This site is published for residents of the State of California only. The information contained in this site is for educational and reference purposes only. Follow up conversations with potential clients or effecting the creation of a 7702 Private Plan will not occur without proper suitabililty requirements, disclosures requirements and signed and copies received by prospective client per California State law. We believe that a properly structured 7702 Private Plan has a place in nearly every individual's portfolio, and we will take the time to fully answer all of your questions before submitting an application to open your own Private Plan retirement account.
It’s time to rethink your 401k plan!
With a new law from Congress, millions of American’s are now being automatically enrolled in their company's 401k plan, this is great news for fund firms and commissioned sales people, but not really good news for workers.
A couple of years ago Congress enacted legislation that allows employers to automatically enroll their employees into the company 401k plan. It’s no surprise that this legislation was sponsored and heavily lobbied by Wall Street who stands to make billions in fees every year.
In one sense the legislation is working perfectly, if the goal is to simply increase 401k assets. But if you want to increase workers ability to save for retirement in the most effective manner possible hidden fees must be addressed. In the current 401k environment, traditional savings plans are a crummy deal for millions of workers because most plans have hidden fees of more than 2.5%. And at just 2% hidden fees, you will lose 50% of your retirement potential.
Better Alternative
For a variety of reasons, experts generally agree that income taxes will be going up in the future. Workers have to factor in that they may very well be in a lower tax bracket today than they will be in retirement. 401k plans generally take after tax contributions, and are fully taxed at retirement. If you are in a lower tax bracket now than you will be at retirement you will pay a much higher tax bill than if you invested after tax dollars in a 7702 Private Plan.
Younger workers can particularly benefit from a 7702 Private Plan. There are no limits to the amount you can contribute, and the insurance benefits that are automatically included with the plan can help to offset insurance costs you may need to purchase to protect your family in the event of a premature death or disability. Money in a 7702 Private Plan is also available prior to age 59 ½ without state or Federal penalties. This can be useful to purchase a home, car, college education or covering other school expenses. With a 401k you have to pay heavy penalties if you take money out before age 59 ½.
Today the traditional idea that you will be in a lower tax bracket when you retire is not a solid plan, you have to consider the real possibility that you are going to be in a much higher tax bracket at retirement than you are today.
Risky Investments
Employers have attempted to exempt themselves from negligence claims from workers with 401k plans that have tanked, employers have automatically enrolled workers into funds the Department of Labor classifies as ‘Target Date Funds.’ These funds wrap together high risk investments with supposedly safer investments such as bonds and money markets. The aim of a target date fund is to buy risky investments early in a participants career then become more conservative over time.
Unfortunately target funds (TGT) have proved to be a disaster in the recent financial crisis. Many individuals who planned to retire in 2010 were sold the most risky of these funds with a devastating result and lost more than 40% of their value almost overnight.
No matter what Wall Street has persuaded Congress to do, the only truly safe investment option is known as ‘Equity Indexed Crediting’, this investment option guarantees market based gains from a growing market index such as the S & P 500, or the DOW Jones Industrials, while at the same time eliminates the possibility of market based losses when that index declines.
Fees
Very few people check the fees charged in the funds in their 401k plans, mainly because it is virtually impossible to get a true answer as to how much is being skimmed off the top of your 401k plan every year. Recently Bloomberg Reports (video) produced a video report of how clever mutual fund companies, commissioned sales people and 401k plan administrators rake in hundreds of billions of dollars every year from hidden fees in American’s 401k plans.
In the end automatic enrollment in a 401k plan has been a much greater boon to the mutual fund industry than it is to the individual savers. The money is locked in until you retire and the mutual fund companies earn fees on it year after year regardless if your account value goes up or down and without having to do any work to earn those fees. The whole structure of automatic 401k enrollment doesn’t guarantee financial security or retirement security, but it does guarantee billions in profits to fund managers.
Easy Decisions
The decision (investment matrix comparison) to opt out of the company 401k plan and invest in a 7702 Private Plan is easy. Compare unlimited market risk, a witches brew of hidden fees, and the prospect of increased losses from higher taxes in a 401k plan to a risk free, tax free and no hidden fee 7702 Private Plan from a highly regulated and financially sound insurance administrator.
