I wrote an article yesterday about why the 401k match is a terrible idea. In fact, I believe the 401k in general is a terrible idea. The response on this topic was giant! People inherently have known that this was a scam to get their money, but have not had that thought validated until now. Today I want to write what I believe you should do if you have a 401k or IRA. You ready for this?
Halt contributions. Even if they’re matched. Fear of loss doesn’t make something a good idea. Stop putting money into it. “But what about my match?” Cut your losses and make a smart decision. Your match is not worth your financial future. That money is long gone and you will not recoup it without being taken advantage of for the next several decades.
Roll the plan over. If you are no longer employed by the company who sponsored the 401k, roll it over. Do not go to your local financial advisor. Come see me. I work nationally and I will teach you how to roll it over into a self-directed account. Not only that, my team will do all of the work for you and help you learn about your new investment options in real estate, private lending, and other alternative ventures that are available only to those who self-direct their retirement accounts. Click here to schedule a call to learn about self-directing these accounts.
Borrow against the account. If you are still employed by the company, you cannot roll over the 401k. However, you can borrow against it. You can borrow 50% of your account value up to a maximum $50,000 loan. This means if you have $30,000 you can borrow up to $15,000. You will typically pay your 401k loan back to yourself over a 5 year amortization with about a 5% interest. What does this mean? If you borrow $15,000 then you will pay yourself back $283.07/mo for the next 5 years. So it stands to reason that if you can make more than $283.07/mo on a stable income producing investment, this is probably a great idea.
Cash it out and pay up. I’ve seen people do this and it is the most expensive option. If you cash your 401k out early…I should say if your company will LET you (your company can say “no you cannot have your money”) then you’ll pay income taxes plus a 10% penalty on the balance. This could result in losing up t0 50% of your balance. It’s not the first thing you should consider doing, but ultimately, if you can make that money back with other investments with the remaining balance then you could justify doing it. It is all about ROI. Honestly, your 401k has 0 ROI until the point you draw more from it than you put in. You aren’t profitable until that point. You gave them money and until you get it all back plus some, it is still a loss.
Leave it there and forget about it. Many people choose to do this. You can just halt contributions and leave the account there. Put it into something semi-stable and wait until you quit or retire and can finally roll it over. Will it grow? Probably. You’ll eventually roll it over and be able to have control again. This is the price investors pay when they hastily listen to the Wall Street pawns who push these accounts like they are prescription drugs for your money.
What should I do with the money I used to contribute?
This is exactly what I do and what I teach my clients to do:
a. Take the full contribution and put it into the properly structured, high cash-value, dividend paying whole life insurance. Yes I said life insurance. The top 1% have used this vehicle for centuries to bank their money until they were ready to invest it.
b. Pay your smallest balance debt off with your cash value. Use the old payment to repay your cash value. Repeat until your debts are paid off aside from your home, investment debts, or any debt that is tax deductible. You now have massive savings and lots of cash flow.
c. Invest your cash value into short term secured promissory notes. These are passive investments that will keep growing your money and build cash flow.
d. Invest your cash flow into real estate. Ultimately this is where you need to be. The problem is you need $50,000 minimum to do this right. Your cash value will create extra leverage and ensure profitability on each property.
Right now, you’re asking “why haven’t I been taught this if it is the right answer?” Great question! Follow the money! Does Wall Street get paid on any of these things? What about the IRS? Does your employer benefit? No. Only you do. Therefore, nobody is financially incentivized to teach this model because it is not where they get paid.
I’ve built a business off doing this for my clients. If you would like to do things with your money that you actually agree with, can make sense of, and be excited about then click here to schedule a call with my team. The only reason you wouldn’t is that you don’t believe me (call me and see if you can find any b.s.), you don’t have money (which is why we need to talk), or you don’t make the decisions with your finances (show this article to your spouse or partner). If your finances matter, you’ll find a way to make it work. Right now, on your current path, I believe you will continue trading time for money and live in mediocrity. You’re better than that and deserve more. Click here and let’s talk.
Own Your Potential,
Jerry Fetta
Jerry Fetta helps his clients make money, keep it, and multiply it.
He believes everyone should own their potential. He believes you were not created to spend 40+ hours per week serving the 40-year-to-life sentence trading your precious time for money just to live in mediocrity.
However, the truth is that time and money must be exchanged. It just doesn’t need to be you making the exchange.
Jerry helps his clients create wealth that exchanges time and money on their behalf.
His clients see a 30% increase in income, a guaranteed increase in savings rate, and 8-12% fixed annual returns on their assets in the 1st 90 days of working with him.
To get started, go to www.WealthDynamX.com/potential
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