I always thought investing in a retirement plan like a 401K was the fool-proof plan 🤞 to ensure I could retire at 65.
Throw a little 💵 money at it every month, and eventually I’ll be a 💰 millionaire who can sip mimosas in my lavish 🏖️ vacation home.
Until I learned...
💥💣💥 THAT'S NOT HOW IT WORKS 💥💣💥
Let me bring you up to speed.
Pension plans used to be abundant. Work for a company, pay into their 💲 pension plan, the company guarantees you’re going to have a ⚖️ retirement.
Today, very few companies offer this. Why? Because it requires the company to take on the ☠️ risk of managing that money.
In 1978, the Revenue Act was implemented to solve this problem for 🕴️companies (not employees). It shifted the ☠️ risk from the company to the employee 🤯. The 401K was created.
The 401K isn’t inherently good or bad, it’s a 🔧 tool. A tool to get you to retirement.
A tool where you take on ALL THE ☠️☠️☠️ RISK.
A tool you can't use until you're 👵🏽 59½.
But wait! What about RIGHT NOW?
Ladies, if our focus is on 30 years 👵🏽 from now, we lose out on opportunities 💰 that are in front of us TODAY.
Opportunities that enhance our lives now AND at retirement.
After all, it’s the journey 🥳🥳🥳 you should be enjoying… not the destination.
You need a better 🔧 tool than a ⛔ 401K.
I have a whole 🧰 🛠️🪚🔩 🗜️ tool box to share with you.
3 Pitfalls of the 401K- The Right Now, The Future, The Everyday
The Right Now: Liquidity 💸 (Access to YOUR money)
Withdraw any 401K funds before 59 ½, and the IRS penalizes you by taking a 10% 💸 tax on top of income 💸 tax.
So basically, YOUR hard-earned money is 🔒 locked up unless you want to pay the penalty.
This creates 😱😱😱 MASSIVE OPPORTUNITY COST.
You’ll need to come up with extra cash (or pay the penalty) to:
- Start a 🙋🏽 business
- Invest in 🏘️ real estate
- Seize a once in a lifetime opportunity to 🧳 ✈️ travel
- Bridging the gap after a 💸 job loss
- Buy a 🚙 car
With women in the United States earning 30% less than men (1), where will you get that 💸 extra money?
Having access to your long-term savings is the difference between:
- Having the 💵 collateral to invest VS. 😵 missing the opportunity
- Buy a car 🚙 🙌 with cash VS. getting a 📈 high interest auto loan
- Holding out for the 🎉 right job VS. taking the 😞 next job after a job loss
The Future: Tax Deferral
Investing in a 401K is Pre-Tax. Meaning you defer paying tax now, but you 💸 pay tax later.
On the surface this may sound like a smart move. But let’s do the 🧮 math.
If you invest $1,000 in a 401K and let it grow to $10,000, would you rather pay taxes on the smaller amount or the larger amount? Of course 🎓, the smaller amount!
It’s almost certain that you will pay more in taxes when you pull the money out (when you really 🪫 need it).
The Everyday: Fees
With a 401K you’re paying 🏦 someone else to manage your money which costs a fee.
As your account 📈 grows, so do the 📈 💸 fees because fees are based on a percentage of your assets.
According to NerdWallet, a millennial (age 25) paying just 1% in fees will lose 😲💢 25.1% of the value of the account over 40 years (2).
If your fee structure is closer to 3-4%, you could be losing over 😲💢 70% of your value!
This means someone else is profiting off of your retirement savings.
You’re probably 🤔🤔🤔 thinking, “Yeah, but there really isn’t anything better out there for me”.
I’m here to let you in on a 🤫🤐 secret. There is a better tool.
It's the same 🧰 tool that some of the US's 💰 wealthiest families have used to build generational wealth.
It's the reason I don't invest in a ⛔ 401K.
The Feathered Nest Strategy™ will protect your 🔐🪺 nest egg like a 🏰 fortress, so that you're back in control of your 💰 hard earned money. Your financial future will rest on a 💪🏛️ foundation of certainty rather than risk.
With this proven strategy, you’ll be able to 💵 save money for retirement, earn 📈 guaranteed interest that is not dependent on the stock market (unlike your 401K), and have access to your 💰🔓 money any time you need it 🙌🥳🎉
If you found this article helpful, DO this:
- Forward this newsletter to someone who can benefit from it
- BOOK YOUR FREE 1:1 CALL with Day Lark Wealth to find out how you can start building wealth
References
- https://www.census.gov/library/stories/2022/01/gender-pay-gap-widens-as-women-age.html
- https://www.nerdwallet.com/blog/investing/millennial-retirement-fees-one-percent-half-million-savings-impact/
Day Lark Wealth does not give financial, tax or legal advice and nothing contained in this newsletter is intended to constitute financial, tax or legal advice. You should consult with financial, tax and legal advisors prior to implementing this information.
