The 401k is a SCAM? | The truth about 401ks...

There's a lot of noise out there about 401ks, and if they are worth doing or not. And some, even call it a scam. So today I'll take a look at the different options, and come to a conclusion to answer the question: Is the 401k a scam?

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[PassiveEarnings]

Hi Dream!
Very interesting topic, I am also contributing to my 401K, employer also provides 100% match till 5%, which I love. Although, I get that pension would have been better than any 401K plan, but I am willing to settle in for the next best thing. Plus, I am also maxing out my Roth IRA every year, so will hopefully have some taxable 401K and then tax free money in Roth IRA form in my retirement. Can’t rely on Social Security at all at this point.

[jrizzo]

Not a scam but absolutely need other buckets, Roth, HSA, Individual account

[jeffreydanielewicz]

As always the answer is “It depends”. As I am now realizing in planning, 401k/403b plans are good from the viewpoint of the company match being “free money”, but obviously it becomes pay now or pay later on the taxes. Also, the effect being a dividend investor is negated when rolling over a 401k/403b into a rollover IRA. Your withdrawals will be taxed as regular income and you lose the capital gain advantage. So, the answer is contribute to get the “free money” match in your 401/403, but also build you traditional account with dividend issues where you can. (If dividend investing is your thing).

[WillSugg]

Great video and helpful to tease out what the specifics are for each type of retirement account.

[JaniceHylton]

I have a pension, 457B (NO match), and Roth and taxanle.
My husband has 401K, Roth,
and taxable.

[fvid]

Don’t forget your 401k are protected funds against creditors, and if you need to, you may borrow against your 401k.

[international_dividend]

The US does many things great, but taxation is not one of them. Why complicate things? In my jurisdictions of Australia and Hong Kong there are untaxed mandatory employer contributions (some companies top that up), pretax employee contributions and... get this... withdrawals are tax free!

If the point is to reduce future government expenditures (and make no mistake, it is) a government should make retirement funds worthwhile and simple to understand. The numeric and alphabet soup of retirement accounts in the US is unnecessarily complicated and off putting.

[brent]

I will say that it can be a scam depending on how it was handled. Our 401ks were automatically invested with some roboadvisor that charged fees and probably gave returns half as good as S&P 500. 401ks need to automatically go towards a little to no fee target date fund at least.

[donaldcomer]

My company has a 8% match and it's good for young people who are not thinking about retirement yet but you can find better retirement options out there

[RobOToole]

i thought i was smarter than a 401k early in my career. i would have loved to dca into the market at that time instead of daytrading through the gfc. i still see that empty account in fidelity to remind of how dumb i was.

[ApexReserve]

It all depends on your income and employer match. Always contribute up to your employer march first. Then go max out your Roth. Then come back snd max out your 401k if you can. Beyond that, it's the taxable brokerage. You can also do an HSA if you're a gambling person.

[Returnofthejedi]

This is easy for everyone watching this video a 401 k sucks …for everyone else 401k is this most effective way to invest for retirement…the 401k should be required from every employer…it’s that important…

[aces]

How do you decide whether its worth maxing RRSP as a high income earner?

I already max my TFSA and RRSP and also have a 6% employer match. I also have a sizable taxable margin account (that has more than tfsa and rrsp combined).

Can you go through the math to see if its worth it to me to contribute more to rrsp beyond the match?