Employer Backed 401k

What this episode covers

After over three decades the American worker has begun to see the light when it comes to the employer backed 401k. Though many will argue it’s an effective retirement strategy, they lose the gift of speech when the results are mentioned out loud. Download Audio Transcript: Today let’s talk about your employer back 401k and the matches that he may give you. Most people fall in love with these matches. They’re usually somewhere of 50 to 100% match depending on the lock of the drawer your work. If you’re the typical American that makes 40 to $60,000 household income before taxes, you don’t have a lot left to put in your 401k in the first place. Most people are putting two to 5,000 a year unless they start making a lot more money. Even the cost of living in the Midwest it’s a lot of cash just to live. The reason people get excited because they think, “I put in a dollar and my employer puts in 50 cents. How … I can’t do anything wrong.” Here’s the thing I’m going to work backwards with the result that’s going to knock that down. People who think that it makes sense mathematically, I totally get it. “I’m making 50 cents on my freaking dollar,” well you’re not because we have those pesky little 2008 crashes. What happens is your built up $50,000 went down to 35 faster than you could watch it happen and your match is just disappearing. Now and then people say, “Well, if I didn’t have the match I could lose more.” Okay, but you would have less to lose so what it is matter. The thing is this, let’s go to the end game where people say, “Because of that match my retirement is going to be hugely improved or over what might have been.” Forbes came out recently with an article that said, “The average 65 year old American only has $100,000 in their 401k.” Now, that average American by my reckoning has been contributing to that 401k for somewhere in the vicinity of 30 to 34 years. 401k’s givers give or take began around 1980. Three decades give or take they ended up with a $100,000, if they’re going to make 4% which is what the Wall Street financial planners are going to tell you that’s $4,000 a year of retirement and they all had matches of some sort or at least the vast majority of them did. Stop looking at the matches as the savior of your retirement, it’s the bait. 401k’s are a guarantee of you living out a life sentence of a horrible retirement not the guarantee of a robust retirement.

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