Comments on: 401k The Biggest Scam Ever http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/ News and Information for a Down Economy Sun, 19 Feb 2012 00:36:31 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Ken http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-426 Ken Mon, 07 Jun 2010 19:26:23 +0000 http://recessionreadyamerica.com/?p=1255#comment-426 The measurement stick for whether or not a 401k is worth it: 1. Taxes in the future will not be higher than taxes in the present. At this rate, no way... not without social security and government to go bankrupt. More than likely, property tax and income taxes will have to increase. Possible way to fix taxes. 20% federal tax on all purchases and eliminate the ever-complex tax code. The more you spend, the higher taxes you pay. No loopholes, no complexities, no unequal burdens on the poor versus the rich. 2. Performance of your 401k is higher than inflation. Assuming a modest 3% inflation per year, if you do not match 3% performance, in 30 years, your money will be worth about 10% of the original value! 3. Beneficiaries, probate, and the government. Is your 401k going to your beneficiaries or to probate after you pass away? Probate charges a percentage and inheritance taxes will decimate a 401k savings if you pass away. Taxes will probably take a large share. Brainstorm of fixes: 1. Treasury or municipal bonds. Long term yields are guaranteed at 4% or more tax free. Again... might be questionable if you ask about bankruptcies of city or federal government... or inflation. 2. Credit card company CDs. Interesting how much more interest they can give you than traditional banks. Some rates are more than inflation currently. 3. Loan out your money. Can't think of what to do with your money? Invest in an ATM machine business or start performing personal loans. Disclaimer: None of this is financial advice. Only an expression of frustration at the current system. The measurement stick for whether or not a 401k is worth it:

1. Taxes in the future will not be higher than taxes in the present. At this rate,
no way… not without social security and government to go bankrupt. More
than likely, property tax and income taxes will have to increase. Possible way to fix taxes. 20% federal tax on all purchases and eliminate the ever-complex tax
code. The more you spend, the higher taxes you pay. No loopholes, no
complexities, no unequal burdens on the poor versus the rich.

2. Performance of your 401k is higher than inflation. Assuming a modest 3%
inflation per year, if you do not match 3% performance, in 30 years, your money
will be worth about 10% of the original value!

3. Beneficiaries, probate, and the government. Is your 401k going to your beneficiaries or to probate after you pass away? Probate charges a percentage and inheritance taxes will decimate a 401k savings if you pass away.
Taxes will probably take a large share.

Brainstorm of fixes:

1. Treasury or municipal bonds. Long term yields are guaranteed at 4% or more tax free. Again… might be questionable if you ask about bankruptcies of
city or federal government… or inflation.

2. Credit card company CDs. Interesting how much more interest they can give
you than traditional banks. Some rates are more than inflation currently.

3. Loan out your money. Can’t think of what to do with your money? Invest in an ATM machine business or start performing personal loans.

Disclaimer: None of this is financial advice. Only an expression of frustration at the current system.

]]> By: Mike http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-217 Mike Sun, 31 Jan 2010 21:24:58 +0000 http://recessionreadyamerica.com/?p=1255#comment-217 The average 401k plan has about $45,000 in it while just over 40% of those have less than $10,000. The company match is becoming a thing of the past. The longer your money is in a 401k, the more exposed to the market it is. If you desire to retire when the market is in a downturn, you would most likely need to get a part time job which kind of goes against the idea of retirement, doesn't it? The average 401k plan has about $45,000 in it while just over 40% of those have less than $10,000. The company match is becoming a thing of the past. The longer your money is in a 401k, the more exposed to the market it is. If you desire to retire when the market is in a downturn, you would most likely need to get a part time job which kind of goes against the idea of retirement, doesn’t it?

