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Are you one of the 60 million Americans who contribute to a 401k plan? Well, it’s time to uncover the truth behind this massive financial hoax. In this eye-opening video, Clayton Morris, a respected real estate investor, reveals the secrets that Wall Street doesn’t want you to know about your retirement account. Don’t let your hard-earned money go to waste, subscribe now to learn how to take control of your financial future!
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1) Fees. Most Americans have been led to believe that the 401k is a low-fee account, but that’s not always the case. The 401k can have a whole host of fees: plan administration fees, investment fees, and individual service fees. Although the Department of Labor requires that retirement plan fees are “reasonable,” there’s no concrete standard in place to define what reasonable means.
2) Automatic enrollment & payroll deduction. Pay no attention to the man behind the curtain, your employer and 401k provider will handle everything for you. If you’re starting a new job, don’t be surprised if you’re automatically enrolled into a 401k plan. And to further take away any oversight, they’ll just automatically deduct money from each paycheck. Some companies will go a step further and actually elect the investments for you. Can you imagine that any of this is for your own good?
3) Taxes. The 401k is marketed and praised for its tax deferred status. And that sounds great if you just put your head down and follow what your employer and your provider tell you. But here’s the truth about deferring taxes – if your 401k plan is championed for its tax deferral status, you should know that this implies a lower income at retirement. This system wants you to have a lower income in the future, which means you won’t be building wealth anytime between now and your retirement.. A better choice would be a Roth 401k that allows you to pay taxes upfront, but most plan participants don’t allow access to this type of account.
4) False perception of having options. This is one of the biggest drawbacks of the 401k. If your employer offers a 401k plan, they likely offer a choice of investment options that are managed by a provider. They may boast that you can choose your investments, but the options are incredibly limited. You can’t invest in specific companies like Apple or Target, and you certainly can’t invest in tangible assets like gold or real estate. In a 401k, your options are limited to mutual funds and ETFs that invest in a variety of companies.
5) There’s no education around the 401k. At best, your employer might send you home with a brochure that gives you some general information about how the plan works. Investment advice can be worked into your account, but it will cost you. With any investment, you should know exactly what you’re getting, you should understand the returns, and the investment should be benefitting YOU more than it benefits a financial advisor.
6) The benefits are exaggerated. Most people believe that their 401k is going to provide them with a solid foundation in retirement. If you’ve been told that your 401k is going to support your golden years, I urge you to dig into the numbers and see for yourself.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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The 401k is a popular retirement savings tool, but there are some secrets about it that could be destroying your retirement. Many people contribute to their 401k without fully understanding how it works or the potential downsides. Here are some secrets of the 401k that you need to be aware of in order to protect your retirement savings.
One of the biggest secrets of the 401k is the fees associated with it. Many people are unaware of the high fees that come with 401k plans, which can eat away at your retirement savings over time. These fees can include administrative fees, investment management fees, and mutual fund expenses. According to a study by the Center for American Progress, the average American household will pay over $138,336 in 401k fees over a lifetime. These fees can significantly reduce the overall value of your 401k and potentially leave you with less money for retirement.
Another secret of the 401k is the limited investment options. While 401k plans offer a range of investment options, they are often limited compared to other retirement savings options such as IRAs. This can restrict your ability to diversify your investments and potentially limit your potential returns. Additionally, some 401k plans may offer high-cost, underperforming funds, which can negatively impact your retirement savings.
Additionally, many people are not aware of the restrictions and penalties associated with withdrawing money from their 401k before retirement age. If you need to access your 401k funds before the age of 59 ½ for any reason, you will likely be hit with a 10% early withdrawal penalty in addition to income taxes. This can significantly reduce the amount you receive from your 401k and should be taken into consideration when planning for retirement.
Finally, one of the most overlooked secrets of the 401k is the lack of guaranteed income in retirement. Unlike traditional pension plans, 401k plans do not provide a guaranteed income stream in retirement. This means that you are responsible for managing your investments and ensuring that you have enough savings to last throughout your retirement years. This can be a daunting task for many individuals and can lead to financial insecurity in retirement.
In conclusion, while the 401k can be a valuable retirement savings tool, there are some secrets about it that could be destroying your retirement. It is important to be aware of the fees, limited investment options, withdrawal penalties, and lack of guaranteed income associated with 401k plans in order to protect your retirement savings. Consider seeking professional financial advice to maximize the benefits of your 401k and ensure a secure retirement.
Invest somewhere else 401k is a lie they milk you every 15 yrs
I don't know. If you start working at age 24, at 60k a year, 10% going into a 401k with 50% match on 3%, with a raise of 2% each year. Your talking over $1M by the time your 62. Thats without having a side retirement account. I would say that's a pretty good foundation.
Sooo many people look at their 401K as a set it and forget it situation. I have told friends and family at the very least be pro active with their 401K. They put people in an easy to mange, lame high fee fund of some type. Look at the cookie cutter fund they were put in. They are being ripped off. The exponential growth of the fees is awesome also, but in a bad way. Look for fees, and get the hell out of the target date option. What I really push is to sign up with Schwab or Fidelity, or another reputable brokerage firm.
People should pull out their traditional 491K money as a loan & safely store it. Economy is not doing well & they may lose it. Pull it out as a loan & store it safely, but continue contributing. Once economy is safer, return the funds back into their 401K plan.
Great info…thank you.
Morris, this is good content. Once I already had a real estate portfolio, though, and before retirement, I set aside the max to my 401k (split between a regular and ROTH) because it was a tax hedge.
It has worked out, as I've been retired for 4+ years, and other than one withdrawal to buy into a multi-family deal, I haven't had to touch it. Now of course, they have been converted to the IRA versions.
One last thing that I took advantage of before the loophole got closed. I used to be able to buy and sell stock within it, and I had long noticed the cyclical sine wave that the company I worked for took each year, and was able to move into the bottom of the sine wave, wait a bit, and sell. That is generally NOT a recommended strategy, but it made significant gains for me until the powers that be forbade the practice.