If you’re like most Americans, you’ve probably been conditioned to believe that the 401k is the ultimate retirement plan. But the truth is, the 401k is not a smart way to save for retirement or build wealth. In this video, you’re going to find out why I would never invest in a 401k plan.
You’ll learn why saving your way to retirement doesn’t work, and why the 401k is setting you up for failure. We’re going to run some numbers on saving for retirement, discuss inflation, employers matches, and tax implications. If you’re ready to challenge the messages you’ve been taught about the 401k plan, this one is for you!
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As an AI language model, I do not have personal preferences or investment goals. However, I can provide some insights on the topic of investing in 401ks.
A 401k is a retirement account that is sponsored by an employer. It allows employees to save and invest a portion of their salary, which is then matched by the employer up to a certain limit. The contributions and earnings are tax-deferred until retirement, at which point they are taxed as income.
While a 401k may seem like a good option for retirement savings, there are several reasons why someone might not want to invest in one.
Firstly, 401ks have limited investment options. Employees are typically offered a selection of mutual funds and other investment products to choose from. These products may not align with an individual’s investment strategy or risk tolerance, which can lead to lower returns and increased market risk.
Secondly, most 401ks charge fees and expenses, such as administrative and management fees, which can eat into an investor’s returns over time. These fees may not be evident at first, but they can add up over the years.
Lastly, 401ks are subject to market volatility, which can result in losses. When markets are down, an investor’s savings in a 401k may take a significant hit, which can leave them with less money for retirement.
In conclusion, while a 401k may be an option for retirement savings, it may not be the best option for everyone. Investors should carefully consider their investment strategy, risk tolerance, and other retirement savings options before making a decision. It is essential to seek the advice of a financial advisor to determine the best course of action.
You always pay taxes when you take it out.
401K is an asset, no reason not to have one. Some employer even give you 1% to 6% match whether you contribute or not.
Your math is off. After 32 years at 10% compounded interest it’s $2mil.
My company matches 6%. I think it's a no brainer to put 6% into my 401k. I also invest in real estate.
People may not have pension plans however, people can buy insurance products that can help them prepare for retirement.
Real estate investing is not for everyone. What may work for one person may not work for someone else. You also left out the Roth retirement accounts.
The saving for retirement model doesn't work because people aren't saving for retirement. When people have less than $1,000 in there that is not the fault of the investment but the fault of the investment amount
The financial industry doesn't know you exist
Good info thanks
I will always contribution to my 401k and a Roth, I have invested in TESLA Stock. I have real estate rental properties outside of any retirements account. Exactly, this is about Real Estate VS Stocks
very misleading title.
This is not sense, thanks to my 401k I was able to wildraw with out penalty for the 2020 bill frim Covid. Got me a house and had dowpayment and closing costs. Also, I can get loans from my 401k with out the bank. Of course you don't invest only in 401k
You double-counted inflation.
Vanguard energy fund doesn’t even pay my dividends they keep everything
My family has been in real estate for years. Yes great returns eventually but the headaches, lawsuits, etc that come with it aren't worth it. And you need a fairly large down payment to get into it. I've invested in 401K since in my 20's and I am happily retiring at age 59 1/2 with out owning real estate beside my own house. Not retiring as a bazillionaire, but that's overrated in my opinion.
Taxes only go up each year
Company match sucks to put 100 to 200 in and my employer put in 100 wow 300 after 6months
I do invest in stocks as there more reliable and more liquid
We'll for one 401k charges u a recordkeeping fee through vanguard 40$ annually and fidelity charges like 30$
The math seems wrong. Saving $767/month over the course of 12 months is $9204. Over the course of 10 years that's $92,040. That's not even counting market gains compounded over time. How did you get $83,000?
Ahhh you are selling something….got it
My wife and I started saving at 26 for our retirement. We started with $2,000 per year, started investing the savings in 2008. Mostly saving in tech funds and index funds. Over 30 years between the savings and the investing we have a combined net worth of 3.4Million mostly savings and deferred retirement funds. If you start early and do it gradually you WILL become a millionaire in 20-30 years.
Literally the worst advice you could give people. Missing out on $19,500 of tax deferred and/or tax free growth EVERY YEAR? Delete this video.
Do your homework on this guy.
This video is not about 401k's. It's a stock vs real estate investing argument.
Just max out your 401K and put it in a fund that has a low ER and follows the S&P500. That's all you have to do.
You have a problem in your calculation and because of that, you are giving incorrect (and even dangerous) advice.
You said the annual market return is 10%, with 3 % inflation, (and assuming that is correct), the 7% discount rate is a real return. That means, after 32 years, the future value as you have said is approximately $1m ($1,095,591 to be exact). That number will be your future value net of inflation, not $388k.
If you want to incorporate inflation in the calculation, you use 10%, and in 32 years you would have a future value of $2.1 million.
Btw, the cash flow from real estate is not guaranteed, and the returns are cyclical. The market is interdependent. If economy is weakening, the rental properties faced downward pressure in prices to avoid vacancies.
Stocks and bonds are traditional asset classes, and real estate is a diversifier that can be added in our portfolio, not should be our exclusive investment otherwise we faced concentrated risk.
My suggestion would be to invest in 401k up to the matched employer offering, then maximize the ROTH IRA. People can invest in MREITS if they want real estate exposure, Roth allows active management . Once the ROTH IRA is maximized, then invest again in 401k.
Several questions nice video!
Number one if I have my own s corporation with my own 401k is there any harm to using it to max out my 401k since all the money is coming to myself?
Number two if you are going to be retiring and have less income coming in because you are not working as aggressively wouldn't that put you into a lower tax bracket? And by that same token would that not mean that your tax would be less when you take 401k distributions?
Clayton I think you are right BUT I like to put away 60% pretax money into my 401k, 403b and 457b and pay almost no taxes. Like you said in other videos save enough take a loan and buy investment.
Wasn't he on foxnews?