The Great 401(k) Flaw

by IST

401(k) plans have become widely used over the last 30 years.

Unfortunately, the plan has many flaws. The biggest of which: is that when people reach the age they MUST begin withdrawing money from their plan. Age 59½. The 10 percent early withdrawal penalty on IRA withdrawals ends at age 59½. However, you are not required to take distributions until after you reach age 70½… AKA – the governments payday.

How many of us were told to save tax deferred and then take out when you are retired and in a lower tax bracket? How many people can risk retiring into a lower bracket or income? It’s a ridiculous proposition. Who believes tax rates will be lower in the future? I doubt assumptions were made for the inevitable escalating tax rates – except maybe by someone in the government.

There are over 75 million baby boomers beginning to retire in between 2012 and 2016.

As more baby boomers withdraw their funds (Selling stocks), a dramatic decline in the stock market could result.

The more people who see the dramatic stock market decline, the more people will sell their shares to avoid losses; causing stock prices to tank even further. This is something Robert Kiyosaki predicted 10 years ago.

Poor retired Person

But, who wants to see puny returns that can’t keep up with inflation or miss out if the market doesn’t crash or go down? This is one of the reasons we use Equity Indexed Annuities, Life Insurance, and other safe money principles where you can get the benefit of the market ups, but avoid any loss during the market downs.

I don’t know about you – but, after the last market crash – I’ve become a lot less interested in gambling on stocks and try to limit the risks involved in the market. My gains have been more consistent and less volatile.

 

To learn more about the best annuities today – like the ones we personally use, please give us a call 763.263.0785 or send us an email.

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