Only contribute up to your match. Not one dime more. In this episode, I'm going to
address the question, "Should I participate in an employer-matched 401k?" Uh, maybe. maybe not.
Listen and i'll share why and help you understand maybe up to the matched amount but perhaps not.
So, my name's Doug Andrew and I've been a financial strategist and a retirement planning
specialist now for 4 and a half decades. And so, when people ask me this question,
"Should I participate in a 401k plan at work because my employer is offering a match?" Now,
a match would mean that if you put in maybe 6% of your income, they'll match 50 cents on the dollar,
another 3%. Yeah, sounds pretty good, right? Well, hold on. I'm going to share with you what
it really is and it may be good. But when people ask me that question, I'll usually say, "Well,
maybe. It depended upon the rate of return and how well the 401k is being managed.
But I would only contribute up to the match and I would redirect anything over and above that to
something far superior to a 401k." And people go, "Whoa." Well, you're going to understand
why I believe this because I've seen way too many people in America outlive their money when they
followed the herd and put money in traditional IRAs and 401(k)s. Even if the employer was
matching. and then they didn't see it coming at the end of the day when they retired. So, let me
share with you the wake-up call that they would get even if their employer matched the money. And
this will help you decide whether or not you should participate up to the match or beyond.
So, first of all, let's make sure that you understand that what a qualified plan like an IRA,
401k involves. See, IRAs, 401(k)s, 457s, 403(b)s, pensions, profit-sharing plans; these are what
we call qualified plans. Now, qualified with who? The government. In other words,
it means generally with a traditional qualified plan like an IRA, 401(k), you get to contribute
the money with pre-tax dollars or you get to deduct what you contribute, that would be an IRA.
So you get to use tax advantage contributions. It accumulates tax-deferred but then when you go to
withdraw money in retirement, now you have to pay tax. Well, the premise for that was, "Oh, you'll
likely be in a lower bracket when you retire because that's what it was like like 30 years
ago." But that has not been true or axiomatic for more than 25 years now. People who accumulate
any type of a respectable retirement nest egg usually find themselves in as high or higher
bracket as they were in during their earning years if they're savers. See, most people save enough
money to be able to equal or exceed the lifestyle they had while they were earning. The only people
I've seen that are in lower tax brackets when they retire are those that didn't save very much. So,
there are those people. But if you're a saver and you have a 401(k), you can put in that money. But
beware, you're going to have to pay tax on the back end. Now, this is where employers offer a
match. "Oh, well, if you put in 6%, we want to encourage you to do this in the company's 401k.
So, we'll match 50 cents on the dollar." So, you put in 6%. They'll put in an additional 3%. And
people go, "Oh, I'm getting a 50% rate of return". No you're not. You're starting out with 50%
more. You're getting whatever rate of return you're going to get. I hope it's at least better
than 6 or 7 or 8 percent. Most IRAs or 401(k)s only earn about 3.5%, did you know that? Let's
analyze this. When you get vested, that means when you work there long enough or you retire, you're
vested; that means you can now take money out of the 401(k). Let's say you were vested immediately.
You contribute a dollar, your employer matches 50 cents. You got a buck 50 working for you,
right? Let's say you're immediately invested and you pull out that dollar fifty. Well, a third of
it goes out the window in taxes. So, you really only netted the amount you put in. So, if an
employer matches 50 cents on the dollar, that's nice. They're sort of trying to cover your future
tax liability that you're going to owe on that money. Because if that dollar fifty doubles to 3,
if it keeps growing, you're going to have to pay 33% on whatever it's worth. When you take it out
the government has a permanent tax lien on your IRAs and 401(k)s. So, it might be okay
to get a match. Some employers might match 100%. A dollar for dollar you put in 6. They put in 6,
wow, that's nice. But ofttimes, you're allowed to set aside like 15% of your income or a certain
dollar amount. You wouldn't believe how many people that come to me and they're putting in
12 or 15 percent and they're only being matched on the first 6. And I go, "Why are you doing that?"
And they go, "Well, isn't that prudent? Isn't that wise?" And I go, "Ah, no. If you really
understood the impact on the back end, I would only put in as much as you're getting matched and
redirect every dime over that to something that's going to be tax-free at the end of the day."
-"Oh, you mean a Roth?" -"Nope". No, a Roth is a step in the right direction. Something way better
than a Roth. And they go, "Okay. I'm listening." Are you? Here we go. So, if this is beginning to
intrigue you, I would recommend you share this with other people who may gain insights into
opportunities that they may not know exist. And you're about to hear one here in just a moment.
