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Posted on | June 6, 2010

401(k)s: A Horrible Way to Save

In October of last year Time magazine published a story entitled “Why It’s Time To Retire the 401(k).” The article reports:

“…the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves. In the past two years, that has become all too clear. From the end of 2007 to the end of March 2009, the average 401(k) balance fell 31%, according to Fidelity. The accounts have rebounded, along with the rest of the market, but that’s little help for those who retired — or were forced to — during the recession. In a system in which one year’s gains build on the next, the disaster of 2008 will dent retirement savings long after the recession ends.”

401(k)s are poor investments for most people because they expose investors to market volatility. Investors have little control.

Worst of all, with tax deferral all you’re doing is delaying the inevitable taxes, and taxes will not be lower in the future.

It’s a myth that you’ll be in a lower tax bracket when you retire. Even if your income is less, you don’t have the tax deductions you used to have.

The following Fram oil filter television commercial illustrates this concept perfectly:

*If you’re reading this in an RSS reader or email, you may need to click the title of the post to view the video.

Stop delaying the inevitable. Make wise decisions to protect your nest egg from taxes.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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