Want to find out how easy it is to opt out of your employers 401k plan and establish your own 7702 Private Plan? Contact Us today for a free telephone consultation.
With a new law from Congress, millions of American’s are now being automatically enrolled in their company's 401k plan, this is great news for fund firms and commissioned sales people, but not really good news for workers.
A couple of years ago Congress enacted legislation that allows employers to automatically enroll their employees into the company 401k plan. It’s no surprise that this legislation was sponsored and heavily lobbied by Wall Street who stands to make billions in fees every year.
In one sense the legislation is working perfectly, if the goal is to simply increase 401k assets. But if you want to increase workers ability to save for retirement in the most effective manner possible hidden fees must be addressed. In the current 401k environment, traditional savings plans are a crummy deal for millions of workers because most plans have hidden fees of more than 2.5%. And at just 2% hidden fees, you will lose 50% of your retirement potential.
Better Alternative
For a variety of reasons, experts generally agree that income taxes will be going up in the future. Workers have to factor in that they may very well be in a lower tax bracket today than they will be in retirement. 401k plans generally take after tax contributions, and are fully taxed at retirement. If you are in a lower tax bracket now than you will be at retirement you will pay a much higher tax bill than if you invested after tax dollars in a 7702 Private Plan.
Younger workers can particularly benefit from a 7702 Private Plan. There are no limits to the amount you can contribute, and the insurance benefits that are automatically included with the plan can help to offset insurance costs you may need to purchase to protect your family in the event of a premature death or disability. Money in a 7702 Private Plan is also available prior to age 59 ½ without state or Federal penalties. This can be useful to purchase a home, car, college education or covering other school expenses. With a 401k you have to pay heavy penalties if you take money out before age 59 ½.
Today the traditional idea that you will be in a lower tax bracket when you retire is not a solid plan, you have to consider the real possibility that you are going to be in a much higher tax bracket at retirement than you are today.
Risky Investments
Employers have attempted to exempt themselves from negligence claims from workers with 401k plans that have tanked, employers have automatically enrolled workers into funds the Department of Labor classifies as ‘Target Date Funds.’ These funds wrap together high risk investments with supposedly safer investments such as bonds and money markets. The aim of a target date fund is to buy risky investments early in a participants career then become more conservative over time.
Unfortunately target funds (TGT) have proved to be a disaster in the recent financial crisis. Many individuals who planned to retire in 2010 were sold the most risky of these funds with a devastating result and lost more than 40% of their value almost overnight.
No matter what Wall Street has persuaded Congress to do, the only truly safe investment option is known as ‘Equity Indexed Crediting’, this investment option guarantees market based gains from a growing market index such as the S & P 500, or the DOW Jones Industrials, while at the same time eliminates the possibility of market based losses when that index declines.
Fees
Very few people check the fees charged in the funds in their 401k plans, mainly because it is virtually impossible to get a true answer as to how much is being skimmed off the top of your 401k plan every year. Recently Bloomberg Reports (video) produced a video report of how clever mutual fund companies, commissioned sales people and 401k plan administrators rake in hundreds of billions of dollars every year from hidden fees in American’s 401k plans.
In the end automatic enrollment in a 401k plan has been a much greater boon to the mutual fund industry than it is to the individual savers. The money is locked in until you retire and the mutual fund companies earn fees on it year after year regardless if your account value goes up or down and without having to do any work to earn those fees. The whole structure of automatic 401k enrollment doesn’t guarantee financial security or retirement security, but it does guarantee billions in profits to fund managers.
Easy Decisions
The decision (investment matrix comparison) to opt out of the company 401k plan and invest in a 7702 Private Plan is easy. Compare unlimited market risk, a witches brew of hidden fees, and the prospect of increased losses from higher taxes in a 401k plan to a risk free, tax free and no hidden fee 7702 Private Plan from a highly regulated and financially sound insurance administrator.
Want to find out how easy it is to opt out of your employers 401k plan and establish your own 7702 Private Plan? Contact Us today for a free telephone consultation.