Jason is 53 years old and just changed jobs. He’s facing two retirement planning dilemmas…
- He has $830,000 in his 401(k) from his previous job and wants to move it where it gives him more guarantees that he and his wife, Julie, won’t outlive their money in retirement.
- He had been putting $19,000 a year into his old 401(k) and wants to continue socking away that much. But in the last couple of years he experienced several downsides to 401(k)s that have soured him on the idea of continuing down that path.
The Five 401(k) Drawbacks Jason Discovered…
Drawback #1: When the pandemic hit, Jason’s employer stopped doing any matching contributions, which had been a big incentive for him. He’d forgotten the employer match isn’t guaranteed.
Drawback #2: As Jason gets closer to retiring, he has much less of an appetite for risk and volatility. What if the market crashes again shortly before he plans to retire in 14 years at age 67?
He’d been saving diligently in a 401(k) for 29 years already, and his average annual return had been less than 6%! Sheesh! All those sleepless nights and heart-stopping crashes… for less than 6% a year?!? He wondered if a monkey throwing darts couldn’t have done better than that… [Read more…] “How to Trade In Your 401(k) for an Increasing Guaranteed Income for Life”
While doing my research for my new book (The Bank On Yourself Revolution, to be published on February 11), I came across four stunning new wealth-killing revelations about 401(k)’s and IRA’s.
If you have money in one of these plans, I urge you to read this advice about your 401K and/or IRA today to find out how to protect yourself from making costly mistakes:
Wealth-Killer #1: The fees you’re paying may be much higher than you think
I’ve written in the past about how Congress passed a law in 2006 protecting employers from liability as long as they automatically put employees’ contributions into certain types of mutual funds, known as “default” investments.
Target-date funds (TDF’s) have emerged as the default investment of choice. Unfortunately, they’ve also proven to be very risky AND they’re among the most costly mutual funds you can buy. (Would it surprise you to learn the mutual-fund industry lobbied Congress to get that law passed and make sure their interests were protected? Didn’t think so.)
So last month, an article in Forbes (“The Trouble With Target Funds”) revealed that, according to the prospectus of one popular target-date fund, your projected fees and expenses for each $10,000 invested is $2,478 over a ten-year period (assuming it grows at 5% a year).
That’s 25% of your savings!
So, if you had $300,000 in that fund for ten years, you’d get soaked for – are you sitting down? – $74,340! (And that’s just over a ten-year period!) It also doesn’t take into account all the other fees you’re charged in a 401(k).
The author of this article concluded…
[Read more…] “Important 401K and IRA Advice”