Description: The article covers the topic on 401k. The author will talk about the differences between projected returns and actual returns, the reasons about why he loves real estate compared to a 401k model, the pros and cons of that on limitless TV and the reasons why he disagrees with mark.
Mark Cuban says that the 401k is a no-brainer and I want to challenge that a little bit, I want to scrutinize the pros and cons of that here on limitless TV, everybody, we’re back here talking about 401ks, we’re talking about it, because it’s the only real retirement plan that Americans are taught.
Your tax advisor will mention IRA this or someone will tell that you should invest in the stock market, but at the end of the day, we’re told get a job after you get your degree and put your money into a 401k.
Recently, Mark Cuban, a man that I admire, I love watching him on Shark Tank, this is what he said though that, he was comparing the 401k to savings accounts and he said if you have a 401k match and you’re not forcing yourself to put in as much as possible, you’re an idiot.
Those are strong words and I got to tell you now that on one hand, I totally agree with mark, on another hand, I completely disagree, if you’re comparing Americans who as a whole are not good at saving.
Then I agree with mark putting money in a 401k is a smart choice, because if we’re not putting in money in a 401k, we’re not saving our money, as a result, what does that mean?
It would be better to put money in a 401k than nothing, because hopefully, you’re averaging a few percent on your money probably doing better than you are on your bank.
But what I want to talk about today is where I disagree with mark, because the reality is that if you’re putting money in a 401k, it means that you don’t have a retirement plan, let me break it down for you.
I want to talk about the difference between projected returns and actual returns, I’m going to debunk now, the number one flaw in 401k you don’t get told, because everyone’s going to say.
Let’s talk about your projected return and then we’re going to compare it versus your actual return, we all have been through the ups and downs or your parents were where they were losing a 50% of their money in their 401ks all in one swoop in one moment.
Then it took years to build it back up now for when keys are on the higher end of the cycle, what a lot of people don’t realize is that we’re still catching up from our losses from yours earlier.
But this is what we’re told, let’s put money in a 401k and let me give you a feel for the way that the numbers get misrepresented, if I have a thousand dollars in my 401k and then all of a sudden that next year, I double my money.
This doesn’t happen, but I make a hundred percent return, look at the percentages in the math, if I make a hundred percent return, then that one thousand dollars turned into two thousand dollars.
If you doubled your money in anything, you are probably happy, but guess what happens the next year, the market takes a dump and it goes down 50 percent, that’s one thousand.
I started with a thousand and now I’m back at a thousand, but guess what they’re going to say, I return if you want to take a hundred percent up in 50 percent down, they’re going to say that you are averaging 50 percent on your 401k, between the two years.
Now look at that for a minute, remove for a moment, the fact that someone’s earning fees whether you make or lose money, someone else is charging you for managing your money in this manner.
Look at the fact that they’re claiming a 50 percent return on your money, when the reality is yours, you’re at the same dollar that you started with, but they’re claiming it as a 50 percent return.
These numbers get grossly misrepresented on a regular basis, so what ends up happening is that I had a great year in the stock market, last year I had a great year in my 401 KS, I made 20% and I’m thinking greatly.
What does that mean? What is that 20% and what does it mean? When you take into account your losses and when you average that out, if you do the real math, if you do the actual math, this isn’t 50%, you’ve made money and you’ve lost money.
There are no gains you’re not up, but someone else did get rich or someone else did make money, so Mark Cuban, this idea of whether you have a 401k match, whether it’s your only savings plan or for those of you that like Dave Ramsey out there, have some type of savings plan.
If you don’t have a plan, then a 401 K is a great default for those, however, that has been watching my channel for a while and you’re saying, I know that you’re into this thing called real estate.
Let’s do a real quick 401k analysis and compare it to what would happen, if we put it into something like real, first of all, the 401k sustainably tied to the market, you have no control over it.
So I’ve got a big problem at the end of the day with this idea that on the 401k map, I don’t have control, but over my real estate, I don’t have total control, but I have a lot of control.
So let’s talk about 401ks for a moment and let’s compare it to the beautiful world of real estate closed on a couple of properties made a nice little grundle of money.
I want to talk for a moment about the differences, so I’ve never put money in a 401k, when I first got married, I think it is $1,000 in a 401k, as soon as we could take it out, once we started seeing what the real estate was doing, we did it now, send me, Chris, you don’t diversify.
