A growing number of retirement planning experts are joining the chorus of people saying 401(k) plans no longer make sense for savers in recent articles on Motley Fool, Bloomberg, MarketWatch, and other major publications.
They’re lamenting that one of the biggest appeals of the 401(k) – the ability to make contributions with untaxed dollars in exchange for tax-deferred growth and withdrawals – is disappearing.
The national debt was already skyrocketing before the pandemic spurred the biggest fiscal stimulus programs in history. And a surge in unemployment has lowered tax revenue for federal and state governments.
What do governments typically do to counter budget deficits?
They raise taxes, of course!
And as taxes rise, deferring them in a 401(k) or IRA means you’ll pay more later – potentially a lot more.
Even before the pandemic, the Center for Retirement Research said people lose 25%-33% of the value of their 401(k) to taxes… and most people are shocked when it happens because they forget they’ll owe the IRS taxes on every penny they’ve put in and every penny of growth they’ve deferred.
Do you know what the tax rates will be in 20 or 30 years from now? For that matter, do you know what they’ll be next year or in two years?
No one knows! Just like no one saving in a 401(k), IRA or investment account can know what their retirement account(s) will be worth when they want to tap into them.
And if you can’t answer these questions with certainty, you don’t have a financial plan. You have a hope-and-pray crapshoot – pure and simple.
Here Are More Reasons Experts Say the 401(k) is a 40-Year Experiment that’s Failed…
In addition to creating a totally unpredictable future tax liability, experts say 401(k)s come with other wealth-killing pitfalls:
- The employer match turns out not to be “free money” after all – the Center for Retirement Research found companies that offer matches simply make up for it by paying you less salary
- The employer match isn’t guaranteed – thanks to the pandemic and shutdown, many companies have reduced or suspended the match
- You typically have to stay with the company for 4 to 6 years to be able to keep the full match – how’s that working out for the tens of millions of people now suddenly out of work?
- The fees in 401(k)s and IRAs compound against you and can easily devour 30-50% of your savings, according to Brightscope and the Department of Labor
- You have little to no control over the money in your 401(k) or IRA – the government controls it, imposing numerous restrictions and penalties if you don’t follow their rules to the letter
Is it any wonder that even the man who invented the 401(k) – Ted Benna – says it’s a “monster that’s out of control” and should be blown up?
The Bank On Yourself Strategy Gives You Numerous Advantages, Including…
- You know what your tax rate will be on withdrawals from your policy throughout your retirement – ZERO! Your policy grows tax-deferred and can be accessed tax free, under current tax law
- The income you take from Bank On Yourself does not cause your Social Security benefits to be taxed and doesn’t hike your Medicare premiums, unlike 401(k) and IRA withdrawals
- There are no surprise or added-on fees – the projections and guaranteed values of Bank On Yourself-type policies have already had all costs deducted and accounted for
- You control the equity (cash value) in your policy and can access it whenever and for whatever you want – no questions asked!
- You can use the money in the policy and your policy can continue to grow as if you never touched it – only a handful of companies offer this feature, so be sure to work with a Bank On Yourself Professional who knows which companies have the best products for this strategy
- You get guaranteed, predictable growth and retirement income – with no luck, skill or guesswork required
- The pandemic has made us all more aware of our mortality, so it’s comforting to know these policies come with an income-tax-free death benefit that is usually many times greater than the cash value of your policy to provide peace of mind in the event of your untimely death
How to Keep Your Retirement Dreams from Turning into a Nightmare and Protect Yourself from Future Financial Shocks
You can’t keep doing things the same way and expect a different result.
Don’t you owe it to yourself to investigate how adding Bank On Yourself to your financial plan can help you reach your financial goals and dreams without taking any unnecessary risks?
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