Is Your Money Secure?
Most Americans intend to save money. We’ve been taught that since we were kids. Save for a rainy day. A penny saved is a penny earned. We were given piggy banks. At 16 most of us went down to the local bank and opened our first account. Despite this, America still maintains one of the lowest global savings rates.
We’ve all heard the phrase “It’s not about what you make, it’s about what you keep”. But I would add to that, what you keep is only as good as WHERE you keep it.
Most Americans keep their money in one of two places.
- A bank
- A retirement plan
Pretty normal right? Everyone you know does this.
But have you ever asked yourself if these types of accounts are really a good idea?
I want to give a brief description of the way each of these accounts is advertised, versus some of the unknown facts you should consider before using them.
Let’s start!
a. The Bank. You believe that you deposit your money, the bank pays a nominal interest rate, your money is safe, and you can withdraw it whenever you need it. Right? What if I told you that when you deposit your money into the bank, they actually take your money and loan it to other people. Not only that, but they loan it at a 10:1 ratio, meaning you gave them a dollar and they only have $0.10 of your dollar. They loaned the other $0.90 out to make money with it. The rate you’re getting is 0.10% or something minor like that and the bank is making double and triple digit returns on your money. What if the money of yours that they loaned out doesn’t get paid back? That’s what FDIC insurance is for. Think about it. Why would a bank need insurance against the loss of your money? We don’t really have bank heists anymore. They can’t misplace it. The only reason it exists is they over-loaned your money and the borrower didn’t pay them back. Therefore they can’t pay you back and the federal reserve steps in. The federal reserve prints new money out of thin air to give to the bank so they can pay you back. Well the federal reserve is funded by loans paid by our U.S. Treasury from income they received from the taxpayer. So who really pays the FDIC insurance? You do. Virtually nobody knows this about banks and it makes them a terrible (literally the WORST) place to put your money.
b. The Traditional IRA. Sounds like a great plan right? You put money in, deduct it from your taxes, and then grow your money tax deferred right? Well think about this. First, who actually created the Traditional IRA? The IRS. What’s the primary function of their job? To steal from you. So why in the world would you ever put money into an account they created, knowing their job is to steal from you? Also, in 40 years do you expect taxes to be higher or lower? That was rhetorical. Taxes will be higher. And your hope is that your money grows while it’s in there right? So let’s do some simple multiplication here. If you have more money in the account than you have today, being taxed at a higher bracket than you’re in today…what does that equate to? It means that you will pay more money in taxes upon withdrawal of your money than you ever got to deduct. To the tune of about 10X more in taxes paid. Not only that, but at age 70.5 the IRS forces you to withdraw money so that they can ensure they get their tax dollars. The traditional IRA is the IRS’s crockpot to slow cook the taxable goodness they get when you pull your money out.
c. The 401k. This one sounds good too right? All of your co-workers do it plus, your employer gives you free money to contribute to it. Why wouldn’t you use the 401k? Founded in 1978, by Ted Benna, Benna now calls the 401k a monster and says he wishes he never created the concept. If the guy who created it won’t even use it, should you be? Remember the big tax mess we described with the Traditional IRA? Well the same scenario applies to the 401k too. Except with the 401k, once you put your money in, it is trapped until you’re 60 years old. At least with an IRA if you want your money you can pull it out early. With a 401k, most employers won’t let you touch your account until you retire or quit and if you do, you’ll pay a 10% penalty in addition to the taxes due. Lastly, your employer only matches you because it lowers their payroll taxes. Look it up. A 401k is called a “deferred compensation plan” meaning you are opting to put off getting paid until later. Your company saves on taxes and you feel like you got free money. The truth is, when surveyed, the average company states for every $1 they match into your 401k plan, they reduce your paycheck by $0.99 on the dollar. Lastly, in 2006 legislation came out stating that you the employee, cannot sue the company or 401k plan administrator for losses in the account as long as you were limited to invest in certain “approved” assets. Guess who lobbied this bill? Wall Street. So as long as your employer only allows you to invest in approved Wall Street Funds, you cannot sue them for the performance of the account.
d. Roth IRA. The Roth IRA is the counterpart to the Traditional IRA. The money goes in after taxes and grows tax free. You do have to hold the funds until age 60 to avoid any penalties. This sounds like a no brainer right? Here’s a few issues. You lose control of your money. You officially are giving up control of your money until age 60. Additionally, you are limiting the types of investments you can make. Roth IRA’s must be sponsored by a custodian and the custodian will limit the types of investments you can make. Also, a little known fact here, the Traditional IRA was repealed in the 1970’s. Meaning the IRS allowed it and then took their word back due to congress. It was later brought back again. The Roth came out in 1997 as a part of the tax payer relief act and was primarily for lower income families. Since then it has been normalized and currently houses millions of American dollars. Congress has discussed for several years now getting rid of the Roth classification, which would mean all of the money you thought was growing tax free could easily become taxable. We are always amidst a budget crisis and ultimately the plan could be easily nationalized and revoked. This goes back to the question I asked earlier. Do you really trust the IRS with your money?
In summary, most people naively put their money in these vehicles because they believe they are making a smart and responsible decision for their future. The fact is, unknown to you, you are being taken advantage of by Central Banks, Wall Street, and the IRS. If you didn’t know this or if you did know this and never knew how to solve this problem, I have a solution that may work for you. It’s called the Sacred Account.
The Sacred Account has the liquidity of a bank, but cannot be loaned out or lost. It has the tax free growth of the ROTH IRA, but cannot be changed by the IRS. It has the “free money” appeal of the 401k (due to the dividends), but doesn’t force you to sacrifice your income. And it can make 2 main promises. You will never lose money. You will always make money. If you’d like to learn more about it click here.
Own Your Potential,
Jerry Fetta
Grant Cardone Certified Coach
Jerry Fetta helps his clients gain more financial knowledge, make more money, keep more of it, and multiply what they keep.
If you feel like one or more of these areas is costing you money and opportunity right now, then get more information about Jerry Fetta and Wealth DynamX by going to www.WealthDynamX.com/contact
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