In doing so they give up the liquidity, control, and use of their retirement savings all because no financial advisor or investment firm has ever approached them or their employer with a better, more prudent place to save money. With no alternative, most people will simply abide with the option provided. Retirement savings vehicles are no exception.
The sad fact is the majority of American contribute to 401k or their equivalent type plans because it's the only type of retirement plan offered by their employer. If you're reading this, chances you have a 401k/IRA type retirement plan. Since these plans have been around for over a generation, there is a perceived trust in the system despite evidence to the contrary that it works in your best interest. I personally will never see the upside into saving a pre-tax dollar now in order to guarantee a future tax bill at an unknown and potentially larger tax bracket. Add in the current limited liquidity to these plans which actually has legislation in Congress to restrict the use of the money further and you have to ask yourself: how can these retirement plans get any worse? But sadly, they do. Not only do these plans lock up your money, guarantee a future tax bill for the rest of your life, but they also fail to protect your money from stock market loss. Is it any wonder why these plans are doomed to fail?
I understand most people don't really think about having their money locked up in 401k/IRA's because we've been conditioned to believe it's in our a best interest to save for a rainy day. However, by locking up your retirement savings into a 401k, it forces you to rely on banks and credit card companies to finance the very things you could have acquired (and, by the way, you could have paid interest to yourself instead of to the bank) if you had the access and liquidity of your own savings. I know what you're thinking, though. It's smarter to pay cash for everything. Unfortunately, you're not understanding the secret about money that banks understand: you finance everything you buy.
Paying cash means you give up the ability to earn interest on your cash forever! Think of the last car or vacation you paid for with cash. Are you able to earn interest on that money or is the interest you could be earning gone forever? Since that interest on your cash doesn't end up in your own banking system, guess where it goes? If you're still fishing for the answer by the end of this article, please re-read as many times as necessary. And if you're wondering how you're supposed to pay for things if you're not paying cash or putting it on a credit card, keep reading.
Before I solve the riddle for how you are to pay for things without paying cash or with credit, I want to tell you something you probably already know and sprinkle in something you may not be aware of and it's this: 401k's are a very profitable savings system for Wall Street (you should know this,but if not read here) and these government qualified retirement plans tie directly into the relationship you have with your local bank and/or credit card companies.
First, by participating in a 401k, an employee allows Wall Street to manage their savings with little to no liquidity. If the employee happens to need access to their account for any reason, the options are limited. What most people end up doing is going to their local bank or go online to shop for the best financing options without realizing the best financing is available if they only had access to their savings.
Without access to your own savings, you'll be positioned into a corner right where banks want you. Once you're there, banks are ready to capitalize on your need to borrow. Are you ready to finance your first home, start a business, your dream wedding, your car,etc...? Pay attention to all the advertising. Banks are there to help you! Make note of it. Ask yourself,"What if I could borrow my own money to finance and pay myself interest instead of the bank? Why do I need to borrow money from a bank when I already have been saving money for years in my 401k?"
You may not be aware of it, but banks are in the lending business. They are not in the deposit and savings business. That's an important distinction to make. Banks will want to sell you on all types of products and services under the guise of being helpful towards accomplishing your financial goals and dreams. However, their primary goal is making you believe that you need them more than they need you. The truth is, you only need a bank to accomplish one function: a checking account. Beyond a checking account, all your banking needs can and should be centered around your savings where you can use it as the means to recapture the total purchase price of things you'll otherwise pay cash with or finance with credit.
Psychologically, these financial institutions know that limiting saving options allows their captive audience the ability to make quicker decisions. Since your money is tied up in one box (401k), you have to go obtain money from a different box (bank lending department or credit card company) controlled by the same financial institutions acting in concert to deprive you of what is rightfully yours: the compounding collection of interest on your money in perpetuity! If you controlled your individual banking function via your own banking system, you could bypass the banks and Become Your Own Banker!
The solution to all your financing needs doesn't require your banks help. I know they are all too eager to help by promising incredible service and offering themselves as a friend when you're in need, but they are actually the enemy because they will earn the interest on your money for everything you buy that you otherwise could have earned yourself if you had your own banking system.
Think of it this way. You deposit your money at your bank or employer 401k. Leaving out your 401k/IRA for now, when you have a greater need than what's in your checking or savings account, the teller will recommend you speak to a personal banker so they can discuss their loan products should you happen to qualify based on their lending criteria. This is what millions of American's do everyday and our investing and banking systems have conditioned us to think it's the best way to manage our money and finances. It just happens to be the best way for the banks and Wall Street, NOT YOU!
The thought I'm proposing you digest is the ability to save your money in an unlocked box where you have complete control of your money. You can access it whenever you want it, for whatever reason. You get to be the banker. Pay it back right away... or pay it back over 5, 7, 15 years or when ever. As the banker, you get to decide! Regardless of how long it takes you to pay it back, you will recover every penny of principal and interest you otherwise would have paid to your bank! It all goes back into your money system, not theirs!
Does that seem out of this world?
It shouldn't because the money system I'm referring to has been around for over 150 years. Not only is it backed by the safest and best capitalized financial institutions in the world. It's also a money system that operates in a tax-favored system approved by the IRS. It actually existed before the creation of the IRS in 1913. In fact, this system works so well and is so reliable that the largest banks in this country utilize this money system for a sizable portion of their own assets that they deem necessary to be ultra liquid and ultra safe. Let me make a point here that banks do not buy mutual funds with their own assets! They are actually the largest buyers of permanent Cash Value Life Insurance in the world!! That's something to chew on next time your banker conveniently recommends their mutual funds knowing full well they don't buy the very things they sell. And yes, your bank likely sells permanent cash value life insurance. However, they won't design these policies to create a banking system. Why? Well, if they did design and sell what I sometimes refer to as a "Banking Policy", would you actually need to borrow money from a bank when you could borrow it from yourself and pay yourself interest? The answer would jeopardize the lending department of every bank across the country.
So what is the number one takeaway from this article?
- Unlock your savings and put it into a Private Tax-Free Money System so you can continue to earn interest on the things you otherwise would pay cash or credit with, and earn interest on your cash tax-free in perpetuity!