]]> By: SoYouThink http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-146 SoYouThink Sun, 20 Dec 2009 19:54:27 +0000 http://recessionreadyamerica.com/?p=1255#comment-146 By the time people are ready to retire, the vast majority of their wealth is stored in their house and in a 401k/other type of retirement plan. Housing prices have crashed and, thanks to government efforts, are stabilizing now but will simply crash again in a few years. Add in all of the expenses of maintaining a house, the property taxes and the interest paid on mortgages over the years and the result is that most people break even at best on their house. 401ks are not a terrible idea per se but their implementation generally stinks. For most plans, your choices amount to a lot of crappy stock funds, a couple crappy bond funds and money market funds. Like housing, stocks are being held up by government stimulus but they will crash just like housing once the stimulus stops. My 401k has energy and gold funds, which is nice, but they have had disappointing performance compared to just holding the commodities themselves. One example of why they stink is that the #1 holding in the gold fund is Barrick Gold, which I like to call the Citigroup of gold miners in that they do everything and stink at everything. In the end, people are going to end up with a lot less money than they expected by holding on to their houses and their 401ks. I've read Rich Dad, Poor Dad and it is a pretty weak book overall but there are a few pertinent points. Those who got hosed in the last few years now need to man up. There are no more excuses for not having your act together and understanding what you need to do to be prepared for retirement. If you don't see what is coming next then it is your own fault. By the time people are ready to retire, the vast majority of their wealth is stored in their house and in a 401k/other type of retirement plan. Housing prices have crashed and, thanks to government efforts, are stabilizing now but will simply crash again in a few years. Add in all of the expenses of maintaining a house, the property taxes and the interest paid on mortgages over the years and the result is that most people break even at best on their house. 401ks are not a terrible idea per se but their implementation generally stinks. For most plans, your choices amount to a lot of crappy stock funds, a couple crappy bond funds and money market funds. Like housing, stocks are being held up by government stimulus but they will crash just like housing once the stimulus stops. My 401k has energy and gold funds, which is nice, but they have had disappointing performance compared to just holding the commodities themselves. One example of why they stink is that the #1 holding in the gold fund is Barrick Gold, which I like to call the Citigroup of gold miners in that they do everything and stink at everything.

In the end, people are going to end up with a lot less money than they expected by holding on to their houses and their 401ks. I’ve read Rich Dad, Poor Dad and it is a pretty weak book overall but there are a few pertinent points. Those who got hosed in the last few years now need to man up. There are no more excuses for not having your act together and understanding what you need to do to be prepared for retirement. If you don’t see what is coming next then it is your own fault.

]]> By: M.J. Harris http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-144 M.J. Harris Fri, 18 Dec 2009 17:39:52 +0000 http://recessionreadyamerica.com/?p=1255#comment-144 I think what the author is saying, is that over time it becomes a risky investment. Especially the older are. When you are younger your 401k consists mostly of your contributions. However as you get older it is more exposed to the market. People who are, or are near retirement have lost significant amount of money and future income since the market crash in 2008. If you expect any market volatility then a 401k may no longer be a good investment for individuals near retirement. I think what the author is saying, is that over time it becomes a risky investment. Especially the older are. When you are younger your 401k consists mostly of your contributions. However as you get older it is more exposed to the market. People who are, or are near retirement have lost significant amount of money and future income since the market crash in 2008.

If you expect any market volatility then a 401k may no longer be a good investment for individuals near retirement.

]]> By: Paul Cowden http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-143 Paul Cowden Fri, 18 Dec 2009 16:15:25 +0000 http://recessionreadyamerica.com/?p=1255#comment-143 I don't follow your logic at all. If 401(k) performance has been poor, the blame can be assigned to poor investment choices among collective investors who self-direct their 401(k) allocations. Matching contributions to a 401(k) *are* a great way to make money, so long as you don't fritter away the upside on poor investments. You carp, but what alternative investments do you recommend? 401(k)'s have preferential tax advantages, and help to provide an investment discipline that's geared toward the long-run. What's wrong with that? I don’t follow your logic at all. If 401(k) performance has been poor, the blame can be assigned to poor investment choices among collective investors who self-direct their 401(k) allocations. Matching contributions to a 401(k) *are* a great way to make money, so long as you don’t fritter away the upside on poor investments.

You carp, but what alternative investments do you recommend?

401(k)’s have preferential tax advantages, and help to provide an investment discipline that’s geared toward the long-run. What’s wrong with that?

]]> By: Terry http://recessionreadyamerica.com/2009/12/401k-the-biggest-scam-ever/comment-page-1/#comment-142 Terry Fri, 18 Dec 2009 07:41:27 +0000 http://recessionreadyamerica.com/?p=1255#comment-142 Hi and thanks! I enjoy reading your posts and have been meaning to tell you so here is a late Thanks! You have a lifetime reader here. Terry Hi and thanks!

I enjoy reading your posts and have been meaning to tell you so here is a late Thanks! You have a lifetime reader here.

Terry

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