Why is the “Father of the 401(k)” Now Putting His Money into Bank On Yourself Instead?

It caused quite a stir when the man who is credited with being the “father of the 401(k),” Ted Benna, recently announced that he’s put a substantial part of his own money – “probably the biggest part of my wealth” – into what is most commonly known as a Bank On Yourself plan.

You see, for at least six years now, Benna has been calling the 401(k) a “monster” that “should be blown up.”

Benna is credited with finding a way to capitalize on the tax code to create a way for working men and women to supplement the pension plans that many workers used to have. Those pensions plans have been disappearing, and 401(k)s were created to hopefully help pick up the slack.

But over the years, Benna watched Wall Street and Big Business pervert the 401(k) in ways he couldn’t possibly predict.

In a recent interview, Ted Benna discussed three reasons why we should be very leery of 401(k)s and IRAs:

  • The government may repeal the 401(k) and IRA, so you won’t be able to put any more money pre-tax into these accounts, or the amount you can put in will be drastically reduced (Congress considered doing that again last year!)
  • Benna believes the next stock and bond market crash is imminent and could wipe out 40% of the typical portfolio
  • Wall Street has hijacked these plans, and the excessive fees charged by mutual fund companies and plan administrators are robbing you of up to half of your nest egg

I’ve Been Sounding the Alarm About 401(k)s and IRAs for Even Longer than Benna

And I’ve been attacked ruthlessly for that by the Wall Street fat cats who always get paid – whether we win or lose.

But the real story here is Benna’s admission that he has, in his words, “put most of my money” into the high cash value, dividend-paying whole life policies most commonly known as Bank On Yourself-type plans.

Benna says these plans avoid the dangers that traditional retirement plan accounts face. Another reason he likes this type of plan is because of its tax advantages.

If you’re interested in the back story of how Ted Benna came to reveal all of this in an interview, read my blog post about the “501(k) plan”.

I think you’ll also find this article, 6 Reasons Your 401(k) is a Scam, eye-opening.

Ignore the Warnings About the 401(k) at Your Own Peril

Wall Street has been extremely successful at getting us to buy into 401(k)s, IRAs and similar government-sponsored retirement accounts lock, stock and barrel. Most people have little or no savings outside of these vehicles, according to the Federal Reserve Survey of Consumer Finances.

But the chorus of experts warning of the dangers of 401(k)s and IRAs keeps growing.

Don’t put your head in the sand – find out TODAY how the Bank On Yourself concept can bring true lifetime financial security to you and your family. Just request your FREE Analysis here, if you haven’t already.

Do it right now, while you’re thinking about it. Don’t make the mistake of waiting until it’s too late.

Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?

A balance sheet shows you at a glance what you own, what you owe, and what the difference is. The difference is your “net worth” – and the greater your net worth, the more you’re in a position to meet life’s financial uncertainties.

A balance sheet for John and Jane Doe, showing assets including $300,000 in retirement savings; and showing liabilities.
Figure 1. A Simple Balance Sheet
It’s called a balance sheet because your assets minus your liabilities always equals – balances – your net worth.

If you owe more than you own, your net worth is a negative number, and that’s an early indication of possible financial problems or bankruptcy in your future.

Here’s a simple balance sheet. See Figure 1. We see that John and Jane have added up the fair market value of their major possessions – their house, car, furnishings, cash in the bank, and retirement savings – and have total assets of $570,500. But when we subtract what they owe – their first and second mortgages, car loan, student loan, and credit card balances – their net worth (the cash they could come up with if they sold everything) is $369,000. [Read more…] “Is Your Personal Balance Sheet – Your Financial Snapshot – Giving You a True Picture?”

Congress Considers Axing Your 401(k) Tax Deduction

Congress is considering proposals right now to take away the tax advantages of your 401(k).

To help finance the tax reforms being proposed, Congress is eyeing axing the up-front tax deduction for 401(k) contributions. And one proposal would also change the tax-deferred nature of 401(k)s by imposing a 15% tax on your annual gains.

Why would Congress consider tinkering with the tax benefits of such a popular program as the 401(k)?

For the same reason that notorious holdup man Willie Sutton gave for robbing banks:

Because that’s where the money is!”

The current taxation of 401(k) plans was estimated to have cost the federal government more than $90 billion in potential tax revenue last year alone, according to the Joint Committee on Taxation. [Read more…] “Congress Considers Axing Your 401(k) Tax Deduction”

Why Does Ted Benna, the “Father of the 401(k),” Love the “501(k)” Plan?

The man widely credited as the “Father of the 401(k) Plan,” Ted Benna, is among those saying the plan is no longer a good way to save and invest for retirement. He cites concerns that the government may change the rules, and not in your favor; that an impending market crash will wipe out much of what you’ve saved for your retirement; and that staggering fees can eat up a large portion of your nest egg.

Benna has gone on record as endorsing something that has been creatively called a “501(k) Plan.” Don’t get distracted by the name “501(k).” Although “401(k)” refers to the section of the Internal Revenue Code that deals with retirement plans, “501(k)” is an obscure Internal Revenue Code reference that describes the educational status of certain child care organizations! Using “501(k)” to refer to some kind of retirement plan is a gimmick dreamed up by Madison Avenue types. But all they did was take the Bank On Yourself concept, which is a proven 401(k) alternative, and give it a mysterious new name, the “501(k),” hoping you’ll pay money to find out what they’re talking about.

But while others are charging you money for this information, we’ve been giving it away for years! For FREE information about the Bank On Yourself method that others call a “501(k),” download our free report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future here.

History of the 401(k) Plan and Ted Benna’s Contribution to It

[Read more…] “Why Does Ted Benna, the “Father of the 401(k),” Love the “501(k)” Plan?”

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

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

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

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?

[Read more…] “The Ticking Tax Time-Bomb of Conventional Retirement Plans”

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.

Obama State of the Union Address

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…

[Read more…] “The good, bad and the ugly of the new myRA”