It fails many Americans!
So says the father of the modern day 401(k).
Do you mind if I share some of my insider
viewpoints why this is?
Great!
The 401(k) passed into law under the Revenue Act
of 1978.
The... Revenue Act?
Hmm... What's more unusual is that IRS was in
charge of the 401(k), which is the same government
body in charge of getting as much money from you.
That's a little conflicting, right?
Before the 401(k), companies offered pension plans
to employees.
Companies started to realize the amount of risk
that these pensions had put on the company.
The way the could transfer the risk and
responsibility from company to employee was
through a 401(k).
One of the common rebuttals is that it's
tax-deferred.
True... But here's the fine print.
Federal Income Tax is deferred, but Social
Security and Medicare are taxed 7.6% a year.
The 401(k) tax benefit was to help executives on
their yearly bonuses, not the middle-class worker.
That is why I make the case that most people are
not in a position to benefit from the tax benefit.
Usually, in life, you end up paying more for
something later; than you would if you paid now.
But, if my employer matches my contribution, it's
free money.
That's your decision to make, but I don't think
it's worth it.
After the introduction of the 401(k), this opened
the door to bankers getting their hands on your
money causing most to turn a blind eye over the
years saying, let a professional do it.
99% of 401(k) plans provide limited options which
all happen to be mutual funds that have management
and hidden fees.
After fees, the average return drops down to
2%-4%.
Then factor in a conservative number of 3% for
inflation, poof!
You take all the market risk while the funds
collect their fees and you can't touch it.
From what I've researched, the average 401(k)
balance is around $96,000.
Let's pretend you retired today with $250,000 in
your 401(k).
Let's say the annual interest rate earned on that
nest egg is 2% with inflation at 3% (annually).
If took $15,000 a year from that account to live
off, it would last 25 years, that's it.
That is a real problem most Americans face today
because that's not enough to survive.
I saw this first hand with my Great Grandma (Nan).
Before she passed at 87 years old, she was
battling cancer, buried in debt and still
searching for a job.
That is the mission OptionSIZZLE was founded on,
which is to help people like you take back control
of your money and become independent money making
machines.
To your wealth, freedom, and options!
Joshua Belanger
