The TRUTH About Your 401(k) That No One Tells You / Wealth Labs Podcast with Garrett Gunderson

[@chrisg.298]

Hard to convince me that utilizing a 401k w/match is not good advice for most people unless it has some really terrible funds. I do agree to use money to its highest/best use (which could be college, skills, etc), if that is what was intended by this. I'm mid-40s and am halfway to 8 figure net worth simply investing in 401K/IRA from an early age, buying a personal home early, and buying a 2nd home with cash. Have seen several of your videos now saying it doesn't work out that way so just giving viewers a different perspective.

[@robertparsons313]

USE OF THE MONEY: Some 401k plans have the Roth option which could be used penalty and tax-free (return of contributions) in emergencies or other times. Hardship withdrawals are usually available for traditional 401ks. TAXES: Many people will pay higher taxes now if they don't shelter money in a 401k/457B. I think giving thousands of dollars per year to the IRS is just as bad or worse than paying some fees on your investments. We all would like to build up nice cash reserves, but that can only happen after the IRS takes its cut, right? Where else can a salaried employee with a W2 easily & legally shelter income from tax? What am I missing?

[@caveman9897]

That’s impressive but it can be gone tomorrow. Some people think diversification is stocks/bonds/ (all paper assets)

[@rr8253]

I took out a loan against my 401k and yes, I paid it back in the 5 years and stayed with that company. I also didn't take out a huge sum. And yes, I was paying with after tax dollars but I was paying myself that interest and if I took out a bank loan, I would have been paying that loan back with the same after tax dollars but the bank would be getting the interest, not me and it was a lower interest rate than a bank loan. I was also still able to contribute while I had a loan, which some plans don't allow you to do. I am not saying that I recommend taking out a loan, for all of the same pitfalls that you explain...you could be a slave to your job whereas you want to leave and go work somewhere else but then your loan becomes due or you have to pay the taxes and penalties on the balance that wasn't paid so you stay at that job but I think that there are definitely instances where it's ok.

[@heartofthunder1440]

R R not sure if that loan really becomes due or not after you leave the company, if you’re not 100%vested company contribution and employees contributions, then maybe the company has the right to pull back their money. But, from what I’ve heard, and don’t quote me on this, I believe that most 401k retirement plans are transferable. From 1 employer sponsored plan to another, or can roll it over into a IRA. And still be safe, continue making your loan payment back like you would if you were working. As I’m typing this out I’m also watching the video on this, just do what they say. But, I’m also sure if you would to call your institution, they tell exactly what to do, fedility might be different from, merril lynch and so on. But, I’m pretty sure they all fall within federal guidelines.

[@dragontongue958]

One note I didn't hear in this video about getting out of a 401k is the so called rule of 55. The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to pull money out of their 401(k) or 403(b) plan without penalty.1 This applies to workers who leave their jobs anytime during or after the year of their 55th birthdays. Of course, there is a slight catch you need to be aware of. The Rule of 55 only applies to assets in your current 401(k) or 403(b)-the one you invested in while you were at the job you leave at age 55 or older.2 If you have money in a former 401(k) or 403(b), it's not eligible for the early withdrawal penalty exemption. You would have to wait until age 59 1/2 to begin withdrawing funds from those accounts if you wanted to do so without paying the 10% penalty. Hope this helps.

[@GarrettGundersonTV]

Thank you for sharing, helpful for sure.

[@reggiethecommenter9137]

17:35 I get the part about the payback period triggering the penalty but I'm not understanding the value of the loan concerns. If you borrow $5,000 from your 401k, they send you the whole $5,000. They don't withhold tax from the loan. They send what you ask for. You payback that same amount plus some modest interest. Am I missing something?

[@willtonic]

You're paying back the same amount yes, but with post-tax dollars. To pay back the 5000 loan you'll first have to earn 6000+ dollars in gross (before taxes). I think the point is that the loan is not without tax consequences, just because it comes from a "pre-tax" source.

[@markf.2050]

​@willtonic No matter what the source of your loan, you have to pay it back with post tax dollars. What's the big deal?

[@Jbentley9999]

Tax is a wealth killer, so avoiding tax is the way to grow wealth and keep it tax free.

