Never Invest In 401K and IRA If You Want to Be Rich for Retirement Planning
There is a reason why the rich do not invest their money in a 401k or an IRA. It is because those types of investments were created by the rich, to take money from the poor.
If you want to be rich, NEVER invest in a 401k and IRA's.
Learn About the Better Qualified Retirement Account Here
Your 401k Is A Scam
The largest part of the scam is that you do not get to touch your money until the government allows you to. Currently the age is 59.5 years old.
Did you know that they can raise that age and ANY TIME the choose? All they need is enough votes from the politicians and it can be moved up to 80.5 years old.
You will see below the long list of why the 401k and IRA's are scams to take money from you and me and give it to the elites and politicians.
We Have All Been Lied To…
All of our lives, we are taught to work our lives away for someone else, and then retire when we are 65 years old.
Here is the plan that is taught us from the time we started government school:
- Go to school
- Get good grades
- Go to college
- Get a degree
- Get a “good” job
- Buy a home to live in
- Invest in a 401K
- Invest in an IRA
- Retire when you are 65 years old
- Try to save enough money to live the rest of your life
- Hope to not run out of money
This is a horrible plan that NO ONE should follow.
https://open.spotify.com/episode/0uzAOry5j6IvVpSJLZfuEa
I realized this plan was repulsive when I was 27 years old. This is when I decided to make a change.
Fast forward 10 years to my being successfully unemployed, firing my boss, living the dream life, and never working another job again. At age 37, I quit my job to live the life of my dreams.
Well, you were also lied to that these “Investment” accounts, like the 401K and IRA were created to help you retire.
NO! This was not created to help you retire or be wealthy and rich. It was created to help others become wealthy and rich.
You need to learn how the Rich get rich and stay rich.
Andrew Carnegie said: “90% of all millionaires became so through owning real estate.”
This was how I became wealthy and rich.
Real Estate Investing.
Now this is true investing. Buying properties that make you money each month weather you work or not.
Check out my article on the 6 ways rental properties make you money. This will open your eyes on how the Rich truly stay rich.
What You Should Invest Your Money In
I became successfully unemployed at 37 years old by investing in real estate rental properties.
Each property that I bought made me a minimum of $250 in passive income each month.
After 30 properties, I had over 6 figures a year in passive income and no longer needed a Just Over Broke J.O.B..
Check out this article I wrote on how to invest in real estate. It is the definitive guide to becoming successfully unemployed.
The Problems with 401k and IRA
“The 401k will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public.”
– William Wollman, The Great 401(k) Hoax
When you retire, depending on how you set it up, your retirement income may not be what you think it is.
Many people are reaching retirement age realizing they do not have enough money to live off of, so they have to get a part time job to make ends meet.
If you are planning on your 401k to be your retirement, you better think twice.
Think about working your entire life to retire and not have any money to retire on.
Every day, baby boomers are hitting retirement age realizing they do not have enough money to live on. I personally do not want to reach retirement age without enough money to live on without keeping a job for income.
What a sad day it would be when you realize that your 401K is not enough to allow you to retire.
Pro Tip: Use a Self Directed IRA or 401k
If you must have a 401k or an IRA for your retirement, then I suggest using a self directed IRA or 401k.
A self directed IRA or 401k is where YOU can invest your money wherever you want. You are not forced to invest in stocks or mutual funds. You can actually invest in Real Estate, Gold, Silver, Businesses, etc.
Rocket Dollar is the best company out there to help you create, run, and be successful with your self directed investing.
Get $50 OFF your account when you use “MASTERPASSIVEINCOME22” as your promo code.
Check out this article where I show you how easy it is to set up an self directed IRA and 401k with a step-by-step guide.
Learn how to retire early with real estate investing here.
I retired early with real estate investing when I was just 37 years old. It only took me 6 years to replace my income from my job with the passive income from my real estate business.
Year after year, I bought more and more properties. Each property I bought, the closer I got to quit my job.
Now that I am successfully unemployed, I will never work a job again.
