Description: The following article talks about the main idea on 401k. The author will analyze some details that are related to the materials we are not told about 401K. we will be shown two huge problems of 401k and it will lay out the true pros and cons of the income tax.
This is Matt Theriault of epic real estate not to get my pump on my way to the gym, I’m thinking about this video, this classic clip, I will tell you what they’re not telling you about your 401k.
It’s been about two years since I recorded this and guess what they’re still not telling you, so that means it’s still costing you watch this, you got a second one, I want to talk to you about something that I get excited about.
You know the 401k, the 401k experiment has been an absolute disaster for most people when the market crashed in 2008, investors saw years of dedicated savings get totally wiped out, it forced Americans to cut back on their lifestyles and delay their retirement to even a later date.
It’s not their fault, that’s what makes it so sad, I mean they were doing what they were told to do using a totally inappropriate plan to save for retirement, you know the 401k, it doesn’t work, because it has two huge problems.
First of all, it’s incredibly complicated when you put your money in a 401k, you build a portfolio out of a huge mix of stocks and bonds, once you’ve picked your investments, you need to monitor them day and night as the market is always changing the market changes day and night.
This is a daunting task even for professional investors, regular Americans never had a chance second on top of being complicated, the 401k is based on the wrong retirement mindset for the new economy.
It focuses on growing your limited savings for some far and a way point out there in the future that may or may not arrive, since the amount that you can save per year is limited, it becomes nearly impossible to put away enough to hit your goals in a reasonable amount of time.
It is not in this way though you can make a 401k withdrawal and move your money into investments that aren’t complicated and do work, you see the key to financial freedom is using an investment that grows your income not your savings.
If you can grow your income every year, it opens up a whole new world of possibilities, best of all, you benefit from your investments today as well as in the future, the key to making this happen is through residual income, this is income that comes from your investments, not from your labor.
Because of this residual, income is also known as passive income, in the world of real estate, you may also hear referred to as cash flow, I mention that because one of the more accessible and manageable methods to create residual income from most people is through rental real estate.
Once you get a property up and running, you’ll start to collect rent payments each month with little effort, this also means you put your money into something real and easy to understand instead of trying to analyze complex financial formulas.
You need to be able to determine if this particular house is worth living in, if someone will pay you each month more than what it costs for you to own it since people need shelter you are investing in an asset that won’t fall out of demand.
So once you get your first rental property off the ground, you’re going to feel this boost in your monthly income, it may be small at first, but a boost nonetheless and this is going to make it easier to manage your living expenses.
It’s going to allow you to save more for your next passive investment, once you save enough, you can invest in another property and keep growing your residual income, if you keep repeating this process, you’ll find that it’s a significantly shorter journey to financial freedom than the busted 401k vehicle.
You’ll also find that there’s no limit to the amount of residual income that you create no limits, so financial freedom can start with a 401k withdrawal, settle down before you get all excited, I know there is a cost to making a 401k withdrawal possibly a sizable one depending on your situation, this is why many investors feel trapped and don’t want to move their money out of their 401k.
Let’s put these costs in taxes, when you take your money out of your 401k, you’ll owe some income tax on the entire amount that you withdraw what most people don’t realize though is that you’re going to pay these taxes.
There’s no getting around it even if you waited until retirement, there’s no getting around the tax, since these taxes are unavoidable, there are sunk cost and they shouldn’t even be part of your decision.
The other cost of a 401k withdrawal is the 10% early withdrawal penalty, this penalty is charged on your entire withdrawal, it’s in effect until you turn 59 and a half, that’s why they call it the early withdrawal before 59 and a half.
There’s no way around this penalty either, it’s an unfortunate extra fee, however, let’s do the math, compare this fee to your potential extra income, how long will it take for you to recoup this money back in rental income? Maybe a year, a few years or maybe six months.
Everyone’s going to be different, once you recoup this penalty, the cash flow from your rental property from that point on will be pure profit for you to enjoy now and in retirement, ultimately, that’s what you’re saving on a 401 K to save enough until it will create residual income for you in retirement until you retire.
When you can do it, that’s what they don’t want you to know the powers, don’t want you to know that and they are never going to tell you that either, they’re never going to tell you that the 401 K is a broken investment vehicle and they’re not going to lay out the true pros and cons of the income tax.
The penalties associated with a 401 K either, they refer to them as taxes and penalties, they do that to scare you from taking control of your money, they’re nothing more than a cost of doing business.
You should view them as such, because this is business, it’s your business for some of you depending on your age and depending on the amount that you have in your 401 K, it might make sense to sit tight.
But for most of you, I doubt that’s the case and you don’t have to take my word for it, it’s a math equation, it’s pluses and minuses and then there’s an end result, there’s a final number, don’t let the labels like taxes and penalties, don’t let those labels get in the way of your plusses and minuses, don’t let those labels delay your financial freedom, cut yourself loose from that 401k trap, get out of this broken investment vehicle as soon as you’re able and move your money into investments.
Once you unleash the power of residual income, you’ll never look back and you’ll sit there, you’ll look, you’ll scratch your head wondering why you didn’t do it earlier, in fact, for most of you, you’ll look back a year from now and wish you started today.
So I hope you’ll give this information serious consideration, I mean if being financially free, if that’s a goal of yours, you’re going to want to look at income producing assets and if you want some more information or you got some questions, you can go to cashflow savvy com and perhaps one of our passive income experts there can help you out, I’m material at the gorilla State, I’ll see you next time, take care.