But click like, comment, subscribe and click that bell so you'll be notified every time I
post an in-depth answer to a financial question like this one, okay? So, when we think about it,
if most people who save money are not in a lower tax bracket when they retire, why would
you want to continue to add to that problem? Why would you continue to put in as much as you can
and have it grow tax-deferred and then pull out your money down the road when most Americans
agree that taxes will likely be higher? And you will have probably killed a lot of your deductions
along the way? You paid off your house, you don't have those deductions. The kids are now gone
so you can't deduct them anymore. In retirement, you're not contributing money to IRAs and 401(k)s,
you don't have those deductions. If you were a business owner, you don't have those deductions.
And Congress keeps raising taxes because of irresponsible government spending and the printing
of money. My heavens. So, why don't you redirect it to something that's going to be tax-free
on the back end? Now, people say, "You're talking about a Roth." Well,
yeah. A Roth was actually passed in 1997, Senator Roth. He realized a lot of smart people who were
savers, they weren't in lower brackets when they retired and he said, "You know what? They're
beginning to realize it's just better to pay tax on the money you're contributing. Use after-tax
dollars and have it grow tax-free and then take it out tax-free." Because if taxes go up, I can prove
to you mathematically with the same amount of money, you'll have 25, 33 percent. Sometimes 50%
more net spendable income or your income will last longer with the same amount of money in a Roth
than with a traditional IRA or 401k when taxes go up. Okay? But I've never owned an IRA or 401k
or a Roth IRA or 401k. Because what I use is far better. It's like 300% better than a Roth. And
it's what I call the Laser Fund. You can have one too and you'll realize, "Why would I put in any
more that I'm being matched in my company 401k?" If I put in 6, they'll match 3%. But I want to
put in the other 9% into something that's far superior to the company's 401k. Are you beginning
to get it? And you'll be way ahead at the end of the day. In fact, there are many people who
give up and they don't even want the match because their 401k is being managed so lousy that they're
not earning a good rate of return or they've been losing money. So, they don't even take the match
because it doesn't make any difference. It's so poor in its performance. You need to judge that.
But let me share with you how you can learn more and what's better than putting money into a Roth
IRA or 401k. So, my favorite vehicle, savvy CAPs and Tax Attorneys call the Rich Man's
Roth. I snicker because you don't have to be rich to put your money in this. You could
put in 500 bucks a month. But see, if you make too much money, if you're... You know, they call you
rich, you can't even participate in a Roth. Did you know that? If you make too much money,
you cannot own a Roth. So, that's why a lot of savvy people who have the money, this is where
they put their money because they can't even own a Roth. This is called The LASER Fund. Now, LASER
(l-a-s-e-r) is an acronym that I've used for years that stands for liquid asset safely earning
returns. The Laser Fund is actually a properly structured maximum funded indexed universal life
insurance contract where I have earned average returns of 8.2% for 45 years. But for the last
25 years, with indexing which is a strategy in the Laser Fund and rebalancing, another strategy,
I've been able to earn a little over 10% net tax-free. And it'll knock the socks off of a Roth.
Roths have 2 benefits. You fund them with after-tax dollars, they accumulate tax-free,
you can take it out tax-free. The laser fund has had those 2 benefits for over a century
grandfathered as a sacred tax-free cash cow for over 100 years and the internal revenue
code sections 72E, 7702, and 101A. If you'd like to learn more about those, they're in
this book that I want to gift you here in just a moment. But see, the Laser Fund has 4 additional
benefits. I can put in a whole bunch of money if I want, I don't have to put in anything. You cannot
do that with a Roth. You're limited to a certain dollar amount or certain percent of your income.
If I contribute to a Roth and I need money back out of it, in less than 5 years or 59 and a half,
there's a penalty. I can put in 300,000 in the Laser Fund and 30 days later pull out 250,000.
There's no penalty by the IRS for doing that. But I can use indexing with the Laser Fund.
This is a strategy where I make money when the economy is going up but I don't lose when it
goes down. And that's where you need protection in retirement. And at the end of the day when I die,
anything in my Laser Funds blossoms in value. What does that mean? If I died right now,
every million would blossom to about 2 and a half million and transfer tax free to my spouse,
my kids, my grandkids. There's not a Roth around that will do that. Are you curious? If you want to
learn more about how to diversify and create the foundation for a tax-free retirement where I would
recommend you put every dime over and above what you're being matched with your company 401(k),
investigate the Laser Fund. So, click below. Claim your free copy. Go to laserfund.com,
click on the button below. You contribute a nominal amount towards the shipping and handling.
I'll pay for the book and you begin to learn what you can do better than following the herd, putting
money in traditional IRAs, 401(k)s hoping that you won't outlive your money at the end of the day.