Personal Finance Blog for Retirement and Investment Advice

What Is a 501k Plan and Is It an Alternative for Saving for Retirement?

Let me cut through the hype and give you the scoop: The 501(k) plan is just the latest name the Palm Beach Research Group has given to the concept most people know as Bank On Yourself, which is based on a high cash value dividend-paying whole life insurance policy.

The Palm Beach Group has been bombarding subscribers to various email lists about a “warning” issued by the “Father of the 401(k),” Ted Benna.

The Palm Beach Research Group wants you to watch a long video interview they did with Ted Benna, where he reveals three dangers he sees coming that could impact your 401(k) and IRA accounts. He says these dangers could slash your savings by 40%. And you’re promised that by watching this long interview you’ll learn about “a non-government sponsored 501(k) plan” that may “be the only way left for most Americans to retire today.”

This secret plan is touted as a 401(k) alternative “account,” where Benna and some prominent members of Congress have put some of their savings, to shield them from these three dangers.

Unfortunately, even after you watch the lengthy interview with Ted Benna, you still won’t know what this “account” actually is—until you fork over $75 to $149 to subscribe to the Palm Beach Letter and get your copy of their “new” book, The 501(k) Plan: How to Fully Fund Your Own Worry-Free Retirement—Starting at Any Age.

You can’t judge this book by its cover

“New” book? As it turns out, this is not a new book at all! They simply slapped a new title on a book they published a couple years ago about alternative retirement investments, and added a foreword by Ted Benna. The old book was called The Big Black Book of Income Secrets. In fact, at least once in the “new” book, they forgot to change the name and they call their “501(k) Plan” book The Big Black Book of Income Secrets.

You can read my review of this “new” book under its original title, The Big Black Book of Income Secrets, here. My review points out all the red flags regarding the strategies covered in the book that should cause you concern. In addition, many of these strategies are not new at all, and some are exceedingly complex.

The Palm Beach Group Used to Call the “501(k) Plan” “President Reagan’s Secret 702(j) Retirement Account,” and Before That, the “770 Account”

These are all names they gave to what most people know as the Bank On Yourself concept I’ve been talking about since 2001. They’re using sleight of hand, hoping to keep you from getting the full scoop for free. You can download my 20-page Report on this strategy—5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future—right here for FREE.

When you download this free report, you’ll get the full story about the “501(k) Plan”—minus the misinformation and hype—that Palm Beach Group wants you to pay good money for. See what they got right—and wrong—about the Bank On Yourself concept in my blog posts about the 770 account and President Reagan’s Secret 702(j) Retirement account.

Why Does the Palm Beach Research Group Keep Changing the Names of Its Products and Strategies?

Because if you knew the earlier names they gave to their books and strategies, you could just Google them and get the scoop—for free. Google would direct you to Bank On Yourself and then the Palm Beach Research Group couldn’t trick you into paying as much as $3,000 or more for each for their newsletter and advisory services.

Something Happened That the “Father of the 401(k)” Never Foresaw

Photo of Ted Benna, Widely Credited as the “Father of the 401(k)”

Ted Benna, Widely Credited as the “Father of the 401(k)”

Ted Benna is widely credited with finding a way to capitalize on provisions of the Internal Revenue Code Section 401(k) to create a way for working men and women to augment their retirement savings, beyond the pensions many workers received.

But Big Business and Wall Street perverted the 401(k) concept in ways that Benna couldn’t possibly foresee, and in 2011 Ted Benna said he had created “a monster” that should be “blown up.”

Our hats are off to this man with integrity and the courage of his convictions.

3 Big Takeaways from Ted Benna’s Presentation on the 501(k) Plan

There are three key points that Ted Benna made in his recent interview for Palm Beach Group:

1. The first was the danger that government-sponsored retirement plans could be “repealed”

Benna says, “There could be a repeal of the tax advantages these plans offer. So either you won’t be able to put any more money pre-tax into accounts like 401(k)s and traditional IRAs, or the amount you can put in each year will be drastically reduced.”

