Leveraging Wealth Building Muscle

The 401(k) has been leveraging wealth for 40 years and is one of the best tools for building financial muscle.

The 401(k) is having a birthday!

Why does this matter to you?

If you’ve not harnessed the power of a 401(k), either through your employer or a self-directed account, RETHINK your strategy. I am and have been a 25-year advocate of the 401(k) because I’ve used it to build my wealth and therefore my future.

You and me, we’re more alike than we’re different. EXCEPT, and this was my game changer, that I use the wealth-building tools that are the 401(k) and the IRA.

The 401(k) Game Changing Plan

“Game changer?”, you ask?

Absolutely. I’ve made contributions, albeit small to start, to my IRA or 401(k) since 1996. Initially I made contributions through my employer. And despite the fact that my employer didn’t match my contribution during my grind at the J.O.B., I started with an average contribution of $10/week, or $40/month. As a self-employed passionate entrepreneur, I contribute, like clockwork, a minimum of 13% of my income to my retirement wealth.

Starting with a $10 per week contribution to your 401(k) will make a difference to your future. Yes, even in today’s economy. YOU can make a difference.

And, if you’re at a J.O.B. where your employer will match a percentage of your contribution, you are CRAZY not to contribute. Yes, I said it, you’re off-the-wall bonkers to not leverage that money. One stellar reason, because, once that match is made, it’s usually yours. You take it with you when you depart, leave, turn in your notice, or get pink slipped.

If you have a side hustle while working your J.O.B., you can open and contribute to a self-directed 401(k), and your future takes on a whole new meaning. This is a conversation for a different time, but there’s things that no one tells you.

Lastly, for now, most people, and you may be one of them, don’t realize that making contributions may actually increase your take-home pay because the contributions reduce your taxable income. In some cases it will take you into a lower tax bracket. That’s the easy-breezy explanation for now. Obviously, it will depend on your gross income, tax bracket, and a couple of things you have to consider up front. After that,  it’s a matter of being intentional on wealth building.

I’m not a financial planner/advisor, a CPA, or a lawyer. I’m just like you in that I have obligations, such as educational debt and a mortgage, family that I love and care for, work (transparency, I love what I do), and dreams. I will NEVER “retire” because what I do gives me purpose. You, me, we all want and need a reason. But, like you, I want to live on my terms. Not the government’s. Not my employer’s. Let’s, you and me, live on your own terms.

By the way, in my first six years of contributing, my “defined contribution” account, that’s fancy-HR-speak for IRA and 401(k)s, grew to $35,000+. And, barring the Great Recession – because the majority of investors lost on this one, my 401(k)’s been growing better than the 10-percent-over-ten-year-wall-street average.

Get Rich Quick Plan

There is no “get rich quick” scheme with the 401(k), or the IRA. And for real, there is no “magic pill” for life. However, there is big hope. If you can think about your retirement investing as building good habits that will have your back in the not-so-distant future, you can, simply, make your retirement dollars work for you. It’s a really good feeling and you can have this feeling, too.

Is Your Employer’s Plan Version 1.0?

For the purposes of clarity, I’ll take this a bit further. An employer’s 401(k)/IRA defined contribution plan is almost always different than a self-directed plan. The simple reason for this? Employers legally can and do limit what its defined contribution plan will allow you, an employee, to invest in; it all comes down to cost. What’s it going to cost the employer to offer a benefit to you? Think of it like car insurance. The more you “use” your car insurance to pay for accidents, the higher your premiums go. It’s the same with the employer’s plan, the employer limits what you can invest in to traditional stock market investments in order to keep its costs low. The more you use it, such as making a change from one investment to another, the more you drive up the cost to the employer. The best way to save money and offer a benefit, limit the employee’s use and involvement in that benefit.

Without understanding this simple difference between employer versus self-directed plans, you would never know of the investment opportunities or the power of your retirement dollars. 

Full Disclosure

Transparency is important to me. It allows you and me to make better decisions when we understand. Full disclosure, because of something called prohibited transactions, it’s best not to self-manage your self-directed 401(k)’s and IRA’s investments. I liken this to: “Fire burns. Don’t put your hand in the fire.” Remember, I’m not a lawyer. But, once you understand this principle, combined with the knowledge of what your self-directed account can invest in, you have choices. You have the options of learning how to invest your dollars, and wisely doing so, or joint venturing (partnering) with a credible and investor you trust.

One of the biggest issues that prevent people from investing is lack of knowledge. This leads to fear. Fear leads to stuck. And stuck equals stagnation in your wealth building. Have you ever tried to learn how to invest in any one of the different stock market options? Unless investing in the stock market is your passion, the average bear, you and me, cannot keep up with all the variables that make up stock market investing.

I’ve already written on the hidden fee issues, you can find that here.

Finding a trustworthy investor as an option and keeps you in control. This is how I influence my 401(k) investments, through joint venturing with trusted note investors. A joint venture is a passive way for you to grow your retirement dollars.

A second option is to learn how your favorite investment opportunity works and then invest in it. That’s what I do, I invest in mortgage notes and I help others grow their retirement dollars through notes. It’s been good to those I serve and to my own wealth building.

4 Questions You Should Ask Before Retirement

Where are you on the new retirement spectrum? Have you already made the transition? Are you still 10, 20, 30 years out? Wherever you find yourself on the journey, it’s never too early or too late to readjust your plan.

If you need to refocus your vision and want to learn how to build significant wealth from honest note investors who know how to win, then take 30 seconds and click here to gain access your free guide, “4 Questions You Should Ask Yourself Before Retirement”.

Create your future dream life, invest in you.

Happy Birthday, 401(k)!

Cheers to growing your retirement dollars!