[@brettchristinaadams8112]

I took out a loan for 10k from my 401k, set up on a 5 year payment plan with interest. In my mind it was a way to gain access to the funds in the 401k without paying tax or penalties to invest in myself in ways that will either make me more money or even better save me more money than it would have if I left it in the 401k. It cost money to make money it doesn’t cost a penny to save. I still work for the same company and plan on taking out another loan against my 401k as soon as the first is paid off. I don’t see any downfall to this method as I would have been paying the bank with after tax dollars and interest and I have done more with this 10k in 5 years than the 401k could do in 15.

[@GarrettGundersonTV]

Great that you are doing that. Where is the money invested? Do you have a forced payback period? Are you using after tax dollars to pay back the 401k loan that is pre-tax and will be taxed when you take money out eventually?

[@justincoffman4508]

Very good information. The one part that always bothered me about the 401k is that you don't have access to the money now. What if you need it now? Plus the taxes and fees that go along with them. Makes no sense to me.

[@GarrettGundersonTV]

You are spot on. Big issues.

[@401klub]

The 401k fees don’t need to be a mystery. I also don’t fully understand your logic of backing into the fees. The performance numbers would be very different for everyone based on timing of the contributions. That seems like a tough task an average employee would never figure out. I would suggest you make a show about how to read the fee disclosure. You have 4 fees (and they are required to be disclosed): 1. Administration (or TPA) 2. Recordkeeper 3. Advisor 4. Mutual funds I hope that helps. Thanks for all the great content you create!

[@GarrettGundersonTV]

Thanks and simplicity is key. Thanks for breaking this down. Crazy that before legislation that wasn’t that long ago there was a firm in Seattle that sued and found 13 total fees in their retirement plan. Crazy these plans were around that long without full disclosure.

[@401klub]

Garrett Gunderson wow! I haven’t heard about that lawsuit, 13 makes absolutely zero sense.

[@SleepyMagii]

What about Roth 401k? Isn't that taxed as it goes in, also could I transfer that into my broker as the stocks somehow?

[@David-dw2iq]

I’m not saying your wrong, but this video goes against every book, podcast and financial advisor I’ve ever listened to. Whenever I hear you say “invest for cash flow” it hurts... cause I know your right. I’ve always done my employer match and maxed out my Roth. I appreciate your “unconventional” approach. I’m relatively new to your content, which books/content of yours would you recommend I start with?

[@GarrettGundersonTV]

For this, either Killing Sacred Cows or 5 Day Weekend. Yeah, they are all well intentioned but paid by these Oman’s it seeming to save people tax temporarily, so that is how it goes.

[@rr8253]

Yes, but don't forget about the Aggregation rule. If you keep the money in the 401k and only roll over into an IRA, what you want to put into a Roth, then the Aggregation rule doesn't apply because 401k's don't count in the Aggregation. If you roll the whole thing into an IRA and only roll a portion of that into a Roth, the Aggregation rule kicks in, especially if you have other IRA's.

[@troycaster3872]

I'm starting one business in 2020, and making large upgrades/purchases for my existing business. Both are pass through entities, and I am forecasting a huge loss at the end of this year, via deductions, startup costs, etc. If I have let's say 20k or 30k in paper losses at the end of 2020, my plan is to take the offset amount from my 401k and move it somewhere post tax, since I would basically be paying zero tax on a conversion. My plan was to convert as much as I could to a Roth, but maybe there's a better idea? What other financial vehicles are available for me to look into when I convert my pre tax 401k to post tax funds, where I'm not getting hit with a penalty? Or what other little tricks are there to take full advantage of these planned losses?

[@GarrettGundersonTV]

Roth is a great step. I like this income smoothing/tax management technique. Check out cashflowbanking.com too

[@jimjohnson660]

401k might not work for everyone but mine rocks! I put in roth 10% of my income, my employeer puts in 8% of my income, into a SP500 index fund with an expense ratio of 1 basis point, 0.01%. Thats hard to beat!

[@jimjohnson660]

And yes, I already have a small liquid account with 25k

[@GarrettGundersonTV]

Great. The low fee sounds great. Roth versus traditional is an improvement. Key is to learn how to create cash flow and mitigate risk next. Best to you and your financial future.

[@MRZEROTOINFINITY]

Hey Garrett. Just finished your book 📖 Took quite a few notes 📝 Loved the concept: Strategically Engineer your Wealth. Find out “Your Number” and reverse engineer it to build CASH FLOW 💰 Great podcast from start to finish! Learned even more.

