Your 401(k) may cost you your retirement. Here's the truth:
A 401(k) is NOT the employee benefit you've been told.
The 401(k) was created by Congress as a tax-saving scheme for employers and highly-paid executives.
NOT for you.
That free money you get when your employer matches your 401(k) contribution isn't free.
How it works:
Your employer matches your 7% deduction that feeds your 401(k).
Hey, who doesn't like free money?
BUT, at the end of the year, you pay taxes on a 14% contribution(not the 7% you paid in), while your employer gets a 14% tax break.
Adding insult to injury, a 401(k) has 13 hidden fees that will drain up to 1/2 of your investment over the next 40 years.
Check your 401(k) prospectus: If you can find just 3 of those 13 fees, you're really smart!
WHAT TO DO?
An Annuity is basically an investment in a large insurance company, one of the most stable business classes in the world.
The biggest appeal of an annuity is that it's tax-deferred.
A tax-deferred account means you'll pay applicable taxes at a later time, when your tax burden is much less.
Say you roll a $400,000 401(k) into an annuity.
Several things happen.
1- The insurance company invests your $400,000 in stable low-yield products (insurance has a very long-term outlook).
2- At your instruction, the insurance company will send you structured payments each month in the amount you request. For instance, you can request $7,000/month if that fits your needs.
3- At tax time, you won't pay taxes on the $400,000 invested. Instead, you'll pay taxes on the money received that year: $7,000 X 12= $84,000.
That is your taxable income for the year.
4- As you reach retirement age, you can pull as much from your annuity as you please; because you're now in a much lower tax bracket, you'll pay less for it.
All of this adds up to a program that grows your money at up to 3 times the rate of a bank CD, makes your money more available to you, and keeps the government out of your pocket until you're in a much lower tax bracket.
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