No diversification is for people that don’t know what they’re doing, I will not put some money in the IRA, the stock market or the 401k, I’m biased, because I found a strategy that works for me.
The reality is that I do not have any friends that put money in a 401k and become wealthy none. so why put your money in anything that’s guaranteed not to work with a 401k, you have no control with a real estate, you have some control, I may not be able to control what the market does when it goes up and down.
But I do own this asset and I can choose the strategy of what I’m doing with it, so if you’ve watched some of my videos on short-term buy and holds on single-family homes, I’ll take you into the best markets around the nation where you can be earning 1520.
Those are aggressive returns you do that for ten years and compound it and grow that you can build a nice little fortune, a nice little retirement income, so for some of you, if you explode it, you can build a fantastic level of financial freedom with that model. So I’ve got no control here, I have some control over here.
The next thing is that I want to talk about speculation my 401k, it pays me no cashflow, this is a violation of one of my investment rules, if I put money into it, it should pay me and I’m not talking about Sunday, I wanted it to pay me now.
There’s no cash flow that comes in on my 401k, there are some exceptions to this rule, because I will take money and invest it in business in some businesses, don’t immediately pay cash flow.
But ultimately, you’re going to see me always investing in either real estate or business, because those are two things with ROI which is big enough to give you a chance for retirement.
So while I don’t get a cash flow over here, guess what real estate does, real estate pays me, in most cases, it pays me monthly now, that’s important to me, because if I’m getting paid, then I’m getting freedom dollars coming into my bank account on a monthly basis.
This is a big deal for you, because you buy a property and you have a $300 month cash flow, that’s not life changing, but 300 dollars might cover your car payment, so you do three four more deals.
Now the sudden guess about your mortgage is to take care of your biggest expense for the average person, when you’re making $1,000 a month, cash flow or $2,000 a month cash flow in real estate, you can’t retire.
But you know that’s now socking away one to two thousand dollars a month that you can snowball into your next deal and fast forward several years and guess what that snowball turns into bigger and bigger.
Cash flow is a big part of what makes that happen and real estate is a business, it also means that when it has its downs, it’ll pay for itself with that cash flow, when a 401k has downs, you may never recover from it, you’ll have to be dedicated for years to step into any kind of recovery.
The next thing is that 401k has no equity which means it can grow with time and it can expand and it can become more, but real estate, I can purchase it with equity, I could buy a stock for $1.
But now on this side of the fence, I have the ability to buy that stock for a 20% discount or for 80% of its value, I think about that for a minute that equity that you walk into creates, what I call a margin of safety.
So if the market tanks with a 401k even one dollar, you’re out with real estate, if it goes down a dollar, you’re not out, you have some built in protection, so that’s another big difference of why I love real estate compared to a 401k model.
Another thing that I love about real estate is that I have the ability to multiply my assets, it’s not applicable here on the 401k side of the offense, what I mean by this is as my real estate portfolio grows, I can make my real estate, I’m going to study out my real estate.
I’m going to remove some of the equity or I’m going to sell off a property and I’m going to put it into additional property so that it can expand, it can grow, it can become more friends.
These are some of the reasons why at the end of the day, Mark Cuban’s says 401k, you’d be an idiot not to participate and I would say if that’s your only strategy for getting where you want to go in life.
But if you’ve been subscribing to my channel which you have done correct subscribe ring the bell, if you’re subscriber and you’ve been watching some of these videos, I hope that I’m waking you up to a call to go back to our original roots, the family farm, the United States Constitution where we were taking care of.
When we have real estate, it’s written to benefit the individuals that do get back to that model, because it wasn’t broken, it does work, I don’t know how to do it with a get-rich-quick sustainable model.
But I will tell you that if you’ll be in it for a 10-year period of time, you can create a great deal of freedom in your life with it, so at the end of the day, friends weigh these out, I would not have both in your life, I would pull out of your 401k, I would go into real estate, because I believe that it’s going to give you so much more than your 401k.
That’s putting your financial freedom and your financial future into your hands, this is a polarizing opinion and some of you might agree with you, some of you don’t, go ahead and comment below, share your thoughts, share your ideas and share your point of view and then make sure you subscribe and ring the bell and we’ll see on one of our next materials.