The 401k Lobster Trap and How To Avoid It
Tax day is coming April 17th so here's an important reminder to continue to max out your 401k so you can lock up your money for decades in order to pay an open-ended tax bill for life during retirement. Along the way, you'll pay Wall Street 1-3% in fees that you know about to manage your money and another 1-2% in trading fees that you don't know about.
Your company 401k retirement plan offers no lifetime income but, fingers crossed, hopefully you put away enough money in this lobster trap over time to offset the inevitable market ups and downs, management fees, and taxes so you don't outlive your money.
At least if you need access to your 401k money, you don't have to ask permission to take a loan. Well... not exactly. You'll have to ask permission from your 401k administrator. Any loan balance not paid back within 5 years are then taxed and penalized. No exceptions. Given how often people switch jobs these days, try to avoid switching jobs with a hefty loan outstanding otherwise that 5 year window on your 401k loan is reduced to 60 days.
Back in 2011 I shared a blog article about what John Bogle, founder of Vanguard, had to say about 401k's in an interview he did with PBS. I highly recommend reading it because his thoughts will make you think twice about maxing out your full 401k contribution.
In the 7 years since that blog post I've been fortunate enough to meet more and more people each year who are opting out of their tax-postponing 401k plan and into a private, non-qualified tax-free plan like Infinite Banking. If you've never heard about Infinite Banking, here's a couple things you can do:
Go to http://www.FindOutMoreNow.com and use code JM66 to request a free report.
Watch the videos at www.CashValueBanking.com starting with the video at the top which includes a real life example.
Schedule a time to ask questions and learn more using my Calendar.
Your company 401k doesn't have to be your only main retirement vehicle. A common sense approach would be to diversify among different asset classes including assets that have different tax consequences. Tax-deferred is okay, but I know most people would agree tax-free is better!
I know the Wall Street guys and perhaps your tax professional will encourage you to max out your 401k now to lower your current tax bill here in year 2018 but think long and hard about the type of future you want. The less you have Uncle Sam digging into your retirement income, the better off you'll be.
So if a tax-free retirement sounds better to you, start learning more about Infinite Banking. Follow me here on Steemit where I've been posting frequently about the Infinite Banking Concept (IBC) and be sure check out the links above.
Happy Tax Day on the 17th. May it be the last time you postpone paying taxes on your future money!!!
