I invested in a 401k for 10 years and here are my results! How much money did I invest in the 401k? How much did it grow by being invested in the stock market? How much money in dividends did it produce? How bad were the expenses and fees related to using a 401k? How much did my employer-match make a difference (or not)? And finally, was it all worth it?
Also, why are people online claiming that 401k’s are a scam? Should we be concerned about waiting so long to access our money that’s locked away? Is there a negative calculation to factor in when we get an employer match? Are we even benefitting from the tax deferral of a 401k? And if they are so great, why does the average American still not have enough money saved to retire?
⏱Handy Timeline:
0:00 Intro
0:46 Showing my investments
3:01 How much I invested
4:21 Sharing my returns
6:13 Expenses and Fees??
8:13 Impact of employer match
12:06 Overal financial summary
12:31 Was it worth it?
15:52 ‘Tis a scam?
16:42 Potentially valid concerns about a 401k
19:30 How a 401k doesn’t work
20:33 How I kept all my 401k money after quitting
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Investing in a 401K retirement account is one of the most common ways people save for their golden years. With tax benefits and the option for employer contributions, it is a popular choice for many individuals looking to secure their financial future. But what does investing in a 401K for 10 years really entail? And what is the truth behind it?
First and foremost, it is important to understand how a 401K works. A 401K is a retirement savings account offered by employers that allows employees to contribute a portion of their salary on a pre-tax basis. This means that the money you invest in your 401K is deducted from your paycheck before taxes are taken out, ultimately reducing your taxable income. Additionally, many employers offer matching contributions, meaning they will match a certain percentage of your contributions, effectively doubling your investment.
So, what does investing in a 401K for 10 years look like? Let’s say you start contributing to your 401K at age 30 and continue to do so consistently for the next 10 years. Assuming an average annual return of 7%, your initial investment could potentially double over that time period. This means that if you invested $10,000 over 10 years, it could grow to $20,000 or more, depending on market performance.
However, it is important to note that investing in a 401K for 10 years is just the beginning of your retirement savings journey. In order to maximize the growth of your investments, it is crucial to continue contributing regularly and adjusting your investment allocations as needed. Additionally, it is important to stay informed about the performance of your investments and seek guidance from financial advisors if necessary.
The truth about investing in a 401K for 10 years is that it can be a powerful tool in building your retirement savings. By taking advantage of the tax benefits and employer contributions, you can potentially grow your investments significantly over the course of a decade. However, it is important to stay diligent and informed about your investments in order to make the most of your retirement savings. With careful planning and consistent contributions, your 401K can help you achieve your financial goals in the long run.
Brandon really laid it all out when it comes to 401Ks and the importance of early investing. Makes you think about your own financial future, right? By the way, have you heard of My Digital Money? They're all about simplifying crypto investing, giving everyone a chance to build wealth, regardless of their experience with crypto.
My mother goes on rants about how much of a scam they are because she took a hit during the recession – we all did – and never really recovered. Based on what my dad has said about his 401k, we suspect she stopped contributing. My dads took off like a rocket around 2015.
I'm with you. If I had to do it again I would've gone full-Ben-Stiller and done everything earlier and even more hardcore.
Absolutely amazing video Brendan; I agree with everything you said. And yes it's good to get the benefits of both a traditional and a roth!
Fact of the mater is, there are a multitude of ways to access your 401k funds early if you really need to. One way that I've taken advantage of is taking a loan out from my 401k to cover the down payment on a house. The great part of that is that you're essentially lending yourself the money. The interest on the loan goes right back into your investment account in leu of the gains you might have gotten had that money been invested normally. The only real cost is the origination and servicing fees, which are usually relatively small. Talk to your 401k provider about those sorts of options. Great for debt consolidation as well as the interest rates are based on market conditions, not the black box that is your credit score, so interest rates are usually less than 10% while many credit cards out there are charging more like 21%!
I think something else that most people don’t consider for the tax thing is when you put money away pretax you are essentially saving at what your marginal rate (top tax bracket) and say if you use it to replace the same income you’d basically be pulling it out at the effective rate which is lower than your marginal tax rate. Currently my marginal rate is about 48% combined state and fed so yeah I don’t think my effective tax rate will be over that especially if I move to a no income tax state
I would say the only thing about 401ks with companies is most are opting for that instead of a Pension; however, I don't think it impacts employee earnings. I always tell everyone get the 401k match at least, like bare minimum.
Does your wife have a chunky 401k account too or is it just you?
Having a 401k definitely isn't a scam, and it also definitely isn't the right choice for everyone
401ks are a joke. It’s a high risk account that fat cats on wall street use in investing while still living the high life to have you be taxed on every cent you made from it. It basically keeps up with inflation as the rich people get your money to risk.