Say it ain't so, Joe. Is Congress really considering capping 401(k) contributions at $2,400 per year which is down from $18,500 per year now? Let's hope not. This would be a huge mistake and I cannot imagine that it is even true. This would never pass into legislation.
What are these people (idiots) thinking? If you are over 50 years old, you can contribute an additional $6,000 on top of the $18,500. What are they going to do? Allow 50 year old and up people an additional $600 to make it $3,000 total? Seriously?
I just wonder if this is really fake news by the media to try and destroy the Tax Cut 2.0 plan by the Republicans. It fits their playbook 100%. Scare people to death with their outlandish claims in order to win votes from stupid people who don't have any sense and who listen and read fake news all day.
If true, this has to be the dumbest thing to ever come out of Washington, D.C.
President Trump tweeted that the 401(k) will be left alone. I cannot imagine him signing this middle class destroying legislation, nor any President for that matter.
Another thing I heard was they are talking about allowing people over age 70 1/2 to be able to make contributions to their IRA's. Currently, this is not allowed. This is give an old guy a break thinking which would be better than capping contributions. This makes me wonder if the news that came out about capping 401(k) contributions at $2,400 was in reality just another line of fake news.
It always blows my mind that the government has disincentives for people to work. I guess they want everyone on the government dole. Don't these Washington, D.C. idiots understand that if people cannot contribute deductible money to their 401(k), then this means that they will have less money in life which increases their possibility of becoming dependent on the government in the future. Dumb with a capital "D".
Showing posts with label 401(k). Show all posts
Showing posts with label 401(k). Show all posts
Wednesday, July 18, 2018
Saturday, December 24, 2011
When Will the Wall Street Firm Abuse End?
If this is not proof of a Wall Street firm's shenanigans, then I do not know what is. Wal-Mart Stores, Inc. was sued in the U.S. District Court for the Western District of Missouri over Wal-Mart and certain employees who allegedly violated their fiduciary duties by selecting retail mutual funds as investment options, rather than lower fee institutional class funds. In addition, it was alleged that these same defendants breached their fiduciary duties by failing to disclose certain fund expense and revenue sharing information. In layman's terms, this means that the mutual funds being sold to Wal-Mart employees were loaded with 12b-1 fees that paid the Wall Street firm and its advisors excessive trail commissions.
Unfortunately, today there are a ton of 401(k) and Profit Sharing Plans that do this very same thing. This is your wake up call if you own a business. You cannot do these kind of shenanigans any longer. Every attorney in the country will take notice of this case and brother you better believe it when I say they will be looking at every 401(k) and Profit Sharing Plan that they can find to see similar violations of fiduciary duties. If you have yet to be sued over your 401(k) and Profit Sharing Plan, then get ready. The litigators will find you. All 401(k) and Profit Sharing Plan information is publicly available to anyone. All they have to do is look up your 5500 forms on www.FreeERISA.com.
If you are a business owner with a 401(k) and Profit Sharing Plan, or 403(b) or 457 Plan, then you better take notice of what I am saying here today. Good practices include:
When I was the Branch Manager for Charles Schwab several years ago, I had a retirement plan guy come in to talk to me and my team. He told us how wonderful his firm was and how they could put all these really good mutual funds in the 401(k)'s that they wanted to be the third party administrator on. I asked him how much it costs and he told me that it was all taken care of with revenue sharing and 12b-1 mutual funds. The guy never would tell me or disclose his fiduciary duty to me and my team. This is how these Wall Street types sold the 401(k). They would tell the employer that it "doesn't cost you a thing. It is all internal to the funds." In other words, screw the employees. I never did business with him, because I knew that what they were doing was a clear breach of fiduciary duty. Looks like it is business as usual some eight years later. Nothing much has changed, especially when you have a Wall Street firm in the mix.
If you are a business owner and want to talk about how to protect yourself from breaching your fiduciary duty, then give me a call. If I cannot help you, then I will refer you to someone who can. I promise you it will not be a Wall Street firm.
