What Happens When You Wake Up and Realize Your 401(k) Stinks
You may not know as much as you think you do about financial and retirement planning. Just ask yourself a simple investment question like, “What’s the difference between a fixed annuity and a variable annuity?” Do you know the answer? Most people find that they can’t really articulate the inner workings of what they think they know. Though we often feel confident in our opinion of the value of a thing, we create blind biases in our knowledge that, when discovered, can make a world of difference designing or improving a financial strategy. But take heart, a gap in your knowledge is an opportunity to reevaluate your current financial strategy. It’s time to wake up and really smell those stinky 401(k) roses. Let’s learn some hard truths regarding the market, your 401(k), and a better alternative called the Perpetual Wealth Strategy.
Your 401(k) and the Market
The most popular type of retirement plan in the U.S. is the 401(k), but many people aren’t familiar with the rules and regulations associated. Here are the top three things you should know:
Annual limits. When working with a traditional 401(k), you have a limit for how much you can contribute. The limit increases each year due to inflation, so 2016’s limit is $18,000 per year (if you’re 50 or older you are allowed $6,000 more). This is just one reason why originally 401(k) plans were originally established as “supplemental” to a pension, never a sole means to save for retirement. Employer matches are always a win, but that’s up to your employer, of course.
When someone says that a contribution is “tax-deferred” that sounds like great news—but may not be as helpful as we think. Hooray that you don’t pay a penny of taxes on the money you contribute or the gains in the account! But did you know that you’ll be crying, “boohoo” when you take withdrawals and are then required to pay tax? You have to ask yourself, “Are taxes going to be higher today or when I retire?” Likely taxes will be even higher when you retire and make withdrawals.
Since the mid-1990s the amount of 401(k) money in the stock market has grown profoundly. Market volatility seems to be the new norm and, though most people are in it for the long haul, 10,000 baby boomers retire every day. Many are rightly concerned that market volatility puts them at risk to literally lose their retirement savings.
Learn All You Can
What should you do about filling the financial knowledge gap you currently have and ease fears about a 401(k) retirement strategy? We know that the fastest and most effective way to understand financial strategy is to learn all you can and then teach other people. We recommend that you open your mind to new possibility, research new information, explain concepts to yourself as you learn them, and engage others in your collaborative learning effort. Knowing what you don’t know creates opportunity for growth, and is never a sign of weakness.
When clients come to us for financial advice, we always recommend that they build wealth outside of Wall Street. And we know that a real financial plan must include other areas such as debt management, large expense planning (remember those cars, boats, vacations and other big ticket expenses?) and true Tax planning, not just end-of-the-year tax returns. We always recommend what we call The Perpetual Wealth Strategy. It’s a financial system that uses permanent life insurance as the investment vehicle.
Have you ever thought of insurance as an investment option? The truth is, the right insurance products have amazing potential for certainty, liquidity, and control when managing your wealth and saving for retirement. We love to watch the lightbulbs go on above our clients’ heads when they realize that this option was there in front of them all along.
Allow us to share more with you about this better option to grow wealth and save for retirement while offering access to liquid cash. Yes, that’s right—access your cash while you grow your wealth—the best of both worlds. The first step to take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!
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