Episode 114: Why Your 401K Is a BAD Plan with Rebecca Walser

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My Guest on the Show…


Wow – did someone just say that your 401k is a bad plan?


Rebecca Walser comes on the show to share with us why your 401k isn’t just hurting you…it’s actually KILLING your financial plan.

It all started back in 1978 when the famous 401k plan was in a way created by accident. Back in the late 1970s, most employers contributed to a defined benefit plan (AKA a pension) and that cost employers a lot of money.

During this same time, tax rates were much higher than they were today and some very highly compensated executives were looking for loopholes to avoid these high taxes. What they proposed was they could be bonused out in the form of a 401k plan, which allowed them to take their bonus, dump it into a 401k plan to avoid paying the high taxes now, and then grab that bonus money at retirement when taxes were much lower.

However, a few years later businesses started catching on and realized they would save millions upon millions of dollars by getting rid of the pension plan and moving to a 401k plan. Instead of having to fund a pension for years after retirement, they could offer a company match and have the employees contribute the majority to their retirement.

And that’s how the 401k became the retirement standard in today’s world…on accident.

But, it’s not 1978 anymore. Taxes are much different than they were then, the government debt is much higher than it was then, and there is a huge problem facing social security.

How are we going to pay for social security AND how are we going to pay off this massive $21 Trillion of debt?

Is it possible that taxes could go up from their all-time lows of 2017?

Wait a minute….if taxes are at an all-time low and we forecast we may need to raise taxes in the future to pay for the government’s financial mess….then does it make sense to save in a 401k today?

Are we avoiding having to pay very low taxes today so we can pay much higher taxes in retirement?

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Mentioned in this Episode

Video: How the Economic Machine Works by Ray Dalio

Walser Wealth

US Debt Clock

Book: Wealth Unbroken by Rebecca Walser

Show Notes

How Rebecca got started in personal finance [2:59]

The conventional money ideas are outdated and wrong [7:38]

The origin of 401Ks [8:38]

How the 401K accidentally because the standard retirement plan [12:41]

Printing money and the gold standard [23:47]

Why 401Ks don’t make sense today [25:19]

What to use instead [26:27]

The only smart way to use a 401K [28:55]

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