There's No Point In Fixing A 401k Lemon (When There's Already A Better Alternative!)

I happened to read an article on Kiplinger.com today about overhauling the 401k.  I say "happened to" because it appeared on a friends Facebook timeline.  I wouldn't normally read mainstream drivel especially when coming from a Wall Street blowhard site like Kiplinger's but the title "Bold 401(k) Overhaul" caught my attention.  I knew I'd be disappointed and in that regard the article succeeded mightily.  The proposed ideas would only exacerbate the problem 401k's create in the first place. (By the way, I do offer a better alternative rather than just criticize the 401k to pieces.)  These problems are highlighted below by yours truly who felt compelled to reply to NickV's comment:


"Wow, so many negative comments on 401k's. I thank my lucky stars that my wife and I have them. We are middle class and at age 50, we have accumulated $2M so far. To all the people who think the game is rigged, good luck living on SS in your golden years."

My reply:

"I ran some numbers using a 401k calculator (on dinkytown.net) assuming you've contributed 20% of income starting at age 22 with a $70k salary increasing at 4%/yr. I also assumed your employer has been giving you a 50% match up to 6% of your contributions. You would need an annual (not average) rate of return 3.8% to reach $1m in your 401k after 28 years. Multiply that by 2 to equal $2m that you and your wife have accumulated. 

My point is that you've taken an absurd amount of market risk to earn a paltry 3.8% annual return after expenses. As you get older, you'll have to reduce your risk exposure even further which will lower your rate of return even further. You could have paid your income taxes upfront instead of postponing that tax bill for retirement and seen your after tax contributions achieve an internal rate of return closer to 5% without any market risk in a dividend paying whole life policy structured with at least 60% of premiums in Paid Up Additions. You would have also received lifetime death benefit protection for each of you, and no penalties or taxable consequences for using your money anytime along the way. 

People are steered toward 401k plans but they lock up your money, put it at risk, and force you to pay taxes on your distributions. Tell me how your 401k option is better than the plan I use that provides me with 100% use and control of my money, guaranteed growth, tax free use of my money including retirement income, protection for my family and I get it without any luck, skill, or guesswork needed with a 401k. 

The game is rigged Nick. You could have done a lot better without all the risk. Wall Street and Kiplinger's would hate to lose you as a client though which is probably why they'll keep feeding you the same lines about maxing 401k's, dollar cost averaging, buy term and invest the difference, you'll be in a lower tax bracket when you retire... all conventional wisdom that has burned millions of people who keep doing the same thing and expecting different results. By the way, you don't have $2m in your 401k. The IRS has probably around 25% or more claim on it assuming tax brackets don't rise (big assumption for a revenue starved government) and don't forget your state income taxes, too. I do sincerely wish you the best with your plan."

The goal of sharing my reply to NickV is to educate people about options since so many people believe a 401k plan is the only retirement plan available.  As an authorized advisor with Bank on Yourself, I can assure you there is at least one other solution you probably haven't heard of and no Wall Street advisor will ever share with you.

To learn more about how I help people move away from the roller coaster ride of a 401k retirement plan and teach them about Infinite Banking, please contact me at www.IBC.guru.

Thank you,

John Montoya

Taxes, Taxes & More Taxes

Tax his land,
Tax his bed,
Tax the table,
At which he's fed.

Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.

Tax his work,
Tax his pay,
He works for
peanuts anyway!

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.

Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.

Tax his cigars,
Tax his beers,
If he cries
Tax his tears.

Tax his car,
Tax his gas,
Find other ways
To tax his ass.

Tax all he has
Then let him know
That you won't be done
Till he has no dough.

When he screams and hollers;
Then tax him some more,
Tax him till
He's good and sore.

Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid...

Put these words
Upon his tomb,
'Taxes drove me
to my doom...'

When he's gone,
Do not relax,
Its time to apply
The inheritance tax.
Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (currently 44.75 cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Personal Property Tax
Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Recreational Vehicle Tax
Sales Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago, & our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What in the heck happened? Can you spell 'politicians?'
I hope this goes around THE USA at least 545 times!!! YOU can help it get there!!!

GO AHEAD. . . BE AN AMERICAN!!!

