Is the 401K a scam?

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Not financial advice! Please do your own research.

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[Glenn-edbr]

401K is useful to get free money from employers. My employer did a 100% match on the first 5% of salary 401K deposits. So the way I saw it, the company had prepaid the early withdrawal penalty. I withdrew money from the 401K whenever I needed it and gladly paid the penalty (and taxes).

[STF]

I just retired 6 months ago at 55 1/2. Use the Rule of 55 to access my 401k funds without 10% penalty. Use 72t rule to access my Wife’s 401k funds. Very thankful for the 401k plans. Also I believe RMD age is now 73.

[citizenoftheyearCC]

1. No guarantee anyone will ever live that long 2. Many companies require you to work x amount of years to fully vest and enjoy that match, as more people job hop, this becomes even less of an incentive. Long story short - be responsible for your own retirement.

[mannyreyes]

Well said. Our life span is too short to wait till we are almost 60 to withdraw our money. I'm 100% in agreement with you.

[WW-]

A huge pro to taxable accounts is availability of margin.

[jeremyjjet]

I agree with you completely! I want to retire before 59. This is when I have the energy to do all the things that I want to do. When I'm 65 or 67 I can stand on the side lines and watch people do what I want to do.

[NOMORERATRACE]

I retired at 33 years old I am 37 years old now. I never have 401k in my employer company.

[GenZInvestingYT]

Thank god we Canadians have the TFSA 7k contribution limit goes up with inflation, and no penalties for withdrawing. Pure tax free gains.

[AC_]

This is such a great video. & I just came to the same realization in 2023 and adjusted 401k contributions down to the match only.
Great stuff

[RuralNomad]

Just turned 41. Have been contributing to a 401k as soon as it was available to me w/ up to the company match because that's all I knew and heard. I'm obsessed with the thought of passive income and only started a couple years ago with a taxable brokerage account and also did a roth ira conversion from my 401k ( just carved out a small amount) to learn and to hopefully build up a dividend monster. We work hard for our money, so get mad at myself if I make stupid mistakes. Currently up on my dividend stocks, so just have to build it a little at a time. Hoping that I can use the taxable income for whatever, and the roth ira income to supplement 401k. I don't dislike work, I just dislike the thought I have to work.

[xpremium]

I think 401ks and the like were a safeguard made for ppl that have limited to no financial literacy. Which is a large amount of the population. Look at how many people live paycheck to paycheck have no savings and max out their credit cards. For ppl with financial know and discipline its more of a limitation.

[mucusofwanderhome]

One other major benefit is the money is moved into a 401k prior to hitting your bank account . Lots easier to stomach the contributions this way.

[ChristiantrospectiveGamer]

My primary reason for maxing my 401k is that it drastically decreases my taxable income and helps me stay in a lower tax brackets after adding in my dividend income.

[michellerene]

The world has changed so much in the last 20 years. With internet access now, we have more opportunity to educate ourselves and we have access to stock investing that average people didn’t have. Rethinking how to use the 401K is smart. I believe taking advantage of company matching is probably a good idea for most people. Retiring before 65 was unthinkable for my parents’ generation. So they took every penny offered to them.

Centuries ago, it was church donations that took care of the elderly, disabled, widowed, and orphaned. Our elected government has tried to step in and take on that role, for better or worse. Either way, the strong have a duty to care for the weak, IMO. It’s a matter of who you trust to care for our societiy’s financial resources.

[josephsaeteurn]

i wish i can invest how i want with my 401K.. the options is very limited and i hate that..

[skratchinator]

You can also add the items below to the pros list to the ROTH IRA as withdrawl penalty free:

Unreimbursed medical expenses that exceed more than 7.5% of adjusted gross income (AGI)
Qualified higher education expenses
Purchasing your first home (no penalty on up to $10, 000 early withdrawal)
Certain expenses if you’re a qualified military reservist called to active duty

[mucusofwanderhome]

Think of 401k and the age 59 and 1/2 as a safeguard from your current self which is nurturing your future self. I for one like that fact that I’m safeguarded from my current self-sabotage 😂

Also, I’m a little bit older than you and seriously focused on my “freedom fund/brokerage account”. grass is always greener but I have no regrets with the 401k.

[MrWashington]

I’m retiring at 39, maybe 40. I do my 401k at work only up to the match, I control the rest. I consider my 401k my 20 year retirement bonus.

[srortega]

I put in the minimum to get the company match on my 401k. For the last 2 years I have also been maxing out the contribution to my ROTH. I then also am putting $500 a paycheck into a taxable account that I started 2 years ago. If I could go back and change things, I would have started a taxable investment account earlier (even if it was only $100 a month) and I would have been maxing out the ROTH from the time I started it over 20 years ago. The plan is to use qualified dividends, and 401k withdrawals small enough that I don't have to pay taxes and then use income from the ROTH to cover the rest.

[natemillsap]

This was a great video topic with good points on both sides of the aisle. I would always say to at least capture the match available, as in most scenarios, the contributions to a traditional 401k vs paying taxes on the same amount of money not invested yields essentially the same net pay. Roth is of course different but still take the match, it is essentially part of your total compensation. Above that, do what makes you comfortable and able to sleep at night.