3 Reasons Why the Money in Your 401(k)/IRA Doesn’t Belong to You

If you get regular account statements, you probably know the approximate current value of your 401(k) and/or IRAs, so please write that total down now.

Do you think all that money belongs to you?

It doesn’t… and what people find most surprising is how little of your account value actually does belong to you.

3 Reasons the Money in Your 401(k) Doesn’t Belong to You…

Reason #1: You May Not Be Fully Vested

Most people don’t think about this much, but until you are fully vested with your company, if you lose your job or switch companies, you usually won’t get some or all of your employer’s match, and you’ll forfeit some or all of the returns you’ve had on the match. Learn more about 401(k) vesting schedules here.

Nearly half of all companies use a “graded” vesting schedule – these plans slowly vest (give you “ownership” of more of your match) with every year of service until you hit 100%, which usually takes 5 or 6 years.

For example, let’s assume your employer contributed $100 to your match, the returns were $10, and you’re 20% vested. If you lose your job or switch jobs, you only get to keep 20% of the match and return – in this case you’d get only $22 instead of the $110 you thought you had.

And here’s an interesting fact: You’re typically not 100% vested for 5 or 6 years, but according to the Bureau of Labor Statistics, the average time people stay on the job is only 4.2 years!

Oh, and 22% of 401(k)s have “cliff” vesting schedules, which require you to stay with an employer for a minimum number of years or you don’t get to keep ANY of the match!

Reason #2: Deferred Taxes Can Devour One-Third – or More – of Your Account Value

According to Boston College’s Center for Retirement Research, “It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had [in their tax-deferred retirement account].”

And that is based on today’s tax rates. But with Congress continuing to spend like a drunken sailor and ever-increasing numbers of aging boomers increasing the strain on Social Security and Medicare, what direction do you think tax rates are going to go over the long term?

If they go up, as most people expect, Uncle Sam could easily take 50% of your retirement withdrawals. (And this doesn’t even take into account the “free stuff for everyone” movement that’s been gaining popularity.)

Read: The Ticking Tax Time Bomb of Conventional Retirement Plans

Reason #3: The Numbers on Your 401(k) and IRA Statements Are Only “Paper” Wealth

This means that unlike “real” wealth, the value of your accounts could fall by 50% or more in the next market crash, just as has happened in the last two market crashes we’ve experienced in the past 20 years.

Have you “accounted” for that possibility, which becomes more likely with each passing day, since we are (still) in the longest-running bull market in history (and they never last forever)?

The Solution is to Hold at Least a Portion of Your Retirement Savings Outside of a 401(k) or IRA

And the Bank On Yourself safe wealth-building strategy provides an antidote to all three of these problems:

Don’t Let Your Retirement Dreams Turn into a Retirement Nightmare

The biggest regret most people have is that they didn’t get started with Bank On Yourself sooner. Take the next step toward economic sanity and control of your retirement savings by requesting a Free Analysis here today.

You’ll get a referral to one of only 200 advisors in the U.S. and Canada who have passed the rigorous training to be a Bank On Yourself Authorized Advisor. They can also answer any questions you may have.

Request your Analysis TODAY, so you can enjoy more financial peace of mind in the New Year:

Conscious Spending: How to Live a Richer Lifestyle Without Busting Your Budget

Ben Simon, a college student at the University of Maryland, founded an organization called the Food Recovery Network that organizes campus dining halls to donate left over food to hungry Americans. Ben noticed how many billions of tons of food are wasted each year by restaurants, caterers and other food providers.

He believes that, especially in this country, we don’t need to produce more food to see that everyone is fed. We simply need to stop wasting the food we have.

And so it is with many of us and our money.

Rather than increasing the speed of our hamster wheel to make more money, most of us would do well to figure out how to waste less.

Too many of us spend on items that give us very little in return: no lasting satisfaction, joy, or value

[Read more…] “Conscious Spending: How to Live a Richer Lifestyle Without Busting Your Budget”

Can You Answer This Critical Question About Your Retirement Plan? (Most People Can’t)

Here’s the most critical question you must be able to answer about your retirement plan…

Do you know what your retirement account(s) will be worth on the day you plan to tap into them?

If you’re saving for retirement the way most people do, you couldn’t answer this question if your life depended on it!

And When You Get Right Down to it, Your Life Does Depend on it!

Here are three reasons why… [Read more…] “Can You Answer This Critical Question About Your Retirement Plan? (Most People Can’t)”

The Wall Street Journal Podcast Interview with Pamela Yellen: Why You Won’t Work as Long as You Planned

I was recently interviewed by the Wall Street Journal for an episode of their “Your Money Briefing” podcast.

The episode is described as, “Financial security expert Pamela Yellen explains why most people stop working earlier than planned, and offers safe investment tips to reduce the chances of running out of money in retirement.”

In this interview I discussed: [Read more…] “The Wall Street Journal Podcast Interview with Pamela Yellen: Why You Won’t Work as Long as You Planned”

Retirees Will Outlive Their Savings by 10 Years, According to a New Study by the World Economic Forum

The typical 65-year-old has only enough savings to cover 9.7 years of retirement income. That leaves the average American man with a gap of 8.3 years, and women (who live longer) face a 10.9-year gap with no savings left.

That’s according to a scary new study by the World Economic Forum. This assumes you live an average lifespan. If you’re one of the “lucky” ones who lives longer, you could outlive your money by 20 to 25 years or more.

