Qualified Plans

Here recently we have been examining the ill effects of Qualified Plans. One of our recent webinars touched on this subject as well as a video we released a couple weeks ago. When you look at the whole picture of a Qualified Plan it doesn’t look rosy. The consequences are going to cause grief to a lot of folks that have been putting all their trust into their Qualified Plan expecting support from the same during their retirement.

Now, a Qualified Plan does give you an incentive as a taxpayer to save money, but who are you saving it for? When you participate in a Qualified Plan there is a penalty for accessing funds before you reach age 59 ½. Where is the liquidity? And who gets to use all your money during those years when you can’t?

Also, Uncle Sam can change the rules on a whim. Over the last few years there have been serious discussions of the Government taking over all Qualified Plans and turning them into some sort of Government Guaranteed Retirement Account. If Social Security is any clue as to how this fund might be managed, I certainly prefer to pay taxes right away and manage the money myself.

The final straw comes in realizing that while you’re money is locked away earning interest, inflation does not sit idle. When you convert all contributions and withdrawals from a Qualified Plan into terms of today’s dollars it often comes out that you contribute more purchasing power to a Qualified Plan than you’ll ever get back out.

“According to data compiled by the Federal Reserve, the median household headed by a person 60 to 62 with a 401(k) account has less than one quarter of what is needed in the account to maintain their standard of living in retirement.” [i]

Looking at the whole picture of Qualified Plans it is amazing that people actually participate. But where is this type of information provided to the public? Conventional Financial “wisdom” recommends maximum participation in such plans.

It all comes down to the point that, whenever you lock your money away where you can’t access it i.e. Qualified Plans you have given up the control of your money. Congratulations! Giving up control of your money is the best way to lose money. Oh, but that’s not what you wanted to do? Hmm.

Some people prefer to give up control like this rather than take responsibility. They are afraid that they won’t be able to manage the money that God entrusted to them and so they give the control to someone else. Fear is big motivator, but fear can motivate you to do the wrong things. The servant whom his master entrusted with one talent in Matthew 25 was afraid: “And I was afraid, and went away and hid your talent in the ground. See, you have what is yours.” [ii]

When you really see what is going on in a Qualified Plan you have a choice. You can choose to succumb to fear and let someone else control your money, or you can rise up, take responsibility for the situation, and work to make it better. It’s up to you.

By John McFie

[i] Chris Hunter
[ii] Matthew 25:25