Why you need to take an active role in your future

Question

I started investing in real estate when my employer made changes to the pension plan (they stopped contributing to it). I was facing a shortfall in my retirement plans as a result of this change that I needed to make up. After the 401(k) losses I racked up in 2008, and how long it took me to recover from those losses, I knew I wouldn't make it through stock investing alone. I needed something else.

And so do you.

Do not believe that promises made by others will be kept. Take control of your own destiny. If you do falter, at least you'll go down swinging. Still need convincing?

This article talks about pension cuts for truckers already in retirement.

Another on how the 401(k) isn't living up to the hype.

And hopefully everyone realizes Social Security is spending more than it takes in according to its trustees.

My point?

The folks with pensions really can't count on it staying in place as promised. And even if they do, the purchasing power of your defined payout reduces as you age.

Social Security has to change how much it pays, when it pays, and/or how much it taxes to stay solvent. In all three cases, you end up with less.

And 401(k) plans just don't live up to what was promised.

Take an active role in your own future. Don't rely on someone else to take care of you.

Jon Pacitto · Answer

Wow @Ronald Perich I've never thought of it that way before but that is a great way to look at investing in your future. I've always trusted that the "system" would work but you're right, nothing is infallible. Thank you for taking the time to explain this to me.

Ronald Perich · Answer

Bingo! You cannot use that 401(k) money until you're ready to retire or until you leave the job and roll it over into a self-directed account that can then invest in income-producing assets. But even that income isn't giving you immediate benefit - it has to go back into your retirement account.

That means I need to wait until I've reached "retirement" age.

I want the option to retire at any time of my choosing, not when the government gives me permission to do so. I want multiple streams of income that gives me the ability to retire when I want.

Look, I understand the majority of people will never buy or start a business. They feel safe working for an employer who will provide them with benefits and the "security" of a steady paycheck. For those folks, a 401(k) is probably going to give them the best chance of eating more than Ramen noodles when they retire after 40 years.

Ronald Perich · Answer

@Jon Pacitto

My personal opinion of employer-sponsored 401(k) plans is they are a fallacy at best for most people. And this is coming from someone who contributed to their employer plan since day 1. Yep, I contributed to my plan while in high school. But they are a good way to break into investing. And they sort-of force a discipline upon you because you invest automatically and get used to not having the money. As @Dmitriy Fomichenko pointed out, the employer match is an attractive feature of many plans.

But I won't contribute to my 401(k) any longer, even with the generous match. I wrote a post about it a while back explaining why. Bottom line for me is a 401(k) through my employer is not as good for me as investing in cash-flowing assets. But this is my personal opinion (backed up by data), not necessarily something everyone should do. Dmitriy can explain why a Solo 401(k) is a much different story.

If you ever leave your current employer, make sure to move your money out of the plan through a direct rollover to an IRA.

Jeffery Waicak · Answer

I agree, and I plan to "retire " really,  I'll just be self employed, or start a business or businesses at 40. 59.5 is way too long to wait

Dmitriy Fomichenko · Answer

@Jon Pacitto If your employer offers a matching contribution, taking advantage of the matching amount is a good idea. It's a guaranteed return on your money, which you don't often get from investing.

Otherwise, the main upside is the tax benefit. But like others said, with a 401k, you have little control and your investment choices are often limited. You can choose to max out IRA contributions first. Or, you can build up your 401k, then when you switch to another job or retire, you can always rollover that into an IRA or even a Self Directed IRA that allows investing in real estate and other assets.

Rocky V. · Answer

Exactly my thoughts.  Too many Americans get suckered into retirement accounts where the only winner is the company managing the account.  Why would you rely on someone else for your own retirement?  Take control of your hard earned money and take control of your retirement.

Scott Trench · Answer

I think that this is great advice. Why on earth should I expect others to do anything other than look out for their own interests. It is in the business' interest to make me feel like they are going to take care of me, and then to not follow through on that when I no longer have market value and the ability to retaliate.

I assure you that no one else will be responsible for my retirement. We can only pity and attempt to motivate those who fail to realize this concept and leave their fate in the hands of others.

Jon Pacitto · Answer

Great insight Ronald...I have a 401k right now and contribute to it each month. I'm in my second year of having a 401k, are there any upsides you see to having and contributing to one?