Jacob Imam and guest Alex Renn take a look at the practicalities, the insecurities, the sacrifices, and the excitement of actually closing a 401k.
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Breaking up with your 401k might sound like an extreme move, but sometimes it’s the right choice for your financial future. Your 401k plan may have served you well for years, but the financial landscape is constantly changing, and there could be better options out there for you.
Why Would You Break Up with Your 401k?
Your 401k plan may no longer be the best option for you, for several reasons. These could include:
– High fees: Your 401k plan might have higher fees than other investment options, eating into your overall returns.
– Limited options: Some 401k plans may have limited investment options available, which could hinder your ability to diversify as much as you’d like.
– Investment performance: The investment options within your 401k plan may not be performing as well as you’d like, leaving you with lackluster returns.
– Personal preferences: Maybe you just don’t like your 401k plan, for whatever reason. You might prefer to invest in individual stocks, for instance, or have more control over your investment strategy.
How to Break Up with Your 401k
If you’ve decided that your 401k plan is no longer the right choice for you, there are a few steps you’ll need to take to make a clean break:
1. Understand the rules: Before you make any moves, make sure you fully understand the rules and regulations around withdrawing money from your 401k plan. Depending on your specific plan and circumstances, you may face significant tax penalties for making a withdrawal.
2. Consider alternatives: There are many other investment options out there beyond your 401k plan. Do your research to determine which ones might be the best fit for your goals and risk tolerance.
3. Roll over your balance: If you do decide to break up with your 401k, you’ll need to roll over your balance into another account. This could be another employer-sponsored retirement plan, such as a 403b or 457 plan, or an IRA (individual retirement account).
4. Make a plan: Whatever investment option you choose, make sure you have a solid plan in place for how and where you’ll invest your money. Consider working with a financial planner or advisor if you need help putting together a comprehensive strategy.
Breaking up with your 401k might be a tough call, but it could be the best thing for your financial wellbeing in the long run. By understanding the rules, exploring other investment options, and creating a solid plan, you can ensure a smooth transition and set yourself up for success down the road.
Totally static analysis you are will be way better off owning your house sorry. For anyone in the States do not invest in 401k, own property, you will get stiffed letting other ppl use your money. This guy kind of gets it but the comparison is off for a number of principled reasons (using money with the kid is a way better reason and gets to the heart of the matter on financial and societal reasond)…. Go the house…
I think Marc said something along the lines, "Why should our economy revolve around money?" and it blew my mind. In Christendom we need to start with "How does this benefit my fellow man?"
Investing is more about what and who you invest in, than your return. The world is obsessed with money because it is scared.
The most illogical approach I found in the whole video was the imaginary savings of $50K of interest by paying off your house early. My house has a 2.25% rate while inflation is well above that meaning I have a free loan, I can also refinance if rates go lower. When you pay off your super low rate mortgage, you lose the ability to capitalize on lower rates in addition to all the excess capital you could have for free. So if I have a 300K house with 225K principal at 2.25%, I could either pay it all off now and avoid $40K in interest OR I could invest that $200K I have now and end up with a hell of a lot more than 200K+40K in 15 years. It made sense to pay off your house early when rates were 6-8-10+% and inflation was 3%. You were losing lots of money to inflation. But now…why would you pay off something faster when inflation is higher? When the prices of cars, durable goods are groceries are going up 5% but your interest is only 2.25%, you are losing TONS of buying power down the road.
Your video is helping me with discernment of emptying my 401K at age 34 – you gave words to my thoughts that have been beneath the surface for so long. We can pay off our house, add onto it for my aging mom and in-laws, and then what, I do not yet know. Thank you, Jacob and Alex!
We can’t make enough to live when we’re 74 and live in nurses are expensive. Unless one of your kids is a nurse this is difficult today. Maybe invest in gold, or buy a house and downsize and use the money from the larger house for a nurse if you need it? I just feel like there’s imprudence in calling on people to possibly be destitute for the last 20 years of their life. Unless you have a lot of kids (and still they might not be able to afford round the clock nursing if you need it)
Dude… You can still work. Isn't that much more important than all the imaginary tinsel pension funds that might be used for who knows what?. And it's your money.
So don't ever stop working. You can then continue to contribute constantly to the common good.
My biggest takeaway from this is that someone has advised me to take my family's money, give it to someone else for the productive part of my life (which they will then hold hostage at gunpoint to the tune of 25%), and then I get access to it again when I've simply kept my head down obeying the market system for 40 years and denying much charitable work and community building that I would have participated in had I had full access to my money.
I was interested in this channel before it became ways of throwing money away supposedly supported by faith. We’ll be supporting these guys later in life when the well runs dry.
Don't forget that you also will gain access to the full equity of your house and all of the appreciation that comes with that much sooner. There are also some interesting things you can do with cash out refinances of your house once you have that much equity which will give you access to large amounts of money quickly to do magnificent things with.
You should consider posting the email Jacob sent about closing the 401k and link it in the description