Why did Elon Musk say young people shouldn’t max out their 401k contributions?
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Elon Musk, the eccentric billionaire CEO of companies like Tesla and SpaceX, is known for his bold and sometimes controversial statements. In a recent interview, Musk shocked the financial world by stating his disapproval of the traditional 401k retirement plan and endorsing a new concept: Rebellionaire.
For decades, the 401k has been the go-to retirement plan for many Americans. It allows employees to contribute a portion of their pre-tax income to a retirement fund, often with employer matching contributions. The money in the 401k grows tax-deferred until retirement, when it can be withdrawn as income.
However, Musk believes that the 401k system is outdated and not in the best interest of workers. He argues that relying solely on a traditional 401k may not be sufficient to ensure a comfortable retirement, especially given the volatile nature of the global economy.
Instead, Musk suggests embracing a new concept called Rebellionaire. The term is a combination of “rebellion” and “millionaire,” representing a revolutionary approach to wealth creation and retirement planning. Rebellionaire aims to empower individuals to take control of their financial future by actively investing in high-return assets and entrepreneurial endeavors.
Musk believes that the traditional 401k plan restricts employees’ ability to grow their wealth. He argues that by locking their money into a limited pool of investments, workers miss out on opportunities for higher returns. Additionally, he criticizes the lack of flexibility in the 401k system, as individuals often cannot access their funds until retirement age.
Rebellionaire, on the other hand, encourages individuals to become more involved in managing their finances, taking risks, and exploring entrepreneurial ventures. Musk believes that by taking an active role in wealth creation, individuals can tap into their creative potential and increase their chances of financial success.
Critics argue that Rebellionaire may not be suitable for everyone. They claim that not everyone has the knowledge, resources, or risk tolerance to actively invest or start a business. They also point out that Musk’s endorsement of Rebellionaire might be influenced by his own success as an entrepreneur, which may not be replicable for the average person.
Despite the controversy, Musk’s statements have stoked a debate about the effectiveness of traditional retirement plans. Many financial experts agree that the 401k system has its flaws and may not be sufficient to ensure a comfortable retirement. They argue that individuals should diversify their investment portfolios and explore alternative retirement planning approaches, rather than relying solely on a 401k.
Ultimately, whether Rebellionaire becomes a mainstream retirement planning concept or not, Elon Musk’s stance against the traditional 401k plan has ignited important discussions about financial planning, wealth creation, and the need for individuals to take an active role in securing their financial future. As the world continues to evolve, it is crucial for individuals to explore innovative approaches to retirement planning to adapt to changing times and ensure a comfortable life after work.
Elon is a dick stop listening to him.
wtf is this, a cult?
+
They make commissions so low risk is where they want you while they collect.
when you buy a house with a mortgage then depending on the size of deposit doubling of the price of the house would result in x3 – x10 return on initial investment
Whats warrens price target for tesla for 2023 2024 2025?
With all due respect, gentlemen, neither of you looks like a 'twenty-something' and therefore Elon's advice is explicitly not directed at you! Also, I had to look up what a '401k' is and there is nothing about having to be all in on one stock, let alone TSLA. Elon is not advising anyone to buy TSLA specifically and indeed has made no secret of the fact that Tesla's mission is NOT to make stockholders, even him, rich. This is why the stocks go down every time he speaks on an earnings call: most people are actually listening to what he is (and more particularly is not) saying! I am a huge Tesla fan, but emphatically not a TSLA stock fan. If you are still a twenty-something, use Elon as a role model of hard work and employing your talents usefully, not a source of unearned wealth!
That was me. I ended up selling out of the stock fund within months that was supposed soo risky (stock fund) and ended up buying one stock only. I made it really clear that I wanted risky investment- willing to lose it all, and I was suggested stock fund.
I'm from the UK and not aware of the tax on pensions Bradford mentioned. In the past pension pots over £1m were taxed but that was recently removed. Also you are not allowed to take your pension money until 57
After reading "The Coming Generational Storm" (2005) i stopped maximizing my 401K and dropped to just getting the full match. I continued to invest the same total, just investing the rest outside of tax advantage accounts. As long as you aren't trading and realizing gains, there is still a lot of tax deferment — and when it is eventually sold, it is at long-term capital gains rate. Everything from the 401K is treated as regular income.
Wazza should be the IFA. Great articulation . ( for a Brit)
When leaving a job you can move your 401 to a regular self-directed IRA and then control your investments. You can have a 401 max out employer matching funds and still deposit up to a yearly max in a self-directed IRA. The IRA and your personal deposit in 401 is non-taxable. If your house payment is comparable to the rental amount you then get to make interest an income deduction along with the cost of home office.
