Six Reasons Your 401(k) is a Scam

UPDATED: July, 2019

I’m going to make a very bold statement that’s sure to get me some nasty blowback. But as a financial investigator who’s exposed the truth about the conventional financial wisdom, I’m used to that, so here goes…

401(k)s are a scam. Want proof?

Here Are Six Reasons Why 401(k)s Are a Scam…

Reason #1: The 401(k) Tax-Deferral Scam

In our immediate-gratification society, deferring your taxes by funding your 401(k) sounds so good.

But when the tax man eventually comes calling, he won’t ask you to pay what your tax liability would have been if you’d been paying taxes all along. He’ll tell you what your tax liability is at the time your taxes are due.

Conventional wisdom says you’ll come out ahead by deferring taxes. After all, doesn’t that mean your entire contribution can go to work for you immediately? Unfortunately, like many assumptions about personal finance, this simply isn’t true. According to the Society of Actuaries, if tax rates remain the same, “It doesn’t make any difference whether the taxes are taken away from you at the beginning (before you put the money in a savings vehicle) or at the end (tax-deferred). It’s the same fraction of your money that is left to you.”

If the tax rate gets lower over the years, you’ll come out ahead. However, most people, including most financial experts, believe tax rates will head higher, not lower, over the long term. And your retirement could last 20-30 years or more.

The reality is that you are probably sitting on a tax time bomb. Simply put, the government is going to need more money in years to come for several reasons. For example, let’s look at the numbers impacting Social Security and Medicare.

Today there are 62 million Americans using Social Security and Medicare. By 2045, 140 million – twice as many – Baby Boomers and Gen X-ers will be over 65 and requiring Social Security and Medicare. Where do you think the money to pay for that will come from?

Social Security and Medicare’s financial condition has deteriorated despite a long economic expansion. In fact, Social Security is already in a negative cash flow situation. What will happen to those funds in the next downturn?

And what about the national debt? Washington has not dealt with the government’s unsustainable debt and spending for decades, and as of July 2019, the national debt had ballooned to over $22.4 trillion— which comes to $871,954 for each US family! And it’s climbing at a head-spinning rate. (For a painful wake-up call, check out USDebtClock.org)

For all these reasons, the likelihood is that tax rates will go UP over the long term, and if they do, then OOPS! There goes the whole 401(k) “tax-deferral” argument.

Reason #2: The 401(k) Employer Match “Free Money” Scam

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Best retirement plan alternative?

I can’t afford to be a risk taker any more”

Worried Senior

…says 75-year-old Margie Alford of Austin, Texas.  Yet, Margie’s financial planner is moving her CD money into stocks instead, after fruitlessly waiting for three years for interest rates to rise.

Worried Senior

Low interest rates of the past several years have taken a toll on U.S. savers.  “The Fed has removed the last shred of possibility that interest rates will revert to normal in the near future,” according to Christopher Carroll, profession at Johns Hopkins University.1

As a result, retirees are taking on more risk… at a time they can least afford to.

With interest rates on CD’s, saving and money market accounts not even keeping up with inflation, what other options do you have?

The Bank On Yourself solution…

[Read more…] “Best retirement plan alternative?”

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.

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

GA-sW_Q5014

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:

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report, The Ultimate Wealth-Building and Retirement Strategy, plus timely briefings and solutions to critical news and events that may impact your money and finances.

The important decisions about your 401(k) are made by someone with no training or education in most companies.

[Read more…] “7 Really Scary Facts about Your 401(k)”