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Episode Info

Episode Info:

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

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