2. Benna says he believes the next stock and bond market crash is imminent and could wipe out up to 40% of the typical portfolio

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report, that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

He says, “If you’re retired—or on the verge of retirement—and you’re trying to plan a few years down the road, this is something you’ve got to pay serious attention to. Because, if you’re planning your retirement expecting your portfolio will grow at, say, 5% or 6% a year, what happens if another ’08 comes our way next month? What happens to your retirement accounts? … I lost more than I like to admit in my own 401(k) 10 years ago. So I try to learn from my mistakes.”

3. 401(k)s and IRAs have been “hijacked” by Wall Street

“The third danger is fees. This is more of a ‘hidden’ danger. And it’s already here. It’s hidden because it’s not as drastic as, say, a 40% drop in stocks or bonds. But, over the long run, it’s just as deadly. … The average household is paying $155,000 in fees over the course of their lifetime. That’s a significant amount of cash. And all this money is going to Wall Street.”

Benna makes the point that excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg.

I’ve been warning of these dangers and others for years. For starters, see …

Want more information about America’s most popular (and scariest?) retirement plan? Just go to the Bank On Yourself website and type 401(k) in the little box that says “Search Bank On Yourself.”

Benna Says the 501(k) Plan, Better Known as Bank On Yourself, Avoids the Dangers That Traditional Retirement Plan Accounts Face

He’s right. In fact, I’ve been saying that for years.

Benna says that for these reasons and more (including the tax advantages), he has, in his words, “put most of my money in the 501(k).”

Ted’s got it right. The 401(k) is a troubled concept. In fact, the idea of individual wage earners investing their life savings in the stock market is a troubled concept.

And, as Ted Benna eloquently explained, a plan such as Bank On Yourself (which Ted and the Palm Beach Research Group have chosen to dub the 501(k) Plan) neatly sidesteps all those problems, and provides some additional advantages, as well.

So What Exactly Is a “501(k) Plan”?

“501(k) Plan” is just the latest mysterious-sounding name the Palm Beach boys have given to their strategy that copies Bank On Yourself. And Bank On Yourself, as we are always happy to explain, is a safe savings and wealth-building strategy based on a specific type of high cash value dividend-paying whole life insurance.

No, it’s not the kind of permanent life insurance that most self-proclaimed financial gurus love to hate. There are major differences. But it is a form of supercharged permanent life insurance.

Want proof that’s what the Palm Beach Group is talking about? In the transcript of their long interview with Ted Benna, Palm Beach includes a quote, attributed to the Wall Street Journal. Note that they’ve removed the Journal’s identification of the product and replaced it with their own vague words, “this account.”

A look at the Wall Street Journal report they’ve quoted shows what the Journal actually said back in 2010: “Permanent life insurance has ‘become a tax shelter for the rich.’”

We include that Wall Street Journal quote only to demonstrate what the Palm Beach Research Group is talking about. You will realize that permanent life insurance is not a tax shelter merely “for the rich” when you read our article, “The Truth About Whole Life Insurance and Why It’s More Than a ‘Rich Man’s Roth’.”

In the interview Ted Benna did for the Palm Beach Research Group, he discussed what you’ll find in The 501(k) Plan book they are promoting. He said you’ll learn the details of this “account” and how to open one, in the first chapter of the book.

And Chapter 1 of the book is all about “Income for Life,” which is yet another name the Palm Beach Group gave to the concept and strategy more commonly known as Bank On Yourself.

It’s crystal clear. The Palm Beach Group would like to sell you information we believe you’re entitled to have for free. And we’ve been giving that information away since 2001.

How to Open Your Own “501(k) Plan” or Account

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report, that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

… or what you now realize is better known as a Bank On Yourself plan.

You need to talk with a life insurance advisor who has been trained in the special requirements of high cash value life insurance policy design. But the Palm Beach Group makes an outrageously untrue claim, on page 46 of their book, The 501(k) Plan:

The government regulates the fees life insurance agents can charge you. So from a cost perspective, it doesn’t matter whom you choose. You’ll pay the same.”