[@GarrettGundersonTV]

That is awesome to hear. Which book?

[@MRZEROTOINFINITY]

@@GarrettGundersonTV I read two of your books. 5 Day Weekend & Killing Sacred Cows: Overcoming the Financial Myths that are Destroying Your Prosperity.

[@David-dw2iq]

Michael DeRiso which book would you recommend first? New to his content and looking to get started

[@MRZEROTOINFINITY]

AK-Money I liked 5 Day Weekend a bit more! It’s very motivating and gives the blueprint to get out of the 9-5 rat race if you’re stuck in it!

[@David-dw2iq]

Michael DeRiso ordered it, thank yiu

[@gtcam723]

I’m still building but, company I work for puts in 10% if I put in 8% and it’s vested immediately so my figuring is that it’s an alright backup plan.

[@GarrettGundersonTV]

Just get liquidity and your peace of mind fund and build cash flow assets too.

[@gtcam723]

Garrett Gunderson That’s up next as I sort out some things.

[@rr8253]

Yes, the match is not a 100% rate of return on the account as a whole (unless it's brand new) but yes, it is a 100% rate of return on your contribution. I put in $3,000 to grow and they put in $3,000 to grow. I don't get 100% rate of return on any account unless I am doing something like Angel Investing or hit that really hot stock or I am working for myself and can sell my widgets for a great profit or sell my own intellectual property. I love your concepts on cashflow and yes, I totally agree that you have to look for fees. There used to be turnover fees (but a lot of brokers aren't charging trading fees any more so it's not as big of a concern as it used to be).

[@GarrettGundersonTV]

Thank you

[@richp5064]

This is correct and was thinking the same thing while watching. Math is just numbers but depending on how you look at things you can make people believe what your saying from your point of view. Of course it's not a 100% return on the whole balance but it is 100% on the $3000 you invest today. Where else can you get that rate of return?

[@mynameisyeff7939]

Love your content Garrett! I would like to learn more from you, I like your different approach to financial matters

[@GarrettGundersonTV]

Awesome, if you have questions go to AskTheMoneyNerds.com and download some great resources here: wealthfactory.com/megakit

[@rr8253]

Spot on guys! Never buy real estate in an IRA because if you ever do repairs, you can't do them yourself and you have to use IRA money to do the repairs and you have to pull money out.

[@GarrettGundersonTV]

Thank you great point.

[@amolinari9]

I’m literally starting a new job right now where I’m filling out the 401k paperwork. The company automatically enrolls me unless I check the opt out box. They match 100% up to the min 3% of my check I have deducted, but I know that doesn’t mean I’ll be making 6%. The amount I’m talking about here is over $300 a month. Can I put this into a wealth factory cash flow bank?

[@GarrettGundersonTV]

Yes. CashFlowBanking.com to set up an appointment right away.

[@amolinari9]

Garrett Gunderson got my appointment scheduled 😏

[@nilemurry9745]

Great talk, what do you think about IUL's vs 401k's?

[@GarrettGundersonTV]

I think IULs have some pitfalls to be aware of. Doing a Forbes article on it soon. I do own one IUL but cost of insurance (m&e), cap rates, guaranteed versus non guaranteed costs, and surrender charges need to be taken into account.

[@nilemurry9745]

@@GarrettGundersonTV Thank you for the feedback. When does the Forbes article drop?

[@TopHomeBiz10]

Garrett Gunderson Have you done a video on IUL’s? I can’t find one. We have no partial surrender charges right now if you acquire one before July.

[@mastertommy6879]

I watched your training on relationship capitlizing. Interested in more, but what is your view on hypnotherapy?

[@GarrettGundersonTV]

I really love EFT and got a ton of value. I have done other therapies that were extraordinary too but I don’t know much about hypnotherapy.

[@mikelang4853]

Garrett Gunderson EFT is good. Hypnosis is essentially guided meditation. You get into a relaxed meditative trance state and allow the Hypnotist (hypnotherapist) to guide your other then conscious to mind to the desired goal. EFT techniques while in a hypnotic trance can be incredibly fast and powerful. - Hypnotist trained by a retired hypnotherapist.

[@mastertommy6879]

Garrett Gunderson I am a hypnotherapist certified soon.

