Thursday, May 21, 2020
401k Employer Match - Food for Thought
"Any necessary change in your life will involve the way you think and your willingness to change the way you go about it." - Nelson Nash
I'm thinking about 401k's and the match some people receive from their employers and I wanted to share this thought with you.
If you stop to really think about it, the employer match to a 401k isn't "free". It's certainly nice to think of it that way.
However, if you're thinking like a business owner, the truth is that is that match in a 401k plan is really part of the employee overall financial package. It is part of your overall gross pay.
Some employers provide really great benefits and the trade-off is a lower salary. It's no different with a 401k match. The match is a benefit but ultimately it is part of your compensation package.
There is no free lunch. Period.
Whether you choose to accept it is entirely up to you.
Think of it like a gift card.
Businesses love gift cards because many gift cards are never used. Some get tossed without ever using the entire balance. This is especially true with gift cards that may have an expiration date. That's money the business can eventually re-purpose elsewhere.
When you don't opt to take advantage of the 401k match, that's part of your compensation package you're leaving on the table.
Just don't consider it free. It's yours... if you want it.
The big question: is the match worth it?
If you understand and practice Infinite Banking, there's definitely more debate about the merit of the 401k match however.
After all, accepting the match means locking up your contributions until age 59.5. That's money no longer in your control, prone to losses, 2-3% in 401k and mutual funds fees per year (smaller companies have the most excessive fees due to economies of scale), and ultimately a permanent tax lien upon withdrawal.
Also, that employer match potentially means you'll have more in your 401k account.
Great, you say but you will also have a higher probability of paying a larger % of taxes upon your withdrawal. That match is essentially extra revenue for the IRS.
(This is simply human nature to pursue self-interest, not conspiracy-- when Wall Street earns a guaranteed fee on every dollar you contribute for the life of the plan and the government is waiting to collect their portion, too, do you ever stop question their motive in recommending you be all-in on maxing out your 401k?)
Suddenly you begin to realize the match isn't really a 100% no brainer like conventional wisdom would want you to believe.
It's my experience that the prevailing convertional financial wisdom has a way of leading people into financial bondage instead. This is what happens when society turns to government solutions instead of figuring things out on our own.
Government, banks, and Wall Street absolutely all have something to gain by your continued participation. The wise consumer will look to protect their money from prying hands (fees and taxes) by looking at every dollar they save as their own personal property.
A 401k/IRA is bit of lobster trap if you ask me. (Understatement of the year.)
If you decide there's no other choice than a 401k or IRA, it will be the best you can do.
But is it the only option?
Of course not.
IBC proves this because it is a private contract between two private entities, you and a mutual-based life insurance company (owned by you-the policyowner!). When you capitalize your own pool of money within a dividend-paying Whole Life policy, you're actually choosing a tax-favored property that when used properly can help minimize taxation and grow wealth uninterrupted, even while you use the money elsewhere!
The more you learn about IBC the more you will actually be forced to think like a business owner. Whether you run your own business or not, you must realize there are 2 businesses you should participate in.
The first business is currently what you do for income. The other business should be the eternal business of banking. You are already a bank consumer. The difference is you shop at a bank you don't own or control. Might as well understand how banking works so you can benefit from acquiring your own pool of money to build your wealth.
It's a pretty simple solution to life's biggest financial problem (the ability to save more than you spend) once you realize there is another option than a 401k.
1. How much money do you save each year?
2. How much do you spend on fixed expenses (car loans, rent/mortgages, taxes, vacations, tuition, etc) each year?
Are you saving more or spending more?
The average person spends 3.5x more than they save but they have been conditioned to focus on the smaller amount never realizing they have the ability to take control of the larger amount to create wealth.
Pick up a copy of Becoming Your Own Banker by Nelson Nash if you haven't already. It is an essential starting point to guide you on a path of your own making, towards a financial lifestyle that you ultimately can control by eliminating the IRS, banks, and Wall Street from your life.
"Action is preceded by thinking. Thinking is to deliberate beforehand over the future action and to reflect afterwards upon the past action. Thinking and action are inseparable. - Ludwig von Mises