Let me set the record straight: It absolutely matters who you choose to help you open your 501(k) plan …

The government does not regulate the fees, and even if the amount you pay were the same from company to company, which it is not, the advisor has great discretion in how he structures your plan. Done one way, he gets paid about what life insurances advisors traditionally get paid.

But done with your best interests in mind, the advisor’s compensation is slashed by 50% ‑ 70%, and that “extra” money goes into building your policy’s cash value. Bank On Yourself Authorized Advisors are committed to this concept and are willing to accept a compensation cut, knowing you’ll be so pleased with the performance of your plan that you’ll refer your advisor to your family and friends, as well. In fact, that happens all the time.

Talk to Someone with Your Interests in Mind to Start Your 501(k) or Bank On Yourself Plan

To talk with an advisor with extensive training in this area who cares about your welfare, you want to talk with a Bank On Yourself Authorized Advisor. It may surprise you to know that only about one out of every 20 insurance advisors who apply to become Bank On Yourself Authorized Advisors are actually accepted. The training and commitment required are that tough.

So go to the source that’s been open and straightforward with you from Day One, Bank On Yourself. Request a FREE Analysis and custom-tailored recommendations at no cost or obligation. You’ll get a referral to an Bank On Yourself Authorized Advisor (a life insurance advisor with advanced training on this concept) who will prepare your Analysis and personalized recommendations.

Is “Tax-Free Retirement” Too Good to Be True?

Tax-free retirement—living a comfortable life in retirement without the obligation to pay income tax—comes as the result of planning and arranging your finances (following IRS guidelines every step of the way) so that when you retire, none of the money you receive is taxable—perhaps not even your Social Security income.

Tax-free retirement is good, and this article reveals how to make it happen.

Is Avoiding Taxes on Your Retirement Income Legal?

Reducing or avoiding taxes is perfectly legal. People take steps to reduce or avoid taxes all the time. They may donate to charity to avoid paying as much tax. They deduct their mortgage payments. They take legitimate business deductions. They may shift medical expenses, hoping to bunch expenses into one year and exceed the threshold for deductions that year. These are just a few of the legal tax-avoiding measures Americans take every day.

Many people even believe they have an IRA or a 401(k) to avoid paying taxes. But that’s a trap, because traditional IRAs, 401(k)s, and most other government-controlled retirement plans do not allow you to avoid paying taxes. They merely postpone tax day. We’ll talk more about that in a few minutes.

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands.” — Supreme Court Justice Learned Hand

So while avoiding taxes is legal, evading taxes is not. Maybe you don’t report your income. Maybe you take deductions you’re not allowed. Or maybe you just tell the IRS to take a hike. That’s tax evasion.

But make no mistake: A tax-free retirement can be achieved legally, using IRS-approved methods.

Ways to Avoid Income Tax in Retirement

[Read more…]

Austrian Economics—What the Heck IS It?

What is “Austrian economics”? Let’s break it down:

Economics: “A social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.” Ooo-eee! That’s gotta be a page-turner! Thank you, Merriam-Webster.

Austrian economics: “A school of economic thought that is based on methodological individualism.” Gads! But thank you, Wikipedia.

I never studied economics in college. And I’m pretty sure I didn’t take economics in high school either. Or if I did, I slept through it.

Ron Paul, 2012 Republican Presidential Contender

But “Austrian Economics” is a phrase you hear from time to time—even if it’s said in code, like what Ron Paul said following the 2012 Iowa presidential primary. “I’m waiting for the day when we can say, ‘We’re all Austrians now!’”

That struck me as odd. As Matthew Yglesias colorfully observed in his Slate article on Austrian economics, “The average Republican presidential candidate would sooner officiate at a gay marriage than praise Europe, yet here was Paul pledging allegiance to Vienna. What did he mean? Why would we all be Austrians?”

[Read more…]

The Truth About Whole Life Insurance and Why It’s More Than a “Rich Man’s Roth”

I came across an online article by an anonymous blogger who claimed that the only good purpose for whole life insurance was as a rich man’s Roth. He was certain whole life insurance was only for individuals whose high incomes made them ineligible for the tax-saving advantages of a Roth IRA.

