7 Really Scary Facts about Your 401(k)

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.


Watch Pamela Yellen being interviewed about the problems with 401(k)s on the #1 TV station in Los Angeles


Watch Pamela Yellen being interviewed about the problems with 401(k)s on the #1 TV station in Los Angeles

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.

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Frightening 401(k) Fact #2:

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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)

Scary Facts About 401k Nest EggsAccording to the U.S. Department of Labor, fees of only 1% can slash the value of your savings by 28% over the next 35 years!

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 Professional 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.


This video reveals how you can add hundreds of thousands of dollars to your lifetime wealth by financing major purchases through a Bank On Yourself plan.

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 have so many problems, and which they can’t count on or control, into Bank On Yourself policies that they can?

Tell us what you think below.


  1. I did read your book, but because it was vague, I did not take much out of it other than you borrow from yourself and pay yourself back in monthly payments. My wife and I have essentially been doing that for years in that we will pay for a vehicle in cash (and whatever money we had from a previous vehicle sale) and just continue to put $500-$1000 back in our savings monthly (which is even more than the car payment would be through a bank) but in doing so, we are still not becoming wealthy. If we buy a TV or other fairly large purchase, it is always in cash and we continue to save money in our accounts, but again we are not becoming wealthy. So far I am not sold on the program, but of course I’m sure you would say I am missing something. Something that was not it the book I suppose.

    • When you pay cash for major purchases, as you’re doing, you’re half-way there. But it sounds like you may have missed a couple key chapters in my book that explain in detail how running large purchases through a Bank On Yourself policy can beat directly paying cash by a long shot. I suggest you review chapters 2, 5 and 6.

      One reason you are ”not becoming wealthy” using the paying cash directly approach, is that when you take your money out of your savings or money market accounts to pay cash for something, you’re now earning ZERO interest on that money. You’ll only start earning interest again incrementally, as you start saving money again.

      When you Bank On Yourself, you can borrow the equity in your policy to pay cash for things – or even to invest elsewhere if you wish – and your money in the plan can continue to grow as though you hadn’t touched a dime of it!

      How this works is explained in detail on page 68 and 69 of my book, so please review those pages closely.

      Note: Only a handful of companies offer a product that has this feature and meets all the other requirements are needed to maximize the power of Bank On Yourself. When you request a FREE Bank On Yourself Analysis, you’ll get a referral to a Bank On Yourself Professional (one of approximately 200 life insurance agents with advanced training and certification in the Bank On Yourself method), who knows the best companies to use for this.

  2. All relevant points. Target dated should be picked according to your asset allocation not the date you retire. All your assest should be taken into consideration. If you stay with Vanguard, T Rowe Price, Fidelity the have some very good funds with low expense ratios. Problem is most Americans are too darned lazy to read up on investing and keeping expenses low and keeping taxes low.

    • Even if Americans spent hours every day “reading up on investing”, they would never become experts. Especially when you consider that four out of five “experts” – whether investment advisors or mutual fund managers – underperform the overall market, according to The Hulbert Financial Digest and The Motley Fool.

      When you Bank On Yourself, your nest-egg grows safely, predictably and guaranteed every single year – with no luck, skill, or guesswork needed to make that happen.

      Like most people, I’d rather spend that time enjoying my life and family, than wasting it trying to become an investing expert.

    • Hey Jason,

      Thanks for your well-thought out, thoroughly documented comment. I’m guessing you’re an investment advisor.

      The “facts” of the matter are that you’d be hard-pressed to find a reputable source that does NOT agree that the 401(k) is an experiment that has failed miserably. I only had space in my blog post to quote from a small percentage of sources and experts who have weighed in on this, ranging from AARP, Bloomberg.com, MSN.com, CNNMoney.com, Fortune Magazine, the Center for Retirement Research at Boston College… to the New School for Social Research, Time Magazine, Worth Magazine, CBS’ 60 Minutes and the Wall Street Journal.

      I showed you my meticulously documented proof. Now you show me yours.

      I also challenge readers to compare your BEST savings or investing method against Bank On Yourself. I have a standing Challenge to pay $100,000 to the first person who uses a financial product or vehicle that can match or beat the many advantages and guarantees of Bank On Yourself. You can take the $100,000 Challenge here.