[@GarrettGundersonTV]

Nice. Sounds awesome

[@mitchalx]

Garrett Gunderson, do you think taking a 401k loan is a good way to fund whole life insurance policies?

[@markf.2050]

There is no good way to fund a whole life policy.

[@sixsixST2]

My employer matches up to 7% and I put in 13%. It currently has a balance of about 400k and I'm 40 years old, plan on retiring at (hopefully) 55/56. My pension should be worth just north of a million when I retire. I wondering if I should cut those contributions back and put that money somewhere else? I do have some debts I'd like to get rid of. I ran across this lady talking about velocity banking and that kinda has me interested but I don't know if that's right for me either. I really wish they taught this stuff in school.

[@GarrettGundersonTV]

I recommend finding out how to smooth income and tax and distribution on the way out. Go to cashflowbanking.gg and set up a meeting to see what works best. Grab two of my books to give you more ideas (for free) at GarrettGunderson.com/offer

[@huachucacity6933]

What about tax break on 6k savings...

[@johntiedemann2520]

Thank you for pointing out that the mystery, and I am moving on right now 😁

[@GarrettGundersonTV]

Next! Do something better!

[@phil-spinelli]

while a 401 k may not be the absolute greatest investment. It's still a good idea. If they are matching your contributions. If you put 10 bucks in, and they match you with 10 bucks, you doubled you money.

[@GarrettGundersonTV]

It has its place but not for everyone. Lots of risk to manage and other priorities first.

[@govols2214]

Don’t ever contribute over your match into a 401(k). Too many Americans are caught in this tax-deferred trap

[@tadrod2323]

pre tax match of your employer, all 401k has broad investment spectrum like indexs,bonds etc, but of course 401k inow starts at 6%, and they dont advertise in billions coz they don’t have to😂, you can consider other retirement aside from 401k, it is more lack of education on how you manage your 401k is i believe to be one of the reason that some has slow progress in their 401, in all for 401k ,the employee can move their distribution from different funds and the fees are or expense ratios are mostly less than 0.1%

[@GarrettGundersonTV]

No cash flow. Government control. Too much reliance on the market. Just to name a few issues.

[@tadrod2323]

@@GarrettGundersonTV for a 48 yr old with 600k in 401, would you suggest open an ira / roth, whole life ins and maybe add an annuity when i turn 50?

[@knpstrr]

Whole life quote for $1M Death Benefit is premiums of $16,000 per year. If I live for 45 more years, I would have paid $720,000 for a death benefit of $1,000,000. What a deal! That is about a 1.5% annual return on my money! Call me the next John D. Rockefeller! After inflation this policy actually costs you money. BTW, You can borrow against any securities if needed. The loan is called a SBLOC. You don't need to give all of your money to an insurance company. It is common sense, if it was any kind of "good deal" the insurance companies would be out of business. They make tons of money investing your premiums and giving you a sliver of it. Talk about high fees! Keep the returns for yourself! At 8% and saving $16K a year you'll have ~$1M accessible cash in 24 years. Just put it in a brokerage account. 1.5% returns is such a low hurdle rate almost anything is a superior investment for your money.

[@GarrettGundersonTV]

What crappy policy are you looking at? A level death benefit IUL? I'd run from that too. Do you invest in bonds?

[@knpstrr]

@@GarrettGundersonTV one of those sites where it gives you quotes from multiple companies. The mean premium price at my age is $16,000 a year for a $1 mill policy. Total trash. I personally don't invest in bonds. They are too risky

[@GarrettGundersonTV]

Life insurance reduces the risks faced with bonds at a similar return. So since you are risk averse, find a better company and design.

[@knpstrr]

@@GarrettGundersonTV with a long investment horizon equities are far less risky than bonds.

[@GarrettGundersonTV]

Good luck.

[@66block84]

I am already retired. On the verge of paying off my car which I bought while still working, so I could afford the payments & not go into a retirement with a 10 year old car needing repairs. I am lucky enough to have a pension. I also was able to move my 401K money into individual stocks while working & was able to double my 401K by buying & selling stocks. I also had a small IRA that I was able to triple by getting out of the mutual funds & buying a few stocks. Once my car is paid off in 5 payments, I will use that money to invest some more in the stocj market. I enjoy the game.

