Are IRAs & 401(k)s GOLDEN?

I have searched, and searched, and searched again. The best justification by proponents of the mantra - that qualified plans like, IRAs and 401(k)s are OUTSTANDING for retirement is - you get a tax break upfront and your money gets to compound on a tax deferred basis. They claim that DEFERRING taxes until retirement is advantageous because those nest eggs will likely be taxed at lower rates – Who knows? May be they are Uncle Sam. And, they’ll have a change of heart by the time you retire.

There are other reasons, like; your employer may match your contributions (you must read my two previous posts). In the category I will consider shameful, ridiculous, absurd, bizarre, farcical, comical and wacky is reasons like:

"They are good because all you do is simply fill out a form or two at work, and your tax-deferred investments begin."

"I recommend clients put a bit into both a 401(k) and a Roth IRA. But I prefer the 401(k), because it’s so easy for employees to set up at work."

These are absolutely unbelievable quotes from so-called financial experts. And, I mean, those who appear on TV Shows, radio programs and in magazines. I’m talking about people with HUGE titles, such as, Tax Specialist, CPA, CFP and VP of Retirement Services (Just for the record, I’m not against titles; I have a few of my own). Just use them (401(k)s & IRAs) to plan for your retirement! Because it’s easy to enroll – What has that got to do with someone’s retirement?

Come on! You’ve got to be kidding me, right? Seriously! Or, maybe I’m missing something? Should millions of hard working folks use qualified plans to save for retirement because of these reasons? Don’t you think there has to be a better reason than simply POSTPONING taxes? - That is a question I wish (for real) everyone would ask their financial adviser or whoever tries to push them into one of these programs.

The devil is in the DETAILS

Especially, now that its tax season, those short-sighted advisers are bombarding people with what I call the revolving-door, porous, quick-fix, ticking time bomb (I don’t mean the real one) solution – Oh, just throw some money into an IRA and save on taxes! REALLY? They never mention the other side – that you’ll likely get WHACKED later on by Uncle Sam – or, maybe these advisers are totally clueless?

Let me use this analogy: Ever heard or seen one of those pharmaceutical company commercials? Usually it’s about a new medicine (to cure a condition). Yet, at the end of these commercials (at an extremely fast pace), there is a list of several side effects – “some of which may be serious.” – But, go ahead, get the medicine TODAY! After you take them, should you experience any serious side effects, please call your doctor right away. Hmmm, I wonder why those side-effect segments are not presented at the same pace as the segments on how to acquire the medicine – may be when you have those conditions, you hear better at a speed of 500 WPS. - Isn’t full disclosure just wonderful?

In my opinion, when it comes to qualified retirement plans, most of what the vast majority of financial advisers profess fall right into this category. More serious though, is the fact that, they do NOT tell the millions of well meaning, hardworking folks about the POTENTIALLY DAMAGING side effects. Hey, at least the pharmaceutical industry kid of try to – let’s give them some credit.

I understand that a lot of people are hurting financially at the moment. But, I believe now is the time to pause. And really get it RIGHT once and for all. May be there are some better explanations out there - I have not found anything outside the realm of what I mentioned earlier.

You know what? Let me pause here for now. Please! Please!! If I’m missing other worthwhile reasons, would you kindly (sincerely), let all of us know? I’ll make the case as to why in my opinion, based on FACTS and PRACTICAL APPLICATION, there are MUCH, MUCH, MUCH superior options to these 401(k)s. Stay tuned!!!