    • I’ve made it very clear that Bank On Yourself is NOT a magic pill. It takes some patience and discipline – traits that are in somewhat short supply.

      Furthermore, this method has a proven track record of growing people’s nest-eggs safely and predictably for over 100 years. The problem is that many people are looking for something that will make them rich overnight and the consequences of that have been disastrous.

      What sounds “too good” is the promise that saving for retirement in 401(k)s invested primarily in the stock market is a sure-fire method for achieving financial security.

      The reality is that it’s anything but safe, proven or predictable. All you have to do is open your eyes and look around you for proof.

  3. I work for a large corporation and our 401K investment choices do not offer where I want to put my money. They promote the “before tax” “benefits” yet, the direction the current administration is headed scares the hell out of me – tax, tax, tax and redistribution of “MY” hard earned money and sacrifices. The current administration and socialist congress are doing everything they can to destroy the American economy. There is absolutely no common sense or knowledge of what made our country so wealthy in the first place – free markets.

    I have already written off social (in)security – it is broke. Common sense again shows simple numbers – money in and money out – does not compute. Other countries are looking far more profitable than our ever increasing taxed and regulated (by people that broke every government system put in place). Now they want to screw up our medical system! God help us!

  4. I spoke with an advisor. I also spoke to 2 other people who know how to do this. One of them has said that he prefers to use policies which are recognition policies( referring to loans taken out and being recognized and then affecting dividends) over non recognition policies because there is a higher dividend than those with non recognition polices. He said it is my choice and I could even do some policies of each type and compare them. Please explain this finer distinction. I already know what you recommend and how you feel, but want your idea on this.

    • Something we know about dividends is that they will change and can’t be predicted. And since the Bank On Yourself method encourages using your policy to become your own source of financing, I prefer companies that are NON-direct recognition, because they pay you the same exact dividend regardless of any loans.

      I also prefer companies that have a FLEXIBLE Paid-Up-Addition Rider – very few do, though.

      And finally, and I discussed in my book and website, advisors “don’t know what they don’t know” about Bank On Yourself.

      They THINK they know, but only approximately 200 have been accepted into the Bank On Yourself Authorized Advisor training program and taken the rigorous advanced training to qualify to be an Authorized Advisor.

      I encourage you to learn more about what it takes to qualify and the nature of the advanced training they have.

  5. Dear Pamela:

    I enjoyed reading your blog and I am currently enjoying the benefits of the “Bank on Yourself” system. I’m using the principles of the Infinite Banking System which, as you know, overlap considerably with what your book promotes.

    I am a 31-year old attorney in Philadelphia who started using this system right out of law school at age 25. I wish someone had enlightened me to the system when I was even younger! To date, I have taken out my first policy loans for the purchase of a car from the non-direct recognition life insurance company I use and I am smiling all the way to my own bank!

    I would urge everyone posting on here to really research this concept. In my limited experience, it is far superior to 401k plans that are, ultimately, subject to taxation in the future. The up-front costs of banking on yourself are steep (i.e. setting up the policy with an agent, agent getting commissions for the first few years) but the insulated earnings of your cash values, compounded with the way policy loans are structured will far outstrip those initial costs as you near retirement. Imagine recapturing all of the interest you normally outlay to banks and then, when you choose to retire, having a tax-free stream of income. When these policies are properly structured through a good non-direct recognition life insurance company, they are a powerful financing mechanism.

    I currently have 4 of these non-direct recognition policies in force and plan to add as many as my budget allows. I have never contributed a dime to 401k plans and never will! I am not an insurance agent, I am simply an attorney who was fortunate enough to get pointed in the right direction at an early age.



  6. Hi,
    We also have heard of this concept and want to get started right away! Our only concern would be when inflation and hyperinflation hits and the “dollar” becomes worthless, what happens to our money in the “Bank of You”? Wouldn’t it all go away too? We can’t get the person we have been working with to explain this to us so if anyone knows, we would appreciate an answer. As far as we’re concerned we ALL don’t have a moment to lose to get started on this as we do believe in it..

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