Why Only The Poor Invest In 401k and IRA's
The 401k is a law created by politicians with specific rules in the law. One major problem with the 401k is that the government can change the laws whenever they want to.
If the politicians decide that you are not paying your fair share, all they need to do is change the laws and allow themselves to take more money from you in the form of taxes or even seizures.
The sad thing is that future politicians can change the rules if they get enough votes to do so.
Other countries have already looted the savings accounts of their citizens because the politicians voted to do so.
This same thing can also happen in America. It would take is some specific events for this to happen but I believe it is possible.
I choose to invest in things that have passive income which bring in monthly cash flow. Cash flow that will pay my bills, buy more investments, and subsidize the lifestyle I design for myself now without me working.
I choose instead to invest in rental properties. There are many benefits to rental properties and I have talked about them in other posts.
The 401k and IRA do none of these and both are created by the government for the employee.
Problems with the 401k:
Fees, fees, and more fees!
-
- Management fees, Administrative fees, Distribution fees – average 1% yearly
- Sales loads – average 1.4% yearly
- Trading Costs – average .5-1% yearly
- Excess capital gains taxes when a portfolio is turned over
Little to no control of your money
The only control you have over your money is whether or not you want to participate in the plan. You contribute a portion of your salary to an account and the employer takes the money out of your paycheck and deposits it for you and is the sponsor of the account.
Then your employer hires another company to administer the plan and its investments in stocks or mutual funds.
Companies Who Don't Match the 401k Contribution Pay More In Wages
Your employer does not give you money out of the kindess of their hearts. It is to keep you working so you can make them money. They pay you money as an incentive to keep working and not quit.
They will only pay you enough to keep you working and not a penny more.
Companies that match your contributions are ones that pay less in wages.
If you didn't get contribution in your 401k, you will see a larger paycheck than otherwise. I personally would rather have the money now than have it many, many years in the future.
Dependent on outside circumstances and influences
You basically own stocks and mutual funds as you would normally but you have no control over which stocks or mutual funds you own.
The plans administrator does all the work and you are left hoping they do a good job and the companies they purchase do the same.
If the market crashes, so do your investment and all the time you spent making the money to put into your 401k plan.
In 2010, the stock market crashed in the matter of seconds. It crashed because the stock market is now ran with computers and can be manipulated by anyone with the knowledge and desire to do so.
Investigations have found that one person caused the flash crash by himself and sent the stock market in a panic.
2010 Flash Stock Market Crash
Here is a recent article regarding the 2010 flash stock market crash from USA Today:
The arrest of a London trader who allegedly helped cause the 2010 Flash Crash isn't boosting investors' confidence. It's spooking them.
“If this one random guy could impact billions of market value in seconds or milliseconds, what's going on?” billionaire entrepreneur Mark Cuban said in an interview.
“If a guy in his underwear can manipulate markets, anybody can. The optics look really, really bad,” said Cuban, who owns the Dallas Mavericks NBA basketball team.
401k’s were created to supplement pensions and not meant to be a substitute
When the 401k was created in 1978 and was intended to allow taxpayers a break on taxes on deferred income.
In 1980, Ted Benna figured out how to use the law as a way to save for retirement.
Now companies around the country offer these 401k plans instead of pensions because it saves them millions of dollars and the headache of administering the pension for its employees.
401k money is tax deferred not tax free
You are betting that your tax rate will not be higher when you start to withdraw your money.
If the government raises the rates once you start withdrawing your money, you are taxed at a higher rate than when you put it into the 401k.
Also, you can pay the tax before you put your money in (ROTH 401k) the plan or after you start to draw from it. Either way, you pay the taxman.
Withdrawing money is seen as income
When you withdraw your money, it is seen as income and you have to report it to the IRS as regular income.
Depending on where you are in life, you could be taxed at a higher rate because of the increase in income.
The money you put into your 401k lowers your tax rate now but also lowers your tax breaks for deductions like mortgage interest and others.
If you put your money into a 401k, you are taking less in income per year because that money is not being given to you directly.
It is being placed, before tax, into a plan that you hope will go up in value.