Unfortunately, today there are a ton of 401(k) and Profit Sharing Plans that do this very same thing. This is your wake up call if you own a business. You cannot do these kind of shenanigans any longer. Every attorney in the country will take notice of this case and brother you better believe it when I say they will be looking at every 401(k) and Profit Sharing Plan that they can find to see similar violations of fiduciary duties. If you have yet to be sued over your 401(k) and Profit Sharing Plan, then get ready. The litigators will find you. All 401(k) and Profit Sharing Plan information is publicly available to anyone. All they have to do is look up your 5500 forms on www.FreeERISA.com.
If you are a business owner with a 401(k) and Profit Sharing Plan, or 403(b) or 457 Plan, then you better take notice of what I am saying here today. Good practices include:
- Retaining an investment consultant who can acknowledge ERISA fiduciary status in writing and that this investment consultant be reviewed annually for conflicts of interest;
- You should make available web-based investment education resources to Plan participants;
- You should eliminate any investment options that include mutual funds that pay 12b-1 fees, and funds that provide revenue sharing or similar fees to any party at interest, including the Plan's trustee or recordkeeper;
- You should consider adding passively managed funds as investment options; and
- You should comply with the Department of Labor's participant disclosure regulations.
When I was the Branch Manager for Charles Schwab several years ago, I had a retirement plan guy come in to talk to me and my team. He told us how wonderful his firm was and how they could put all these really good mutual funds in the 401(k)'s that they wanted to be the third party administrator on. I asked him how much it costs and he told me that it was all taken care of with revenue sharing and 12b-1 mutual funds. The guy never would tell me or disclose his fiduciary duty to me and my team. This is how these Wall Street types sold the 401(k). They would tell the employer that it "doesn't cost you a thing. It is all internal to the funds." In other words, screw the employees. I never did business with him, because I knew that what they were doing was a clear breach of fiduciary duty. Looks like it is business as usual some eight years later. Nothing much has changed, especially when you have a Wall Street firm in the mix.
If you are a business owner and want to talk about how to protect yourself from breaching your fiduciary duty, then give me a call. If I cannot help you, then I will refer you to someone who can. I promise you it will not be a Wall Street firm.
Tuesday, March 15, 2011
Contrarian Advice on 401(k)'s Investing
Are you one of the myriad of Americans who max out their 401(k)? If so, this article is for you.
The financial media publications that are directed to consumers tell you to max out your 401(k). Perhaps, even your investment guru has told you to do the same. They scream loud and hard that you should sock away the maximum into your 401(k) each and every year. Well, I beg to differ. I will explain why after a little background on the 401(k) landscape.
The majority of Americans try to max out their 401(k)'s, based on my experience. Some 401(k) adviser comes into to your company and tells you to put all you can into your 401(k). Why? Because, the more money that goes into the company 401(k), the more money that 401(k) adviser makes. This is one conflict of interest. But, wait there is more.
What makes matters worse is that the investments that have been offered to company employees have been loaded up with commission splits and revenue sharing from the mutual funds that are recommended. So, these 401(k) advisers not only make money by the total amount invested in the 401(k), they have also structured these 401(k) plans so that they make the most commissions and fees possible. Further, they design them to appeal to the employer. The employer is sold the 401(k) plan so it cost little or nothing to the their firm. Instead, the costs are built into the company's 401(k) plans via additional expenses to the employees.
Keep the faith. The Department of Labor, who is in charge of ERISA based retirement plans, has become keen to these pad the pockets and shift the cost activities. The whole landscape has changed.
I remember when I was the Branch Manager II at Charles Schwab & Co. Inc. in Jacksonville. A 401(k) adviser came in to speak to my team about their 401(k) plan. Of course, you know what they say..."We are the best and to hell with all the rest." My skeptical nature, however, kicked in and I asked a simple question to this 401(k) adviser. "How does the revenue sharing breakdown?" The 401(k) adviser could not answer this simple question. It seemed like a simple enough question to me. How much does a 401(k) participant (employee) have to pay to be in this 401(k)? The answer I got was ..."it is all built in. Its no load to the participant."
