401k account questions are probably the top question we receive here at FutureMoneyTrends.com. Many are just looking to maximize their returns, some are scared of a dollar collapse destroying them, while many of you are wondering if we’ll ever be safe from nationalization in the future.
I am personally not against the 401k, but I do see a MAJOR risk that most people don’t fully appreciate.
Imagine walking into a bank today, the banker gives you $3,000 and tells you, you don’t have to pay him back for 30 years. You gladly accept the cash and walk out…
Is this story missing something important? Does it sound familiar to those of you contributing to a 401k plan?
What’s missing from this story is we have no idea what interest rate the banker is charging us, we also have no idea what the terms are.
This is without a doubt the biggest risk to your 401k, you have no idea what the terms will be when you want to start taking withdraws.
In exchange for taking an income tax deduction today, you are using money that you have no idea how it will be treated in the future. Essentially you are borrowing money from the IRS in hopes that they will treat you fairly when it’s time to pay the money back.
We don’t know what income taxes will be… but I’ll bet they will be higher. The rule where it says you can withdraw the money penalty free at 59 and half, they can change that to whatever age they want to at anytime. For all we know the government could change the minimum withdraw age to 70 and the tax rate to 75%.
Here is a chart of income tax rates from 1913 to 2011, this isn’t exactly the most stable number you could have come up with to plan your retirement withdraws.
As with most things in life, your biggest risk is the central planners. These sociopaths, aka “elected officials,” already have too much control and power over our lives; my recommendation, don’t volunteer to give them any more power over your future.
The one exception…
The 401k with a generous company match, even I would take that bet since your employer is giving you free money. Although I would only contribute enough to receive the maximum match.
Buyer Beware, the 401k is a CASH COW for Wall Street. A 60 minutes report showed that some plans eat up to 50% of your retirement income in fees over the course of 30 years.
Here is a clip from that story. It ends with Congressman Miller stating that by just asking for some disclosure regarding all these fees, he was met with the full fury of the Wall Street lobby.