10 reasons to ditch the 401 k

10 Reasons Millennials Should Ditch the 401k

All information contained in this presentation is intended for general education and information use only and is not intended as a solicitation for buying or selling life insurance products.

The material in this presentation is not intended to give advice on tax planning, investments, real estate, accounting, estate planning, or financial planning but rather to provide education and information about a possible business opportunity with Freedom Equity Group.

As with any business opportunity the FEG Business Opportunity may take time, effort and money which may or may not provide any financial returns.

Assumptions are made in several hypothetical examples to help explain concepts and are for illustrative purposes only and should in no way be construed as any type of guarantee. Past performance is also not a guarantee of future results.

Opportunity DisclosureThis is a Highly Regulated Business, where you must have a Professional License

A Better Option than 401K’s for Millennials

1. You are entering into an Unholy Alliance

•All so-called “tax-qualified” plans are really partnerships between the plan owner and government•Because they only defer taxes, the government actually

‘owns’ a share of all qualified plan balances in the form of their deferred tax liability• In this partnership, your partner makes all the rules, and

he does so at his discretion – without your input, and regardless of your objection

• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state• FEG does not provide tax or legal advice, please consult your advisors

Top 10 Reasons


2. It is NOT all your money

•Most people think that their account balance is THEIR money, but a large chuck of it belongs to Uncle Sam from the minute it went into the account. •Plan owners simply take on the role of ‘custodian’ of

Uncle Sam’s money – and they will continue to do so for the rest of their lives.


Top 10 Reasons


2. (Continued) It is NOT all your money

•Uncle Sam’s share depends on tax rates that will be in effect when the money is taken out – Distribution•Who would ever enter into a partnership without

knowing what share of the profits were theirs?•Yet, this is what qualified plan owners do every day


Top 10 Reasons


3. You will pay higher fees than anyone else

•AARP recently asked 800 workers what they THOUGHT they paid in fees•A stunning 70% said they were not paying ANY fees•But they are WRONG – they pay fees on commissions on

the mutual funds held in their accounts•Often times those fees are both invisible and higher than

they would be in funds that compete on the open market for investor money


Top 10 Reasons


3. (Continued) You will pay higher fees…..

• The erosion effect of fees and commissions is far worse on tax-qualified accounts•While the plan owners don’t own all the money in their

accounts, they do get to pay the fee and commission burden on all the money in their account – money that is not theirs


Top 10 Reasons


4. You will suffer the 5 “Retirement Gotchas”

•1. Forfeiture of low tax rates – qualified plan owners give up access to the lowest tax rates within the tax code (capital gains) - but instead, subject 100% of their money to the highest tax rates in the tax code (personal income tax rates)


Top 10 Reasons



•2. Forced taxation through Required Minimum Distributions (RMDs) – At age 70 ½, Uncle Sam forces retirees to withdraw money and pay taxes on it whether they need it or not


Top 10 Reasons



•3. Taxation of Social Security Benefits – many don’t believe SS benefits are taxable to begin with•How can the money that was confiscated in the form of a

tax to start with… be taxed when given back?•A single filer taking $34,000 from their qualified account,

will have up to 85% of their SS benefits taxed


Top 10 Reasons



•4. Higher Medicare Premiums – The premiums charged for Parts B and D are ‘means-tested’• The same formulas that determine whether or not SS

benefits are taxed will also determine retirees’ Medicare premiums – and it goes up annually


Top 10 Reasons



•5. Full taxation of what you pass on – The amount left in qualified plans when retirees die, passes through Uncle Sam’s hands once again.• This time, what is passed on will be added to the regular

income of the recipient and taxed at their ordinary income rate• This reduces the financial legacy left for the recipient and

drives up the tax rate on his/her regular income as well• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state

• FEG does not provide tax or legal advice, please consult your advisors

Top 10 Reasons


5. You are exposed to a lifetime of market risk•Markets used to move up and down on real things – like

earnings - but today, unpredictable geo-political events like the recent Brexit vote drove a market correction of 10% overnight•Most if not all the money in tax-qualified accounts are

exposed to market risk and mutual funds “diversification” provides little to NO protection•During the 2008 crash nearly all qualified plans lost about

the same 40% that the market itself lost• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state


Top 10 Reasons


6. There is NO mathematical advantage to pre-tax contributions and tax-deferred growth

• It seems so attractive that few look any further – but it is a complete mathematical falsehood when there are options that allow after-tax dollars to grow tax-deferred and be take out tax-free


Top 10 Reasons


7. You will have limited – lousy investment options

•Most company-sponsored plans have a very limited selection and are mostly mutual funds•3rd party brokers and plan administrators choose the

available funds, but when 86% of all funds under perform their benchmark index, what are the chances really good fund options exist in most plans•Many of the funds chosen for you carry higher fees than

other funds that have to compete for investor money• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state


Top 10 Reasons


8. You will live with a lifetime of liquidity risk

• In other words, the measure of how quickly and inexpensively we can turn an asset into cash•Money in the plan is not available before age 59 ½

without paying a 10% penalty – and that’s on top of the full tax burden on every dollar taken out•But a lot of “life” happens before age 59 ½ but getting to

that money will be very expensive• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state


Top 10 Reasons


9. The Loan Trap – like the song “Hotel California”

•30% of all 401K plan participants have an outstanding loan balance• If you can not make loan payments within 90 days, the

entire loan amount will be treated as a distribution – the borrower will pay taxes plus the 10% penalty on the entire outstanding balance•Participants who move jobs or get fired have only 60 days

to pay the entire balance or they will face the same• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state


Top 10 Reasons


9. (Continued) The Loan Trap…..

•While the money is being borrowed from your 401K plan, it is not growing and compounding – which can take a toll on your retirement plans• The worst consequence is that owners repay their loans

with after-tax dollars, which the minute those dollars go back into the plan, become fully taxable again• This is the ultimate double taxation and happens every

day• Benefits vary by Insurance Company, be sure to check with your agent as to specific riders and benefits availability in your state


Top 10 Reasons


10. Matching Fund Trickery

• Those ‘free’ dollars that employers lavish into the plans in the form of matching contributions – lets face it, who doesn’t like free money?• Some employers require vesting before funds are matched,

but if you leave before being fully vested – POOF – all those matching funds disappear• Considering there’s a good chance the deferred tax liability will

be greater than all the free matching money – the free money may not be quite as free as it appears


Top 10 Reasons


So What Are Your Options?

• Learn, listen, and seek out experts who will tell you the truth• In todays market, there are products and options that are

far superior to the now 45 year old qualified plans – and they are not one sided partnerships• Steady growth with no losses wins the race, and today’s

risk-free, tax-free alternatives (not available in qualified plans) fits the bill


Top 10 Reasons

$90,000

$110,000

$130,000

$150,000

$170,000

$190,000

$210,000

$230,000

$250,000S&P Indexed AnnuityAccounts

Taxes and Fees have not been taken into consideration on the Red Line

RED LINE vs BLUE LINE

Index Annuity caps and participation rates vary by product and insurance company, consult with your agent

$100,000 Invested in 1997

~ $17 Trillion USD on the Red Line~ 200 Million Qualified accounts made up of:

- Qualified Plans (401K, 403B, IRA, 457, SEP, etc.)

12 Years = No Gains

$214,980

$183,034minus 25%

Tax =

$137,275