What a lie! No Bank, Insurance Company or Wall Street firm is going to sell a 401(k) plan unless they get paid. No third party administrator will do the record keeping for a 401(k) for nothing. No 401(k) adviser is going to work on implementation of a 401(k) which can take a year or more, for nothing. No mutual fund family is going to put their mutual funds into a 401(k) plan for nothing. No attorney who works on the 401(k) is going to do it for nothing. The point is that there are a lot of hands in the cookie jar. Up until now, all of this has been hidden from view. Thanks to the Department of Labor, this is all about to end.
The Department of Labor is going to make all these hands in the cookie jar tell you, the 401(k) participant, how every cent is allocated. How much the Bank, Insurance Company or Wall Street firm gets. How much the 401(k) Third Party Administrator gets. How much the mutual fund company gets. How much the attorney gets. How much the 401(k) adviser gets and if there are any other hands in the coookie jar, then they too will have to disclose how much they will receive.
These changes are all good, but sadly, we will still see the same pad the pockets and shift the costs 401(k) plans. When you see the breakdown of your 401(k) plan, you may want to take a hard look at how much in expenses it is actually costing you.
After a little background on 401(k) plans, I really wanted to show you why maximizing your 401(k) may not be a good idea. Do you have any debt? Like a credit card or two or three? A Home Equity Line of Credit? A Mortgage? Car Loans? If so, then you have absolutely no business putting a nickel into a 401(k) or any type of retirement plan where you cannot get your money out without penalty and taxes.
Let me break this down for you. Forget about your first mortgage for a minute. Let's assume that you have $50,000 in debt and $50,000 in your 401(k). What is your net worth? It is zero. Yes, I know. You are real proud of yourself for saving the $50,000 in your 401(k). I hate to say this, but this is a big mistake.
You need to see my quick slide show on The Taking Control Plan.
Go to my web site at http://www.marianfs.com/ and click on Services, then the link for the Taking Control Slide Show.
Look at this issue. If you have $50,000 in your 401(k) and $50,000 in debt, then what if you got laid off from your job? You may need to access your 401(k). If you are under 59 1/2, guess what? You have to pay penalties and taxes on the 401(k) withdrawal. Do you really have $50,000 saved when you may have to pay penalties and taxes on the money? Ten percent of that is $5,000. If you are in the 25% tax bracket, then that is another $12,500 off the top. Depending on what state you live in, it might cost you another 3 to 10%. The $50,000 that you saved in your 401(k) is now down to at least $32,500 and possibly more. You are not so proud of saving that $50,000 in your 401(k) now are you?
If I may borrow a line from AFLAC. "What if you got sick and couldn't work?" Again, if you had to access your 401(k), then you are going to be penalized with a 10% penalty and taxes to boot.
If on the other hand, you had saved $50,000 in cash and you were laid off or sick and couldn't work, then you would be much better off. You would have a net $50,000 (instead of $32,500 or less) to help you get through a job loss or a sickness. Sans the fact that you might want to buy some disability income insurance to cover the sickness issue.
The bottom line is that every Bank, Insurance Company and Wall Street firm wants to convince you to max out your 401(k). Now that you know the contrarian viewpoint of yours truly, is this the right thing to do? If I might borrow a line from a Microsoft phone commercial, "Really?"
The financial media publications that are directed to consumers tell you to max out your 401(k). Perhaps, even your investment guru has told you to do the same. They scream loud and hard that you should sock away the maximum into your 401(k) each and every year. Well, I beg to differ. I will explain why after a little background on the 401(k) landscape.
The majority of Americans try to max out their 401(k)'s, based on my experience. Some 401(k) adviser comes into to your company and tells you to put all you can into your 401(k). Why? Because, the more money that goes into the company 401(k), the more money that 401(k) adviser makes. This is one conflict of interest. But, wait there is more.
What makes matters worse is that the investments that have been offered to company employees have been loaded up with commission splits and revenue sharing from the mutual funds that are recommended. So, these 401(k) advisers not only make money by the total amount invested in the 401(k), they have also structured these 401(k) plans so that they make the most commissions and fees possible. Further, they design them to appeal to the employer. The employer is sold the 401(k) plan so it cost little or nothing to the their firm. Instead, the costs are built into the company's 401(k) plans via additional expenses to the employees.
