Not only did the management fees reduce his account by 30.1%, but the tax lien, if in a constant 25.9% tax bracket, would also reduce his account by an additional $850,564 plus the Opportunity Cost on that money. The employee would end up after the employer’s match with only $2,362,325 in his retirement account. And, after all the fees are deducted from the account and income taxes are paid with withdrawals taken from the plan, his eventual tax-deferral was only $564,463 instead of $1,101,505, and his employer’s match had been reduced from $261,337 down to $115,178. So, he is planning on earning a 6% rate of return each year in the market. However, when the fees and taxes were finished depleting his account, he only earned 1.25% over the 31 years. Do you think he will stay in the 25.9% tax bracket? Probably not. Why does the government encourage these qualified plans? Could there be a conflict of interest? The government basically rides piggyback on the client’s account while the client pays all the fees and takes all the risk. Yes, all you need to do is math. In this case, the employee should forget the 401k and pay his taxes each year. He also thinks out loud, “What if the market doesn’t earn 6% every year for the next 31 years, and what if my tax bracket goes up? He also understands how not liquidity (access to his money) having could really be a disadvantage for him and his family. What is the solution? Infinite Banking, or what we define as Privatized Family Banking (PFB), uses a well-designed, high-grade, dividend-paying, A+ Superior whole life insurance policy with 177 years of experience paying dividends which can be used to supplement Social Security and most possibly provide a much better plan of action. Follow the Math If the employee pays taxes of 25.9% on the $25,000 of savings each year that would be $6,470. So, if he paid his taxes outside the 401k assuming
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