6 Challenges You Face that Could Turn Your Retirement Dreams into a Retirement Nightmare…

How many of these challenges have you prepared for?

Challenge #1: The typical household nearing retirement has an average of only $135,000 in their combined retirement accounts – enough to provide at most $600 per month income. (Source: Federal Reserve Survey of Consumer Finances)

Challenge #2: Even healthy couples will face extreme health care costs in retirement. [Read more…] “Retirees Will Outlive Their Savings by 10 Years, According to a New Study by the World Economic Forum”

Retirement Can Be Fantastic … If You’re Prepared

What do you think of when you think of retirement? Freedom? Enjoyment? Less stress?

You’re not alone. Most workers today associate retirement with those concepts, according to What Is “Retirement”? Three Generations Prepare for Older Age, the latest study from the nonprofit Transamerica Center for Retirement Studies.

But the big question is … Will You Be Ready?

Will You Be Healthy Enough to Retire the Way You Hope To?

Just 16% of Baby Boomers surveyed said their health is “excellent.” But only about half of the workers in the survey said they exercise regularly … or eat healthfully … or get enough sleep.

Here’s the issue, as laid out bluntly by life coach Peter Sage …

If you don’t make time for health, you’ll have to make time for illness.”

How successful at life can you be, when your body refuses to serve you? And it will eventually refuse to serve you if you ignore your health.

Will You Have Enough Money to Do What You Want to Do?

Two out of three workers say their big retirement dream is travel. Half of those surveyed said they’re looking forward to spending time with their family and friends. And nearly half get a smile on their faces when they think of the time they’ll have to pursue their hobbies.

The problem is this: half of those surveyed have less than $50,000 total in all their household retirement accounts.

How far will $50,000 take you? [Read more…] “Retirement Can Be Fantastic … If You’re Prepared”

There’s a Good Chance You May Be Forced to Retire Sooner Than You Expect

Perhaps you’ve heard that the best way to make God laugh is to tell him your plans. … Particularly your plans for retirement!

And you’ve probably heard that with the unpredictability of the markets – stocks, bonds, real estate, whatever – you’re going to need to work longer than you had planned, in order to have enough to live on in retirement.

But that doesn’t mean the universe will cooperate.

Research from the Center for Retirement Research reveals that on average 21 percent of workers intend to work to age 66 or later. But more than half of them fail to reach this target.

The share of workers who say they expect to work past age 65 rose from 16% in 1991 to 48% in 2018. But the study shows that 37 percent of all workers end up retiring earlier than they had planned.

How can this be?

Why Are Hard-Working Americans Retiring Earlier Than Planned?

[Read more…] “There’s a Good Chance You May Be Forced to Retire Sooner Than You Expect”

Record-High Credit Card Debt Promises Problems for Many

According to the Federal Reserve, credit card debt in the U.S. is at its highest level ever. In December 2018, credit card debt was $26 billion higher than it was just three months earlier.

Americans over age 60 hold nearly one-third of all credit card debt in the country – and they’re seeing their accounts go delinquent at an increasing pace.

We’re not surprised. Eighteen months ago, we at Bank On Yourself bemoaned the fact that household debt at the end of 2017 was at a then all-time high of more than $13 trillion. Now credit card debt is poised to overtake auto debt as one of the “big three” consumer debt millstones (after mortgages and student loans).

Carrying significant credit card debt can cause serious problems

Living with a large balance on your card(s) can be like trying to cross Niagara Falls on a tightrope: You hope and pray nothing goes wrong.

What could go wrong while your cards are maxed out? [Read more…] “Record-High Credit Card Debt Promises Problems for Many”

How Complex Is Dividend-Paying Whole Life Insurance?

Some financial advisors say whole life insurance is complicated, and that “you should never invest in something you don’t understand.” … Then they try to sell you stocks, bonds, mutual funds, and EFTs that most laypeople can only begin to truly grasp!

Dividend-paying whole life insurance is so simple an average 10-year-old can understand the concept in 10 minutes. We’ll prove it to you now …

The Simplicity of Dividend-Paying Whole Life Insurance

The concept behind a dividend-paying whole life insurance policy is extremely simple. It’s based on five easy-to-understand ideas:

1. Your Risk Is Minimized by the “Pooled Risk” Approach of Insurance

This timeless concept is at the foundation of all forms of insurance. In its simplest form, policy owners pay an insurance company a relatively small sum of money in advance. This is called a “premium.” In exchange, they are covered for a potentially much large expense later. In this case, they receive an agreed-upon amount to cover the costs and loss of income related to the death of the insured, which is called the “death benefit.”

2. You’re Guaranteed to Have “Level-for-Life” Premiums with a Whole Life Insurance Policy

[Read more…] “How Complex Is Dividend-Paying Whole Life Insurance?”

The Most Important Lesson Learned from the Government Shutdown: Americans’ Finances are Fragile

The longest U.S. government shutdown in history laid bare an uncomfortable truth: Americans aren’t saving enough and the majority of us have no rainy-day fund to protect us when the inevitable you-know-what hits the fan.

More than 70% (!) of all types of employees at all income levels surveyed live paycheck to paycheck and said they’d have difficulty meeting their financial obligations if their paycheck were delayed for just one week! That’s according to the 2018 “Getting Paid in America” Survey by the American Payroll Association.

This explains why, after missing just one or two paychecks, we heard so many heart-breaking stories from government workers who weren’t being paid or were furloughed. For example… [Read more…] “The Most Important Lesson Learned from the Government Shutdown: Americans’ Finances are Fragile”