Why Your 401k Is A Bad Investment

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Sources Used in This Video:

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#401k #retirement #invest

[TheMoneyGPS]

This video is in response to the countless people who have asked me about 401k's/retirement accounts. I wanted to completely explain my OPINION about the subject. I know that this may not come off as nice because many people have their life savings in their retirement account or something similar. I mean no disrespect to anyone. I am simply stating what I truly believe. I hope you can respect that. I am here to bring you the data. I did touch on what you should do instead but as I don't get into financial advice, I hope you can understand the 4 asset classes and TRUE diversification and how important that is.

[misterinternational]

They call it “free money” but nothing in life is free and I do mean not a damn thing. This has always been true but most people still have to learn the hard way

[ironmaidenshredd]

I was almost pressured into starting a 401k at work but when I saw how pushy everyone was about it I decided against it. I had someone tell me I was stupid not to enroll for the “free money” as they called it. My work was matching up to 4%. By all means if that’s what you want go for it but I’m paying off all my debt first so at the very least it seemed like a step in the wrong direction. Thanks for the video!

[HB-yqgy]

I all depends when you start. I started my 457 in 1988 just min $25 per paid first guaranty fix. Then started maxing out more aggressive stock. In 2000 lost 50k no worries don't listen to the noise just rebalance i have time. Retired 2014 with over 500k. I came here for the truth. So when every crashes all assets on sale at steep discount.

[venictos]

I will be honest about my 401K! First of all, i have been participating since i was 23 as I was suckered in thinking it was free money. However, the percentage match wasn't good. My new job (I'm 25 now) matches 10.2% on 8% i put in. I will be fully vested in 3 years and it is only meant to provide HALF of my retirement needs in my eyes. I'm saving much more personally with better diversified asset classes and better fees if any. I am considering taking control of my assets with my retirment company soon as I have gained enough experience to where i can handle it myself. Good luck to you all and excellent video!

[David-oomt]

Not good to make such blanket statements. There is more information about 401k fees these days, John Oliver even had a segment about it. Employees can petition their employers to switch plans to something with less fees. More and more plans include Vanguard funds now which many are less than 1% fee. There are even some plans that allows to redirect money into a brokerage account instead of forcing it into an ETF.

[bigbr]

This channel is a favorite of mine and you may recognize that I enjoy contributing, but, informed educated people rarely agree. In theory, a 401k's assets are "at work" in the market. You make the point that people need to work to maintain a portfolio outside these institutional offerings but I think this is understated and the reason why people go with these investment choices, they DON'T want to do the work. IMO, 401ks CAN be a useful PART of a portfolio. I realize your point is that they represent almost ALL of most peoples investments, but you also segue vaguely into income producing assets. I wish you would have spent a minute on a few examples, it would be certain to raise a pandora's box of maintenance issues these assets require. Income property is the biggest most common asset that 90% of the public are woefully unprepared to manage, as an example.

[spaceoddity]

The 401(k) accounts have the following advantages.


The money that goes in there is tax free.

You can set it to go in there automatically.

Depending on your 401(k) depends on what you can invest in. Some even have self-directed brokerage account options

Quite often employers will match your contributions which is basically free money

You can make yourself a loan from your own 401(k) before you are retired.

This company a loan for a deposit on to a house. Or just a general loan for whatever you like.

I also think there is some option to be able to cash out your 401(k) at 55. If you have retired early

You can also invest in dividend paying stocks. And reinvest of those dividends back into your 401(k). Or live off those dividends once you have a time

In the absence of a sound well managed and secure company pension scheme. The 401(k) is the next best investment for your retirement.

There is also a 457K investment account that is offered by some and employers.

So it is not all bad

[eduardosoria]

After I’ve seen people with horrible 401k experiences made me realize that is not what I want. They do rob you. By “saving” you’re money but you can also make a personal savings anywhere besides there. At the end it doesn’t matter what age you are, if you want to use it for personal use they will charge you 20% if you’re total. That’s a HUGE ROB! Don’t do it! Save yours money from these crooks IRS!

[avburns]

The premise is flawed. A 401-K is a replacement/answer for pensions (which most people no longer get). So, do you think pensions are bad? Are you against a tax deduction (if you use a traditional 401-K) and tax deferred growth? Would you like a retirement plan that is automated (the money comes out of your check before you get it), gives you an instant tax deduction, tax deferred growth and possibly a company match ( if offered and dependent on the vesting schedules). This should be where a discussion of 401-K begins.
As for the investment side of the equation, you might start off with some "bad" mutual funds selected by your employers but once you separate from your job you can roll the money over into an IRA and can pretty much invest in whatever you want.

[Veganphobic]

After I put money into my 457 “employee 401k”
and they said I can’t take it out I stopped putting money into it
It’s not a scam but you’re forfeiting your control of your money. And it may not be there later and take 20+ years to pay you back pennies

[tristandelacruz]

I agree with what he says about creating income streams to pay your bills and keep your assets to create cashflow and build from there but why not do both? Putting small amount of money in a 401k or IRA isnt gonna really hurt much. Also 99% of people will fail and give up when trying to create passive income streams. Its not easy and he doesn’t even mention that you have to be devoted and focused to accomplish that. Good video and I respect your opinion.

[nknarula]

I’ve been telling this to my friends and family for years.thank you for making a concise video I can forward. Great financial planning information.

[EricSmythChrist]

Only get a 401k if your employer matches it

[xnotx]

Beautiful video, David. Thumbs up. Which playlist is this video going into? The charts and stuff are good info but is fast paced and somewhat like filler in regards to videos like this(Actual education topics). Videos like this are good learning and could use their own play list, just my humble opinion. :)

[anthonyamaro]

Thanks for the great content and hard work

[InvestingHustler]

I’m glad I never stared a 401k . I remember learning about it in high school and wanted to open one but they didn’t let me because I never had proof of income from the previous year. Everything happens for a reason

[antoniovistcoatis]

I really dislike 401ks but, we are generally stuck with them. It has become harder and harder to move away from them or execute other options as companies push these as the only investment options on employees.

[Jimsac]

Each employer sponsored plan is set up differently from one another. They are not the same. As a California state worker, I have a 401(k) plan through the State of California Savings Plus Program and they also have the 457 plan and can be either Roth or Pre-taxed and they charge a fee of $1.50, per month, for each account. The rate of returns that the participant get depends how the account is managed by the owner. There are also tools, out there, that can help people manage their retirement account. They just have to look and lean them. I have learned some of those tools, that have helped me, and have been gaining more money than I'm losing. In 2018 I got a 20.5% rate of return in my 401(k) plan. In 2019 I got a 22.6% rate of return. My retirement account is doing very well this year and have been getting good returns in each quarter. I can't wait to see what my rate of return is going to be at the end of the year 2020. I will also open up a Roth 457 plan with the State of California Saving Plus Program in the near future. Wish me luck and happy money making.

[ExtraordinaryLiving]

I lost money, a good amount relative to my contributions, when I pulled out my 401K from a former employer's (unmatched) plan to roll over to another retirement vehicle (such as IRA account) ... it happened to both former employers I had contributed money to; this was enough lesson learnt for *NOT TRUSTING ANY EMPLOYER'S 401K PLAN* .
I think I would have done better putting my money into a self-directed IRA account [than putting it in the 401K].