Monday, 7 September 2020

Why 401k Is A Bad Investment_ You Should Invest Your Money This Way

In this article, I'm going to tell you why a 401k is a bad investment, why I don't have a 401k, and what I'm going to do, I'm going to explain to you all of the disadvantages with a 401k. It's not in your best interest, and it is pretty much not a scam per se, but it's an abdication of responsibility by companies instead of giving you a pension.

The Disadvantages Of A 401k 

1. You Have To Put The Money Away

Let's say by the age of 65 you got a million dollars put away. Guess what you got to do with the age of 65. "You have to figure out how long you're going to live". And you have to take your distributions out of your 401k per year or per month, whatever. I want you to think, you're 65 years old or 59 and a half, and you're like, am I going to live another 40 years? Am I going to live another 50 years? Because this is one of the things. People are living longer and they're outliving their money. So that is one of the worst disadvantages of 401k because you could save up a million dollars at age 65 then kick off at age 70, and leave a ton of money behind and not get to enjoy your money.

2. You Actually Have To Put The Money Away

Let me tell you how it used to work.

You used to go work for a company and you said, hey, company, I would stay here and work for you for 30 years, and the company said, okay, good man, we're going to give you a pension. And frequently, the pensions were 70%, and in some cases, there were people who were getting more money during retirement because of a good pension than they were when they were working. Because a pension is a company putting a chunk of money in an investment vehicle, and this is how they pay you until you die. So you don't have to worry about living your money or having enough money because essentially "the pension will pay you as long as you are alive" and in many cases, some of these pensions would go to the widow. If a guy died at 65 or 66 then the pension would divert to the widow. So it was just a much better thing.

During the 70s some smart NBA came up with this idea, let's get rid of pensions, and sell them a 401k. 401k is garbage in terms of the fact that you have to fund it. In the terms that you've to figure out how long you're going to live, and also, it's supposed to be a supplement. A 401k is supposed to be a supplement to your social security and other investments. Because everyone is saying, go out and get a 401k, get a 401k, if you've got the company match take that free money. But no one is telling you how you're going to collect the money and how it's going to work out?.

What Should You Do Instead?

You can go into real estate. Let me explain;

3. The Disadvantages Of The 401k And The Advantages Of A Real Estate Portfolio 

Let's say during your life instead of you building a 401k or investing in the stock market, you buy 4 rental houses. Just four, not 50, not 20. Just four. And these houses by the time you're 65, they are worth a million dollars, and these houses are paid for because you start buying them in your 30s so you got these houses, they're paid off, and these houses provide you roughly let's say $6,000 to $10,000 per month income. It's a beautiful thing because as long as you own those houses, they're going to provide income. So you don't have to worry about figuring out when you're going to die.

Also, this is another beauty of just four houses. Maybe even three, periodically you're going to get raises because the rent's going to go up. We're essentially talking about the same money. Let's crank it down a little bit, and let's say you only have one house. And the house pays you $2,500 dollars per month which is $30,000 a year. That is still more money than you dividing your annual distributions from your 401k with just one house. Literally, if you are broke right now and literally, you're 20, you're 30 something years old, you get yourself together next five years and you buy yourself one rental property. That with social security is going to be about $3,600 to $4,000 per month. One house. Now if you had four. You wouldn't even be worried about your social security check because that's gonna be $6,000 to $10,000 per month. Also. because it's real estate you get to take massive deductions and depreciation schedules where you're going to pay "very small taxes on your income" did I also say that you periodically get raises because rent goes up. This is why the real estate retirement model is better than the 401k or the stock model.

4. If You're Going To Retire You're Going To Need Active Income

Everyone talks about passive income, passive income. But as a business person, I know the power of active income. Let's say you're 30 years old and by the time that you're 65, you have five houses paying you $10,000 a month and that's $120,000 a year. Let's say 20% for property taxes, insurance, and cost. Because once again, this is real estate, you can depreciate it where you're going to pay very little in taxes. That 20% from the $120,000 is $24,000. So you're gonna get $96,000. You don't even need a 401k. If you have one. I advise you to sit down and crunch the numbers and take this information that I'm giving you. Because no one tells you this. Everyone is like get a 401k, get a 401k. And no one is saying what happens when it's time to come collect the money. You have been sold a felonious bill of goods with this 401k stuff and the Roth ira because essentially, they both take money that you can use to live to fund the future and this is one of the things that you should get into real estate.

5. Active Income Is Always Better Than Passive income

One of the biggest problems is everybody's trying to rent seek, get a gang of money, and do nothing. If you will burden yourself with the responsibility of starting a business or managing real estate, you're going to have way more money in retirement, you're going to be able to spoil your grandkids, you're going to be able to pay your medical bills, and you're going to have more money than you need. You're going to have a golden retirement. You're going to be able to take trips. You're going to be able to do so much more than if you go ahead and fund a 401k, and then have to micromanage the 410k because no one ever tells you that once you reach a certain age you've got to figure out, sit down and think, how long am I going to live? That's one hell of a question to ask yourself, and this comes into proper estate planning.

If you're in your 30s and you start getting real estate properties, even if you have to get loans. Get these loans paid off before you retire. 

Put it this way, if you get yourself let's say you're a real go-getter, and you follow this article, you took it to heart, and you get yourself 20 houses that are paying you $2,000 a month. That's $40,000 per month. $480,000 per year. Guess what? You don't have to manage it. At $40,000 a month of revenue you can hire a property manager, a handyman to look after your properties, you never have to answer the phone, you never have to go do anything and essentially you can hire a property manager to show your houses, to do your leases, so essentially it is a form of passive income that you can set up right now. So this is why 401k just sucks. And it's not going to get any better because, with the thing that we're going on, many people's incomes are going to be depreciated so they're going to have less money to live, less money to invest, and if you're like half of America that earns $33,000 a year or less, you don't have the money to even fund a decent 401k because I know that here on internet many people were like, you can start with $100 a month, you put $100 a month away for 40 years you'll be a millionaire.

Here's the truth

Most people do not start investing until they get in their 30s or 40s. So that $100 a month figure is erroneous. Typically, if you don't start at 20 or 21 with this $100 per month, you're gonna have to invest $500 to $1,000 per month to catch up to for all of that compound interest that you missed because you did not start investing in your 20s. No one ever tells you that because I crunch numbers, I look at it and I'm telling you there are many people who are headed for a meager bleak retirement because they're listening to all of this other stuff and they're looking to create a lifestyle of leisure.


If that doesn't light a fire under your booty I don't know what will because the game is dirty. The 401k they make massive fees off your money, you're putting your money away, you can't live the way you want to, and essentially, here at roadtosuccesse, I implore you to do more to think bigger, to live larger.

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