That’s actually pretty funny. Why restrict the incredible advantages of whole life insurance—including the tax advantages—only to the wealthy?

Let’s look at how a Roth IRA works and then compare it to a Bank On Yourself-type whole life insurance policy.

How Does a Roth IRA Work?

A Roth Individual Retirement Arrangement (Roth IRA) is an IRS-approved strategy that allows you to invest money you have earned by making contributions to a Roth IRA plan you have set up. You are not allowed to take a tax deduction for your contribution as you are with a traditional IRA. However, none of the money you take from your plan in the future is taxable. As far as the money in your Roth IRA is concerned, you will not be affected by future changes in the tax rate.

How a Roth IRA differs from a traditional IRA

Roth IRAs are quite different from traditional IRAs.

Chart Comparing Key Differences Between Traditional And Roth IRAsWith a traditional IRA, your contributions are tax-deductible. However, when you withdraw money from your traditional IRA—and you must withdraw specific percentages annually, beginning soon after your seventieth birthday—you must pay taxes on everything you withdraw—at whatever the tax rate happens to be at the time.

See the table for a summary of the key differences between a Traditional IRA and a Roth IRA. [Read more…]

The Surprising Truth About What Happens to the Cash Value of Your Life Insurance Policy When You Die

In Part 1 of this two-part series, I proved the media’s financial gurus are wrong when they claim that it takes years to build cash value in a whole life insurance policy.

In this second part of the series, I’ll show you why all the self-proclaimed experts miss the boat when they claim that whole life insurance policies are a rip-off because you build up all that cash value, then the insurance company keeps it when you die and only gives your heirs the death benefit.

It doesn’t have to be that way, my friend!

Click on the policy statement above to see a larger version

Here’s an actual whole life insurance policy annual statement. (This is a different policy than the one I showed you in Part 1.)

This is a whole life insurance policy purchased on my life in 1992. The statement I’m showing you, issued 17 years later, makes some astounding revelations. [Read more…]

Here’s Proof That the Financial “Experts” Don’t Know About Bank On Yourself Whole Life Insurance Policies

Policy Statement Showing How Whole Life Policies Designed the Bank On Yourself Way are Different From the Policies Most Financial "Gurus" Talk About

Click on the policy statement above to see a larger version

Take a look at this life insurance policy statement. It’s for a policy I took out on September 15, 2002. I’m showing it to you because I want put to rest the misconceptions and untruths the so-called financial “gurus” are spreading about the cash value growth of well-designed dividend-paying whole life insurance policies.

The financial gurus tell you not to buy whole life insurance because your equity in the policy—your cash value—grows too slowly, and you won’t have any equity for the first few years.

This is simply not true of Bank On Yourself-type whole life insurance policies!

You’ll have cash value in the first year with a whole life insurance policy designed the Bank On Yourself way!

[Read more…]

Bill Williams’ AHA Moment: How Bank On Yourself Freed Him from 401(k) Loans and Mutual Funds

Bill Williams is an enthusiastic believer in the Bank On Yourself concept because of how it has helped his family financially. He wrote to me several years ago, and I included his letter on page 228 of my 2014 New York Times best-selling book, The Bank On Yourself Revolution:

Thanks for all the good things you are doing, Pamela. I am working with my Bank On Yourself Advisor to set up my third policy, and I am so appreciative of her guidance and expertise. She has been tremendously supportive.

The real “snake oil” is all of the purported advice about savings and investing we have been fed by the “experts” in the past. I get so upset by the advice to invest with before-tax dollars into 401(k)s or 403(b)s.

I’m over sixty years old and know when I turn 70½, I’m going to have to take required withdrawals from my plans and have the added burden of paying taxes on them. After all, the IRS wants to get its hands on the taxes they let me avoid paying all those years.

I wish not only that I had learned about Bank On Yourself earlier, but that the concept could be taught to the masses when they are young enough to get the maximum benefit from it.