Keep the faith. The Department of Labor, who is in charge of ERISA based retirement plans, has become keen to these pad the pockets and shift the cost activities. The whole landscape has changed.
I remember when I was the Branch Manager II at Charles Schwab & Co. Inc. in Jacksonville. A 401(k) adviser came in to speak to my team about their 401(k) plan. Of course, you know what they say..."We are the best and to hell with all the rest." My skeptical nature, however, kicked in and I asked a simple question to this 401(k) adviser. "How does the revenue sharing breakdown?" The 401(k) adviser could not answer this simple question. It seemed like a simple enough question to me. How much does a 401(k) participant (employee) have to pay to be in this 401(k)? The answer I got was ..."it is all built in. Its no load to the participant."
What a lie! No Bank, Insurance Company or Wall Street firm is going to sell a 401(k) plan unless they get paid. No third party administrator will do the record keeping for a 401(k) for nothing. No 401(k) adviser is going to work on implementation of a 401(k) which can take a year or more, for nothing. No mutual fund family is going to put their mutual funds into a 401(k) plan for nothing. No attorney who works on the 401(k) is going to do it for nothing. The point is that there are a lot of hands in the cookie jar. Up until now, all of this has been hidden from view. Thanks to the Department of Labor, this is all about to end.
The Department of Labor is going to make all these hands in the cookie jar tell you, the 401(k) participant, how every cent is allocated. How much the Bank, Insurance Company or Wall Street firm gets. How much the 401(k) Third Party Administrator gets. How much the mutual fund company gets. How much the attorney gets. How much the 401(k) adviser gets and if there are any other hands in the coookie jar, then they too will have to disclose how much they will receive.
These changes are all good, but sadly, we will still see the same pad the pockets and shift the costs 401(k) plans. When you see the breakdown of your 401(k) plan, you may want to take a hard look at how much in expenses it is actually costing you.
After a little background on 401(k) plans, I really wanted to show you why maximizing your 401(k) may not be a good idea. Do you have any debt? Like a credit card or two or three? A Home Equity Line of Credit? A Mortgage? Car Loans? If so, then you have absolutely no business putting a nickel into a 401(k) or any type of retirement plan where you cannot get your money out without penalty and taxes.
Let me break this down for you. Forget about your first mortgage for a minute. Let's assume that you have $50,000 in debt and $50,000 in your 401(k). What is your net worth? It is zero. Yes, I know. You are real proud of yourself for saving the $50,000 in your 401(k). I hate to say this, but this is a big mistake.
You need to see my quick slide show on The Taking Control Plan.
Go to my web site at http://www.marianfs.com/ and click on Services, then the link for the Taking Control Slide Show.
Look at this issue. If you have $50,000 in your 401(k) and $50,000 in debt, then what if you got laid off from your job? You may need to access your 401(k). If you are under 59 1/2, guess what? You have to pay penalties and taxes on the 401(k) withdrawal. Do you really have $50,000 saved when you may have to pay penalties and taxes on the money? Ten percent of that is $5,000. If you are in the 25% tax bracket, then that is another $12,500 off the top. Depending on what state you live in, it might cost you another 3 to 10%. The $50,000 that you saved in your 401(k) is now down to at least $32,500 and possibly more. You are not so proud of saving that $50,000 in your 401(k) now are you?
If I may borrow a line from AFLAC. "What if you got sick and couldn't work?" Again, if you had to access your 401(k), then you are going to be penalized with a 10% penalty and taxes to boot.
If on the other hand, you had saved $50,000 in cash and you were laid off or sick and couldn't work, then you would be much better off. You would have a net $50,000 (instead of $32,500 or less) to help you get through a job loss or a sickness. Sans the fact that you might want to buy some disability income insurance to cover the sickness issue.
The bottom line is that every Bank, Insurance Company and Wall Street firm wants to convince you to max out your 401(k). Now that you know the contrarian viewpoint of yours truly, is this the right thing to do? If I might borrow a line from a Microsoft phone commercial, "Really?"
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