Diversification is not a bad thing so saying k s are bad and not analyzing the situation is too close minded. Tom — This is painting with a pretty broad brush. Many modern plans offer index fund options with very low expense ratios. Thomas Phelan Replied over 1 year ago. Jesse, My aim is not to try and cut a wide swath with a small scythe, rather to say there is an alternative plan superior to a k. If its is superior why stay with something inferior? Your k future distributions will be taxed plain and simple and at a rate you have no idea of knowing now how high they will be.
Thus they are subject to the whims of Wall Street as evidenced by some of the people in this forum who have loss substantial k portfolio losses. Katie, Yes and no. Nick Kosko Replied about 1 year ago. The chassis of the IUL is broken. The insurance companies are simply buying rolling options to cover themselves and that comes at a tremendous cost.
Sure, you can make an IUL illustration look good, but they do not become reality.
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Not to mention that studies have found many k s are low quality. Apart from the hidden fees, there is the problem that often the custodians I am looking at you, Merrill Lynch offer only funds that pay the custodian a kickback. These funds also tend to have higher than average expense ratios.
I completely agree with the article! Very well said! I just happened to stumble upon this k discussion in the comments and it is interesting because my husband and I are in a situation right now where he has enough in his k for us to start our real estate investing and potentially turn that small amount of money into our future financial freedom. His father thinks we should keep adding to it, I think we should use it. Any advice here? Curious why all the discouragement on the k?
Strictly fee related? How would you recommend people save for retirement? Andrew Olmstead from Kapolei, Hawaii Replied almost 2 years ago. Please expound on your statement why this is a sad thing. You also did not read carefully. The quality of the funds in k s tends to be low. Fact is the government want us to save for retirement, but not save too much or even very much.
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Otherwise, there would not be such low limits on annual contributions, and the allowable contributions to an IRA would be much higher. Also the assumption behind the deferred tax feature of both k s and traditional IRA that your income after retirement will be less than during your working years seems reasonable, but does not actually hold up well. You can easily end up owing MORE tax after retirement than before if you bother to actually make the comparison.
You see, if you start contributing to a high-quality Roth from the beginning of your working life, your lowest taxes will be at the beginning when your wage is less. By the end of your working life, your average tax rate has been roughly equal to your tax rate midway through your working life. Since you will owe both capital gain tax and deferred income tax on distributions from a k or a Traditional IRA, your tax can easily be greater than if you had just paid the income tax up front all along.
With a Roth, you DO pay up front all along, therefore your distributions after retirement are tax-free including the capital gains. The money you save in a k is not likely to be sufficient, so you will probably have to save for retirement the same way you save for anything else, by living below your means and saving the difference even if you save in a regular savings account, or if you want to buy high quality funds, in a regular brokerage account. Dave Petersen Replied almost 2 years ago. Not all ks are bad. My company offers both a regular k and a Roth k option.
Several years ago after pressure from employees, they changed up the fund offerings to include low fee index funds. If your company has a bad k plan, start talking to leadership and getting your coworkers to do the same. As I said IF there is a company match, then a k will work out okay. Lots of companies do not offer a match.
Without the match, most k s are a bad deal. Investment companies should be held accountable for the advice they give, and their advice should be in the best interests of the client, NOT the investment company. Alik Levin from Sammamish, Washington Replied almost 2 years ago. Rich Dad camper here. Good article. I guess his advice is good to prevent or stop unhealthy financial behavior. His advice is no good to help build wealth though, put it mildly. I really tried to read the book.
Maybe I should try a different one. It was dreadful.
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I know! I think the problem comes down to lack of financial literacy in the first place, and lack of discipline. People just need to use it responsibly! People should know the element of risk added going down that path. The article sounds like your not happy about his politics and want to stir the pot a bit. Eric Bruner Replied over 1 year ago. Gregory Boyer from Boerne, Texas Replied almost 2 years ago.
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Credit cards with points programs and paid off each month can bring in free cash in large sums. Especially when used in businesses.
He could also ask Ray Dalio if Bridgewater uses leverage to increase returns on their hedge fund. Merle Borowski Lender Replied almost 2 years ago.
Thank you Leather for the article. Finances to me is a growing and evolving process. I wouldnt expect me as a 20 year old to understand leveraging a real estate property if I didnt understand what a credit score was at the time.
I think from what Ive heard Dave Ramsey is the very beginning of forming a foundation of understanding finances. However people need to grow on that foundation. For example debt can be very devastating if used improperly. Once you have experience with debt and can manage it then you can learn how it can be a tool. Money in all it forms is a tool. Its neither good or evil, it just is. Making it more then that can close you off to learning.
Imagine if when our parents told us the stove was hot and not to touch it remained with us throughout our entire life.
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The problem and why I think Dave Ramsey is important is because people in North America have no financial knowledge. We get a paycheque and then we buy stuff. Good debt- pays you. Bad debt costs you. Your home, car, and other debts can either cost you money or make you money.