[@allenshwz4439]

Live your words , worth a lot . Was wondering if 401K is the same as Canadian RRSP ???

[@GarrettGundersonTV]

Very very similar.

[@michelesimko7541]

Go to get Human Resources office. They should help or direct you to answers. Most do not do this

[@jayreed9370]

I think a lot of these youtube advisors need to understand that very few people are trying to turn themselves into magical entrepreneurs. The vast majority of us just want to invest wisely. We are NOT going to throw ourselves at side hustles (second jobs). The hot take industry already had a thousand channels, there needs to be something for the rest of us.

[@GarrettGundersonTV]

What do you consider "wise" investments?

[@markf.2050]

​@@GarrettGundersonTV Certainly not whole life insurance! But you would probably disagree.

[@jonathanwhitcomb6484]

In the largest study of millionaires ever done the biggest part of their portfolio was there 401Ks and Roth IRAs along with a paid for house. Source is the Book "Everyday Millionaire". 10,000 millionaires studied. Please people don't listen to what these guys have to say. Fees expense ratios are rarely ever matter and access to your "Future" Should be left in the future and your hands off of it. You can also re-allocate your contributions inside your 401K To make sense. get the match, do Roth IRAs and pay off that house ASAP and stay out of all debt. #DebtFree #Financial Coach

[@GarrettGundersonTV]

92 percent of people worth 5 million or more own a business according to John Bowen’s book.would love to debate you on this and debunk it.

[@jonathanwhitcomb6484]

@@GarrettGundersonTV I am not sure about that Author or what study he did or found that stated that so I can not comment on that statistic but what I can comment on is what I previously said and I wasn't necessarily talking about people with net worth above a certain point. My point I am trying to make is that telling people to pull all of their retirement money out of retirement account is a big mistake because your everyday millionaire who worked their whole lives, saved and invested their money into a 401K and have a paid for house make up about 95% of the millionaires in the country. Investing into a 401K is not as complicated as this podcast makes it out to be and things like fees and expense ratios really shouldn't come up too much in that sort of mix. Maybe it would in the open market looking into other mutual funds. To your other point most people aren't entrepreneurs or know how to run a business. They need a plan for themselves and their money and as silly as they might sound or how stupid someone may say they are, Dave Ramsey's "Baby Steps" actually work and have worked for tens of thousands of people. Nothing to debunk about the facts. One thing I would say I like about your podcast was that you said at least people are investing if they are investing. I think that is the message you should continue to spread.

[@Palantir_Daily]

Jonathan Whitcomb You’re coming from the right place. But I also think you have to think about the audience this video attracts. Like most things in life. You can take many paths to accomplish similar things. I believe you are correct that for the average person the 401k may be their best option. Not because it is the best way to accomplish wealth by any means. But really because the lack of education and desire to understand. Which is most of individuals. It is very easy to follow directions that do not involve any thinking. Meaning, it can be quite attractive to those individuals to blindly put a percentage of income into a 401k and not have to worry about it again. And you’re right some will achieve a high balance after a long period of time, if they are lucky. Most do not contribute near enough or consistently. What he is teaching in the video are tactics that very few people care to learn, but if they understand and implement it. They will create wealth at a much higher success rate, faster, and in far greater amounts. It involves conceptual thinking and more work than simply giving up 5% of each check. I believe he is teaching to the few, and typically people that watch his videos, I would assume are willing to go the extra step to achieve wealth.

[@JasonBuckman]

@@GarrettGundersonTV How about people who are worth $1 million or more?

[@michelesimko7541]

Transfer 401k if possible (not employed there)

[@adrianchase9399]

I am only 20 and still go to school. There are lot of people telling me to start my 401K and you will become a millionaire in the age of 65 because of compound interest. I just think it is completely bs because of inflation in the future and different cost of living in certain area. Also not allowing to access that money without a penalty until I am retired. That is such an outdated system. It is not free money because i have to sacrifice a portion of my income for an investment.

[@adrianchase9399]

Not to mention, like you said, there are string attached. It is not a flexible way to invest.

[@GarrettGundersonTV]

Love that you get it. Start right. Invest in your skills. Create cash flow.

[@dilipsangani8960]

Garrett you keep talking about how u did when u were 15 or 19 stop the drum beating and we all know u r successful but make it short and to the point It’s boring to hear u stuff that we are not interested in