Are 401K accounts a “money jail”? Financial advisor reveals how Wall Street is out of touch with normal Americans.

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Photo above - Christina whirled and now contemplates tapping her 401K to start a business, or possibly buy a farm . . .

If you’ve never heard of “Austin Dean, financial advisor”, don’t fret. Neither has Wikipedia. The only entry they have for Austin is former first baseman for the Miami Marlins. Austin Dean ,financial advisor is mostly invisible. You’d think some guy working in Genoa, Ohio for Edward Jones would try harder at self promotion if he hopes to snare new clients. In any case, Austin managed to flag down a reporter at “businessadvisor.com” to listen to his anti-401K rant. (see link below).

A few of the basics of 401K accounts seem to elude Austin. He believes that if you take premature withdrawals from a 401K then you trigger “capital gains tax”. Sorry Austin, D minus on that one. A premature retirement account withdrawal does trigger 2 tax events – income tax at your marginal bracket (almost always higher than capital gains) PLUS an early withdrawal penalty. The only reason I didn’t give Austin an F minus is that he does grasp the general concept that taking money out of your 401K before age 59 and ½ is a disaster.

The article then pivots hard into a hilariously inappropriate recommendation. Instead of fully funding your 401K (with employer matching contributions) Austin suggests that everyone “open a business”. Yep, he really said that. People can’t even afford frickin’ homes. Austin says turn your back on all that, and start your own business. If you don’t have any credentials or experience, I suppose that doesn’t matter. If you survive the experience you will now be in the “small business owner jail”. Which means you can’t get your money out of THERE either, unless you go to a business broker who finds a buyer for your Subway franchise or nail salon.

In the meantime, while you’re waiting for a business buyer, please don’t get sick or have a car accident. If you own a business, your daily onsite participation is usually a good idea. Your 401K doesn’t melt away into nothing if you step aside to get cancer treatment.

Sorry Austin . . . you mean well. And who WOULDN’T like to snare a bunch of new multi-millionaire investment clients for Edward Jones? My condolences.

I’m just sayin’ . . .

An advisor for wealthy people who have retired early explains why he thinks 401ks are 'money jail' and where he tells clients to invest instead

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dale74 · M

Every chance I get I transfer from different accounts into my Roth, because of all the advantages of the Roth, especially inheritance, I can pass my roth on to my daughter a lot easier, and with a lot less taxing

SusanInFlorida · 31-35, F

@dale74 upvoted. good advice for everyone

dale74 · M

@SusanInFlorida so you're 40 years old, and you have
A $100000 in 1 type of a retirement account. Yes, to put it in a Roth, you are going to pay income tax off of that money, but that's off of the 100000 so let's say you have to pay 20000 in taxes. Well, if that money grows to 300000 in that Roth, Ira, you have already paid the taxes so that other 200000 will not be taxed. Nor will the money that was the start of the account.The other hundred thousand or eighty thousand because the taxes had already been paid on it.

justbob · 61-69, M

It's like a disease. Financial advisors never seem to comprehend the tax consequences of the advice they give. People should always talk to a CPA or EA before following any of their advice

Avectoijesuismoi · 36-40

Best advice is to make it a priority to not earn any money in the country that you reside in.
It makes you completely exempt from all those nasty tax obligations

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Avectoijesuismoi · 36-40

@justbob I am not evading tax I get the $ 5000 paid into the bank account every month they are welcome to tax it.

Avectoijesuismoi · 36-40

@justbob my sometime the future to be ex-husband has all the problematic assets and he is no longer resident here. I have indicated that I am willing to forgo all of it including the offered divorce settlement plus the maintenance for our two year old son all I want is exclusivity of the little one.

dale74 · M

@Avectoijesuismoi the children are the most important.I have full custody of my daughter as well

ElwoodBlues · M

Affordability? That's a HOAX🤣😂

Avectoijesuismoi · 36-40

@ElwoodBlues The second statement is the more correct, there is no such thing as affordable, affordability. They are concepts banned about amongst others to get people to draw crosses on ballot papers.
It is the same as "normal" it is subjective. Every person's normal is different. Everyone's "affordable" is equally subjective.
There are many factors that are variables for anyone no matter who it is to be able to make life affordable for all people that they have no direct control over or ability to influence.
Just for a start he can't make people get out of bed or off the sofa and go to work or even make them go and get a job to start with.
He has no ability to prevent them having too many children etc etc.
So how is he or anybody else no matter who it is going to make America affordable, but he can sell them a concept to go draw a cross
on a piece of paper.
The only person in life that can change the variables to change their lives is the person themselves.
Not all the wealthy people were born wealthy there are many that
have through very hard work got where they are now.

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