Here’s why I say that: I think of all of the purchases I’ve made through the years where Bank On Yourself would have been a much better means to fund them. As an example, my son’s college expenses, which I paid every cent by selling stock and mutual funds and taking a loan from a 401(k).

Needless to say, my son received a great education (to his credit), but dear old dad has nothing to show for it. I had to put money into the stocks, 401(k), and mutual fund, so I had the resources—which could have been so much more powerful in a Bank On Yourself policy! It’s as simple as that. If I had done that, I would now still have the policies, which would have even more value.

I am depleting an IRA to fund my third policy and to help fund my first two Bank On Yourself-type policies. I just hope I live long enough to enjoy all the benefits.

Bill Williams writes again, about Bank On Yourself, tax-free retirement, and dividend-paying whole life insurance

[Read more…]

52% of Americans Will Have to Reduce Their Lifestyle in Retirement

52% of American households are at risk of not being able to maintain their standard of living in retirement – even when factoring in potential proceeds of a reverse mortgage.

That’s according to the Center for Retirement Research at Boston College.

Let’s take a look at three critical reasons for that… and what you must do now to protect yourself…

Problem #1: People continue to live longer, but aren’t working longer

According to the Social Security Administration, 25% of people turning 65 today will live past 90, and one out of ten will live past 95, yet most financial planners base their projections of how much money you’ll need on your living to age 85 or so.

What if you’re one of the lucky ones who hangs on until 100 or longer? And just how “lucky” will you feel if you can’t provide for yourself during those final years?

Solution: Assume you’ll live to at last age 100 when determining how long your money will need to last you.

Problem #2: Underestimating health-care and long-term care costs in retirement

The numbers are shocking, and almost no one is accurately accounting for this: A 65-year-old couple retiring now will need $245,000 just to cover out-of-pocket health-care costs during retirement, PLUS another $255,000 to cover one average stay for one person in a nursing home.

Whoa! That’s half a million dollars you’ll need just for medical care… but most people close to retirement don’t even have that much in total retirement savings. [Read more…]

21 Reasons Life Insurance Policy Owners Love the Policy Loan Feature

We recently published a 3-article blog post series inspired by an article that financial planner and investment advisor Michael Kitces wrote about the problems with “banking on yourself” with life insurance policy loans.

Then we invited our readers to tell us what their biggest take-away from these articles was, and to share their personal experience with Bank On Yourself policy loans versus other sources of financing.

The many comments left on these three blog posts demonstrated once again how insightful and articulate our readers are! We’ve published excerpts from some of the comments we received below, where you’ll find 21 reasons why using a Bank On Yourself-type policy loan to access cash beats any other way of accessing capital!

In the first article, we discuss four things Mr. Kitces got right about the Bank On Yourself concept, and then reveal what he got wrong, including five fundamental concepts.

Check out What Michael Kitces Missed in His Bank On Yourself Review, Part 1. [Read more…]

Trump Tweets, Black Swan Events and Your Money

How much does your financial future depend on a 140-character Trump tweet, stroke of a pen on an Executive Order, or an off-hand comment to a reporter?

A lot, as these recent news headlines reveal:

  • “Trump Sinks Pharma Stocks on Medicare Price Negotiation”
  • “Dollar Dumps Most in 30 Years as Trump Raises Doubt Over Strong Dollar”
  • “When Trump Tweets, Wall Street Trades – Instantly”
  • “Trump, Not the Fed, Is What Moves Markets Now”
  • “Toyota Stock Drops Immediately After Trump Tweet”
  • “Trump’s Executive Orders Send S&P 500 to an All-Time High”
  • “Dow Jones Industrial Average Sells Off After Trump’s Executive Order on Immigration”

As you can see, when President Trump tweets or speaks, the markets react – in some cases violently.

Whatever your opinion of Trump is, there is one thing we can all agree on:

We are in uncharted waters. We have never had a president like Trump. We’ve never had an administration like Trump’s. There is no historical precedent for this. [Read more…]