Because you are not taking the money now, your annual income is lowered by the amount you put into the plan. So your tax rate may be lower because you show less annual income.
Withdrawals of the 401k can trigger much higher levels of Social Security taxes.
If you are withdrawing from your 401k, your income goes up which may affect the rate of taxes you pay on your social security benefits.
The more income, the higher the tax bracket, the higher the tax bracket, the less in benefits you receive from social security.
Long investment timelines. You must wait until the age of retirement to access your money without penalties.
If you take your money out of the plan before retirement age you are hit with fees, penalties, and taxes.
This is the way the government gets you to keep your money in the market for as long as possible.
The way of the rich is to get paid cash NOW, when you retire, and every month in between.
Limits to contributions to 401k and IRA
As of 2015, the maximum amount you can contribute per year is $18,000. Not everyone can give that much or more per year but what if you were able to?
Why should you be stopped from investing your money in something that will help you for the future? With real estate, the only limit on how much you can invest is your own limit that you choose.
The Rich do not need a 401k
The rich do not want to leave it up to other people to control how their money is being handled. Also, they want to be paid now, tomorrow, and when they retire.
Waiting until retirement age will not work because they are already retired and want the money now so they can invest and spend the way they want to.
All of these reasons the Way of the Rich is to not throw your money into a “Plan” that someone else controls and you don’t get to touch until age 65.
If you invest in passive income with monthly cash flow in real estate, you will have the ability to retire now, get paid now, and live the life you want now.
Not when you are 65…
Many people don't know what is an IRA. People invest their money in an IRA (individual retirement account) and do not really look into all the problems associated with them.
What is an IRA?
IRA’s are a hands off approach to investing, basically giving your money to someone else to manage and hope the stock market goes up and increase the value of the shares you purchased.
The basic investment your IRA purchases are stocks of many different companies. The $ value of your IRA goes up and down with the performance of all the combined stocks in the group of stocks.
If the stock market goes up or down, usually the group will follow accordingly. Just like the idea that the rising tide raises all ships.
There are many problems with investing in the stock market as opposed to real estate or online businesses but IRA's have their own issues.
Similarly to the problems with 401k, IRA's do have different issues that you should be aware of. I personally do not invest in IRA's and would recommend others to think twice before they do.
I have found that passive income ideas like online businesses and rental properties are the best way to earn passive income.
I have found 15 reasons why I invest in rental properties and why I invest all my money from online businesses to purchase more rental properties.
Pro Tip: Use a Self Directed IRA or 401k
If you must have a 401k or an IRA for your retirement, then I suggest using a self directed IRA or 401k.
A self directed IRA or 401k is where YOU can invest your money wherever you want. You are not forced to invest in stocks or mutual funds. You can actually invest in Real Estate, Gold, Silver, Businesses, etc.
Rocket Dollar is the best company out there to help you create, run, and be successful with your self directed investing.
Check out this article where I show you how easy it is to set up an self directed IRA and 401k with a step-by-step guide.
Here are the 7 Traps in your IRA you must watch out for:
1. Low rates of returned compared to real estate
The best mutual funds return about 8-10% per year. That means that if you invest $5,000 in a mutual fund you may be able to have your investment grow by $200-$500 per year.
Real estate on the other hand can return sometimes 200%-300% returns in the first year if buy it right and rent it out.
I outlined how you can earn money 6 different ways AND how it is possible to get a 780% return in 1 year on your money. Don't settle for 3%-6% return on your money.
2. Only Earned Income Can Be Contributed
If you have a J.O.B. (Just Over Broke) you are able to contribute into an IRA. The IRS states you must earn an income from taxable compensation in order to contribute.
These include wages, salaries, tips, bonuses, commissions, professional fees and self-employment income.
If you invest in passive income ideas with monthly cash flow through real estate, earn dividends, or receive interest, you are excluded from contributing to an IRA.
There is a reason why they are called an Individual Retirement Account. It was created by the rich to keep you working until you are not able to work any more because you reached the age they don't feel you can work any more. Sorry, I digressed there a bit.
Seriously though, retirement is an American idea that is not normal. People don't usually retire and have someone give them money.
