Why Relying on a Pension, 401(k), or IRA Could Destroy Your Retirement and Leave You Broke

Just before the 2008 financial crisis broke loose, Wealth Factory founder Garrett Gunderson released his New York Times bestselling book, Killing Sacred Cows. The book took an approach to personal finance and investing that ruffled the feathers of Big Finance and Wall Street cronies.

Readers, however, loved the book — and resonated with 2 points above all:

#1:401(k)s and the stock market are the riskiest investments for most people, and the gambling mindset they induce creates disastrous consequences.

#2: Conventional retirement planning advice, products, strategies, and techniques expose you to significant danger of being unable to retire, or running out of money prematurely if you do.

As of 2019, we’re now 10 years into the longest bull market in history – and odds are we’re on the verge of seeing the financial devastation of these 2 truths.

If you’re relying on a pension, 401(k) or IRA to fund your retirement, you could be in serious trouble.

What’s Going On Here?

A chilling report recently released by Boston College estimates that 25% of private US pensions will go broke in the next
decade
This means that millions of workers counting on that money will have their retirement dreams destroyed.

Why?

Well, despite the 10-year bull market we’ve been riding, pensions in the US are $7 trillion short of what they need to pay out to retirees. That include pensions from the local, state, and federal levels.

The reason is simple: investment returns on their usual mix of conservative stocks and bonds haven’t been high enough. Over the past year, they’ve earned 2.5% less than they need to meet their obligations – and there’s no sign that’s going to improve.

What About My 401(k) or IRA?

Traditional mainstream advice like this recent U.S News Money article says that “to live comfortably in retirement, you should have either a traditional pension plan or a defined contribution plan, like a 401(k) account.”

Since ¼ of people with pension funds likely won’t see a dime of their hard-earned money, that strategy is out (keep reading to see some options for how to deal with this)…

What about investing in a 401(k) or IRA?

10 years ago when Garrett Gunderson (our Chief Wealth Architect) wrote Killing Sacred Cows, he stated:

The 401(k) is the ultimate sacred cow of personal finance. It is the supreme representation of the marketing genius employed by financial institutions to get you to hand over and lock up your money. If you haven’t yet noticed, I’m out to kill this sacred cow.

The reasons why are simple and clear as day:

• There’s limited opportunity for cash flow (which is more important than accumulation)
• You lack liquidity because your money is locked up.
• Returns are dependent on the market’s performance.
• Investors usually lack knowledge of how your money’s actually being invested by fund managers.
• There are higher tax brackets upon withdrawal (and taxes are likely to go UP in the future) – which means the tax deferral incentive you get for investing actually punishes you MORE in the future.
• Worst of all, these programs are subject to government change.

The last point is arguably the most important and pertinent, because technically… your 401(k) does not even technically belong to you.

The Government Can Literally Take Your 401(k) or IRA

If you sit down and read the fine print for your 401(k) or IRA, you will find that it is what’s called an “FBO” (For the Benefit Of).

In other words, it’s held in trust by a custodian on your behalf and subject to a myriad of government regulation and change.

It’s essentially a tax code. If history proves to be a reliable guide, 401(k) funds are therefore in great jeopardy. In the same way that the government raises and lowers taxes at their whim, it can change the rules and take the money that you so diligently saved.

With current U.S National debt level over 22 Trillion and rising and social security running out of reserves by 2034 (when it will have to reduce benefits by about 25%), there’s a legitimate concern that the government could dip into citizens’ 401(k)s and IRAs.

What should you do instead of relying on your pension, IRA, or 401(k) for your retirement?

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Plus, it shows how anyone can build lasting wealth without risky stock market speculation, confusing financial plans, or needing a $50M net worth to start with.

If you want to discover how to continually grow your wealth using the same method as the richest family in American history…

If you want to give your family all the best things in life without enabling them to squander the family fortune (like most “trust-fund babies” accomplish in one generation)…

And if you never want to fear running out of money (either now or in future generations)…

Then What Would the Rockefellers Do? could be the most important financial book you ever read… and next week, we’ll tell you how to get this book for free. So watch your email for details.

Your Next Steps

1. If you have a 401(k) or IRA, pull out your most recent statement and analyze it to see what you’re paying in fees and how well it’s really performing.
2. Check out our free article on “How to Handle a 401(k)” here. It has a video with more insight into your options, plus a link to additional resources.
3. Watch your email (or scroll down and subscribe for weekly personal finance tips for entrepreneurs) to get notified about how to get Garret’s book, What Would the Rockefellers Do? for free. So watch your email for details.

Remember, the wealthy leverage money differently than everyone else. What Would the Rockefellers Do? shows you how. Watch your email, and stay tuned for details on how you can create generational wealth and live abundantly by modeling the Rockefellers.

That’s it for this week.

Build the life you love,

The Builders at Wealth Factory