with family, friends and colleagues to help them understand this method of managing your finances? Why or why not?

7. Is there any other feedback you’d like to give us?

Singer Karyn White Seizes the Day with Bank On Yourself

I just recorded an inspiring interview with Grammy-nominated contemporary/pop and rhythm and blues recording star – and Bank On Yourself client – Karyn White.

Grammy-Nominated Singer Karyn White Seizes the Day with Bank On Yourself

Grammy-Nominated Singer Karyn White Seizes the Day with Bank On Yourself

Karyn was in her early 20’s when she became the first female artist to have her first three solo releases hit #1 on the R&B charts.  She collaborated with industry legends including Babyface and L.A. Reid, before devoting herself full-time to raising a family.

After an 18-year hiatus, and a fan base that never forgot her, Karyn decided to record again.  Only this time she decided to produce her new CD album, Carpe Diem, herself – and pocket the profits the record companies used to make off of her.

In this interview, Karyn reveals:

  • How she used her Bank On Yourself plan to finance her new CD herself (and why she probably wouldn’t have been able to do it otherwise)
  • How making the right choices about money puts you in the position of being able to take advantage of opportunities that will inevitably come your way
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