SEND THIS TO EVERYONE YOU KNOW

Taxation is Theft

Lew Rockwell posted a great article from Judge Napolitano.  You can find the full article here: http://lewrockwell.com/napolitano/napolitano96.1.html

Everything he writes here is powerful and hits home with me and hopefully with you as well.  Here's my favorite part:

For 150 years, the federal government was run by user fees and sales of government land and assessments to the states for services rendered. It rejected the Hamiltonian view that the feds could take whatever they wanted, and it followed the Jeffersonian first principle that the only moral commercial exchanges are those that are fully voluntary.

This worked well until the progressives took over the government in the first decade of the 20th century. They persuaded enough Americans to cause their state legislatures to ratify the Sixteenth Amendment, which was designed to tax the rich and redistribute wealth. They promised the American public that the income tax would never exceed 3 percent of income and would only apply to the top 3 percent of earners. How wrong – or deceptive – they were.

Yet, the imposition of a federal income tax is more than just taking from those who work and earn and giving to those who don’t. And it is more than just a spigot to fill the federal trough. At its base, it is a terrifying presumption. It presumes that we don’t really own our property. It accepts the Marxist notion that the state owns all the property and the state permits us to keep and use whatever it needs us to have so we won’t riot in the streets. And then it steals and uses whatever it can politically get away with. Do you believe this?

There are only three ways to acquire wealth in a free society. The inheritance model occurs when someone gives you wealth. The economic model occurs when you trade a skill, a talent, an asset, knowledge, sweat, energy or creativity to a willing buyer. And the mafia model occurs when a guy with a gun says: "Give me your money or else." 

Which model does the government use? Why do we put up with this?

Rick Rule's Secret To Successful Resource Investing

"What's odd to me is that people elbow each other out of the way to crowd into a sector when the sector is expensive and frothy, and they leave in disgust when the sector evidences some value.

If you and I were walking one of the great shopping districts of the world... and on the left-hand side of the street there was a row of signs that said, "50% off," "70% off," "All goods marked down," "We got a business sale/moving away sale," and on the right-hand side of the street, there were little, discreet signs that said, "All goods marked up," "No discounts," "No sales," "No value to customers," of course we'd want to be walking the left side of the street.

Well, the left side of the street is what a bear market is. It's a bunch of goods on sale. And the idea that people avoid those sales and only pay attention to the market when goods are fully priced, is, I guess, one of the things that's caused me to be a success. Other people abdicate any chance they have to get ahead in this market. While I feel sorry for them, I'm delighted on my own behalf."

 If those aren't words of wisdom to hold on to, I'm not sure what would be. 

No Free Lunch

In the 1960s, Milton Friedman famously explained that "there's no such thing as a free lunch." If the government spends a dollar, that dollar has to come from producers and workers in the private economy. There is no magical "multiplier effect" by taking from productive Peter and giving to unproductive Paul. As obvious as that insight seems, it keeps being put to the test.

You can do that voluntarily by sending a check to the US Treasury and that would be fine and acceptable because it's your choice (freedom) alone. Unfortunately, that's not how the system of taxation operates. Everyone is forced to pay taxes or face fines, penalties, or jail time. There is no liberty in being coerced to pay taxes. 

Tax payers have no clue where the money we pay goes. Most of the money collected in taxes goes to pay the interest on the national debt. 40 cents of dollar the government spends is financed just adding to the national debt. 

There are two types of taxes: what you pay by threat of law and what is stolen from you in the form of inflation. Most of us are aware of direct taxation but clueless about the other silent tax. Government programs are financed by a broke govt borrowing endless paper money backed by tax slaves and in the end it just makes everybody just a bit more poorer although they just don't realize why.

Eventually, the world will wake up and the way it's turning out, I'm pretty sure the rest of the world will see first what Americans are too distracted to see.  Governments around the world are broke and they are coming after the money you and I have saved.  Cyprus is the latest example and those that say it can't happen here are in denial.  It's been happening here since 1913.  The government here, in partnership with the Federal Reserve, just aren't as obvious about it.  

Learn the difference between a hard default and a soft default.  By all appearances we are headed towards the latter which is why the public is so unaware.  On the surface, things seem fine but still waters run deep.