Should I cancel my 401k?

Question

Hello, I have a 401k and I was thinking of cancelling it because I have a 457 b option plan. I haven’t put much into the 401k so I’m not worried it much(only 6k). But recently I’ve been thinking a lot about it, my employer doesn’t match any retirement plans. I’ve been investing on my own and have good returns, I also will receive pension . Should I just not have a 401k/457 and just invest on my own? Would love some advice, very new to all this investment stuff.

Chris Levarek · Answer

@Steven Cruz If you get a chance, read "Becoming Your Own Banker: Unlock the Infinite Banking Concept" by R. Nelson Nash. There is a great strategy in there to using your savings alongside compound interest growth and invest. Spoiler, it's not using the 401k. Concepts are game-changing.

The 401k is an outdated investment vehicle, one in which the control is heavily out of your hands. The volatility of the stock market, the management fees and the lack of control over your cash, are all just cause to look elsewhere.

However, as mentioned, diversification is important in investments and free money in the form of a match can have it's incentives to continue to play the game with a 401k or retirement plan.

Dave Spooner · Answer

@Steven Cruz I'm not super familiar with a 457b, but from some quick research, it sounds like you can contribute the normal maximums to both independently. Here's one article that covers some of the rules around it: https://wrennefinancial.com/ca...

If both are available to you, I would strongly suggest trying to take full advantage of both. I would not close either. The tax savings are tremendous over time and can result in quite literally millions of dollars of wealth that would otherwise go to the IRS.

Your employer should allow you some control over the actual assets invested in. The safest play is to just stick it all in a variety of ETFs that give you exposure to the S&P 500, International stocks, treasury bonds, etc. I personally recommend looking up some of the Vanguard funds.

Bottom line - don't turn your back on free money!

Account Closed · Answer

It’s really dependent on your circumstances but for me, if my employer didn’t match mine, I wouldn’t use it.

Lane Kawaoka · Answer

I don't use any retirement plan. Would rather have my money now and tax benefits like bonus depreciation can't be used in QRPs.

Sudhanshu Singha · Answer

@Steven Cruz I am not that familiar with a 457b plan but the main incentive for putting money in a 401ks is the employer match, since its very hard to beat a guaranteed 100% return, and tax deduction. If your employer is not offering a match then really the only incentive is the tax deduction which you can also get from opening up an IRA.

I personally only invest the match % in my 401k and invest the rest into S&P ETFs on my own until I am ready to purchase a new real estate property. Some people are more conservative with their savings and keep it in the bank or money market account but I take a riskier approach and have all of my savings invested in either the either index funds or real estate. If you want to expand your real estate portfolio it really does not make sense to save any more than the max match % in a 401k account.

My recommendation would be to only invest on your own if you really  spend time researching your investments. For example if you are going to invest money in individual stocks you should really pay attention to the outlook for those companies. If you invest in index funds then it is more like expecting the overall market to go up or down rather than a individual company.

Should I cancel my 401k?

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