No billionaires become billionaires because of diversified is such a bullshit point.
99.99+% people who invest for retirement will never become billionaires, not even close. So there is absolutely NO reason to assume something works for billionaires also works for 99.99+% of the population.
As for people in 20s, their income is usually not high, so, they should only contribute minimal to get full employer match (if there is any).
In addition to that, if they have faith in the system, they can contribute Roth.
Diversification is best for preserving wealth, but not for building wealth
I started watching this channel with Zero stocks in anything! In the past 3 years i took everything i could and bought TSLA. All most to 145 now. Exciting
Xoxo
Fun convo. Warren found out after, there is a wrinkle where the RMD isn’t forced over 10 years, but that’s the case most often.
Also if you want to pass down the max to children, there are some interesting strategies.
House is not the best investment, but its gives you roof over your head and security, and that cash money sitting in stocks or in the bank cant buy.
I think its good to have both, 401K and normal broker account, to cover all options sometimes its best, when the government give you some tax benefit you need to use it.
Because most 401k only let you buy a small selection of mutual and index fund.
Elon is against these funds buying into sham like ESG index and only a handful of people controlking shareholder voting right of the entire stock market.
Musk is correct. Congress did away with the stretch IRA and tax wise, a saver is better off going with a Roth or a brokerage account which is taxed at capital gains rates which is much lower than ordinary income taxes. The 401k is the least taxed advantage among these three.
When someone has the level of wealth that he does, taxes must be a major factor in investment strategies. If you are disciplined, get the 401k match and then max out the Roth and the rest into a brokerage. If a person is less disciplined, then the auto investing nature of the 401 is better than nothing.
401k?
Only a short way in, having stopped to find out what a 401K was. Now up to speed! My quick thoughts are that in the UK we have a similar system to the 401k, and similarly, we have financial advisers that 'faint' if you tell them you want to invest in a single company, such as Tesla. My financial adviser did everthing they could to stop me investing in Tesla, the delay they caused cost me on the share price but eventually I completed my transfer – had to change financial adviser to do this though. Now a happy bunny, as we say in the UK! regards
I didn't know the US rules, but the Danish rules are somewhat similar, and after looking into it I CANNOT fathom why anyone would ever use the official pension savings system at all, and in fact youre' forced to use parts of by the government. I fully expect that money "saved" this way will be worth at most what was put in, it seems like frankly disgusting scheme to keep the poor wageearners in their place. And investing with banks managing the portefolio, with their 40 differrent crappy stocks, does not seem better in the slightest. It's all a complete joke on people who trust authority or can't think even moderately well for themselves…
I own a house but I would not do it again. Houses are not assets, they are liabilities… if the mortgage is payed off you can argue it's an asset, but most Americans carry a mortgage. Essentially, assets put money in your pocket, and liabilities take money out.
A Trust to keep wealth on constant growth, without the tribulations of the beneficiaries life’s consequences affecting it…. A predictable road to conserving wealth intact.
That’s my understanding of what Trusts are used for… am I wrong ?
we call it a superannuation fund in Australia
Will Tesla pay dividends in 2040?
My 453B allows me to self manage all but 25K so I can buy tesla with mine
Elon talks about why he’s against 401k's in the recent interview/Twitter space
No. The reason they shouldn't is because there are meteor showers. If an asteroid, (in the form of a government decision, or earthquake, death, et.al.), hits their 401k, they are totally wiped out and have no future chance of recovering. If their investment is spread across at least 3 or 4 brokerages, in 3 or 4 industries at least they will survive with enough to recover. As they can afford to gamble a little they will be older and wiser and may even learn how strategic planning works, then they can begin concentrating their wealth with less risk. Perhaps it's a little related to "Sin in haste, repent in leisure".
401k is a way to stabilize the stock market while taking away money from the poor. My mother put money into her 401k for more than 30 years. In 2009 she lost all of it when the system sold all her stock for pennies on the dollar. How much? She lost almost $300k in a month.
I'm up over 500k on a 60k investment in Tesla. Holding long.
Per Dave Ramsey, young folks should do a Roth IRA, not a 401k
Any 401k you can move funds to trade as you like. In the case of Fidelity, ask to create a brokerage link.
Everyone knows the stock market is performing better than real estate with cash investments. However, real estate offers significant leverage through mortgages, making it very attractive. Additionally, owning real estate allows you to live in the property as well.