Each week, Doug Andrew takes time to answer questions on his 3 Dimensional Wealth YouTube channel for his subscribers. These are questions that come up on a regular basis.
Recently, the question was posed: What is the truth about a 401(k) that no one tells you? For years now, Doug has been writing editorials and warning people about how Congress has been peddling IRA and 401(k) snake oil.
The original premise of tax-deferred accounts like the IRA or 401(k) is that you put in pre-tax dollars and then, after retirement, you’ll pay taxes on what you harvest from those accumulated dollars. In theory it sounds pretty straightforward. However, in practice, there are some downsides that few recognize until it’s too late.
HERE’S A QUICK PREVIEW OF JUST A FEW OF THE CONCEPTS COVERED IN THIS EPISODE:
- What is the farmer and the seed metaphor and what can it teach you about tax-deferred vs. tax-free accumulation?
Doug explains the crucial difference between paying taxes on your seeds and paying taxes on the much bigger harvest.
- Why is the assumption that you’ll be in a lower tax bracket at retirement no longer something that can be counted on? Doug warns that this has not been axiomatic for more than 25 years.
- How do so many people find themselves cruising down the highway of life with one foot on the gas and the other foot on the brake pedal? Learn what their simple mistake is and how you can avoid it.
- Why are so many people in danger of outliving their retirement savings? Doug shares the hard truth that people saving in IRAs and 401(k) have already agreed to give roughly 1/3 of it to Uncle Sam.
- What are the three major factors that can eat up a nest egg in record time? Learn how higher taxes, rising inflation and ongoing market volatility could take a bite out of your financial wellbeing.
- What are the best strategies to convert your savings from tax-deferred to tax-free vehicles? Doug lays out the best options for getting those taxes over and done with for good.
- And much, much more…
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