The way I believe it should be is that YOU create your “retirement” and become independent from anyone telling you when you can retire. Why not retire now?
Check out how I quit my job at 36 years old with passive income ideas.
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3. The more you make the less you can contribute because of income limits
If you earn more than $118,000 a year as a married couple you, are cut off from contributing to an IRA because of the IRS income levels put you out of range.
If you have a Roth IRA, your married income cannot surpass $193,000 or your contributions will be cut off.
In real estate, the more money you make, the more properties you can buy. The more properties you buy, the more you will make!
4. Tax Risk with Before and After-Tax Contributions
Depending on which you prefer, IRA or Roth IRA, your contributions will not be deducted from your income taxes.
A Roth IRA is invested with after tax dollars and you cannot take a tax deduction for your contributions when you file your federal income tax return.
Depending on what your tax bracket is now, or when you retire, you could be stuck with more taxes than you originally expected.
Real estate rental properties give you the best tax advantages. Because owning rental properties is seen by the IRS as a business, you get many tax deductions.
These deductions makes it look like your passive income is lower and because of that, you save money.
- Depreciation – The IRS lets you deduct the value of the property over 27.5 years. Depreciation is looked at as an expense, but no money was ever spent. You purchased the property, which makes you money and still has its actual value, and the IRS lets you deduct part of the value of the property over 27.5 years.
- Another great thing about depreciation is that if you give the property to your children, they get to start the entire depreciation cycle of 27.5 years all over again at the current market value!
- Operating expenses
- Mortgage interest, insurance, repairs, advertising, Property Manager, utilities, yard maintenance, losses, etc.
- Ownership expenses
- Property taxes, mileage, business cell phone, professional fees for accountants and lawyers, travel, convention attendance, business education, home office, etc.
5. Giving Money to Heirs is Taxed
A traditional IRA requires you withdraw your earnings at at 70 ½ which may not work for you if you have other plans.
If you do not need your money but want to let it keep growing without incurring fees and charges by leaving it in the IRA, you are not able to.
You must withdraw the money AND be hit with taxes on the money you withdraw.
You can take you earnings and find another investment vehicle like real estate but you have already lost from the taxes paid when you took your money out.
6. Substantial Holding Period for Your Money
Because the Roth IRA is funded with after-tax earnings, when you withdraw your money it is tax free because the original money was already taxed before it went into the account.
There is however an aging process before your money invested can be qualified for the non-tax payout.
You must be 59 ½ years old or disabled. The Roth IRA must be maintained for at a minimum of 5 years before it qualifies for the tax free withdrawal.
You will be hit with a penalty if you take the earnings before they are qualified and be considered taxed as ordinary income and a 10% penalty.
With rental properties, you only have to hold onto them until you want to sell them. There are ways to continually differ your taxes indefinitely. This is called a 1031 Exchange.
For example, you buy a single family home, sell it 10 years later, and make $50,000.
Use a 1031 exchange to buy a more expensive property. You can buy another single family home that makes more income or even an apartment building!
Do all this without paying any taxes today and defer them to a much later date if you decide to cash out completely.
7. Lack of Access to Your Money
An IRA is intended as retirement savings and the IRS will hit you with a 10% penalty if you withdraw it before the age designated by the IRS.
For a Roth IRA, 59 ½ and traditional IRA is 70 ½.
You must wait until the proper age to touch your money without a penalty. The only other reasons for pulling out the money is for a first time home purchase or if you become disabled.
Instead of waiting until you are retirement age, why not get the money now?
I know we all could use some more money in our pockets every month AND that most of us do not want to wait until 70 years old to spend that money.
Invest in rental properties to get cash flow every month for the rent profits.
Passive income ideas that the rich stay away from are any investments that:
1. Does not allow them to access your money at any given time.
2. Does not allow them to control your money how they see fit.
3. Charges a penalty for not following the “rules”.
4. Keeps them from enjoying their money until many years in the future.
5. Allows the government, through the IRS, to dictate the terms of their investment.
Let me know what you think! Submit a comment below!
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