My brother is an SEC licensed investment broker, for 30 years. He considers 401k’s to be poison. We’ve talked enough about them for me to agree.
If they are all you got, they are better than nothing, but they are not all we have. Even “wage earners”. The roth IRA is MUCH better. I hear there is a Roth 401k now, but I don’t know anything about it other than it being a 401k.
Google the difference between them. You may be surprised.
I'm sure not going to go dabble in the stock market.
I understand in general terms the differences, but I still don’t know why you would say a 401K is a “ripoff”. That doesn’t make sense to me at all. Can you explain why you say that?
1. Doesn't a 401(k) plan have a simple advantage over a Roth IRA (or any IRA, for that matter) if the 401(k) includes an employer match?
2. Doesn't the Roth IRA or Roth 401(k) come with an inherent risk of future tax policy changes? In other words, there is nothing that prevents Congress from taxing a Roth IRA or Roth 401(k) in the future even though they've "promised" today that withdrawals will be tax free?
3. In light of #2, doesn't a 401(k) or traditional IRA have inherent advantages over a Roth retirement account in that they offer certainty of tax exemption up front while the Roth offers some probability (even if it's a high probability) of a tax-free withdrawal in the future?
For certain people in my position there are enormous advantages to a 401(k) over an IRA anyway, but those probably aren't worth discussing here because I'm in a unique situation where I am self-employed and have the ability to do self-directed retirement accounts that aren't available to most people.
401(k) plans allow employees to invest automatically and directly into managed funds--some not so good, but many are very excellent, and a good way for millions to save large nest eggs rather conveniently.
Your brother, by damning the 401(k), is trying to send business to someone like himself. How self-serving.
Don't get me wrong, I know full well that there are operating costs to running 401(k) plans, and I know that employees who participate in such plans pay for them indirectly. In a large pool, the costs are usually very low, so the employee typically has a lot working for him.
I'm not dogging "SEC licensed investment brokers," but your brother is wrong to criticize the 401(k) as a "poisonous" tool. By the way, there are 401(k) plans that offer a Roth version, too. It's a pay me now, or pay me later decision.
I think usually a IRA will give you wider investment choices than a 401K. That has been our experience. We are both retired, did rollovers of our 401Ks into traditional IRAs and have been managing our own stock choices which are considerable. Choices were limited through the 401K. We are both above 34% for the year so far.