Your 401K Is A Trap! You'll Never See That Money (In Real Purchasing Power)

401Ks (and other retirement accounts) are nice ideas in theory - reward savers with deferred tax benefits and employee match programs.

In reality, they are thickly veiled attempts to tax your earnings again via the hidden thief of (perpetually understated) inflation.

It actually is a trap.

Of course, this wasn't always true. Previous generations, particularly anyone who has already reached retirement age, got some pretty sweet deals from their retirement accounts. They were invested for some of the longest bull markets in history, and they had the full force of the money-printing US government and non-Federal Reserve behind them pretty much full-stop since the Great Depression. For many decades, it has been hard to lose (critically, in nominal terms) if you simply held, particularly if also receiving tax benefits while doing so.

However, for the millenial generation and anyone younger, the idea that your 401k will pay out in any real sense for you in 30-40 years is mathematically ludicrous.

First, you've got inflation, which is well understated by even the government's own inflation formulas if you convert to any standard other than the most current one. There is a consistent and statistically significant sample of revisions to both data and methodologies with inflation measurement, and nearly every single one has resulted in lower inflation.

"Hedonic adjustments" are one ludicrous example I often mention in passing. In short, they are the claim that if quality increases, you are getting more value so even if price goes up, inflation is "going down". This sounds potentially reasonable until you realize it's merely an excuse for them to claim your TV that costs 10% more but got 15% thinner is actually now 5% cheaper...and magically, 10% inflation in one good becomes 5% deflation thanks to "hedonic adjustment".

Once you do this across the board, you basically paint whatever inflation numbers you want. The BLS is a propaganda front at this point.

This creep would have loved this system.

Why bother to do this? By taxing your value for 20, 30, 40 years at 5-15% "they" are able to finance endless money printing for wars, government corruption particularly in DC, Wall Street salaries, unconstitutional witch-hunts against recreational drug users and holders of cash...the list goes on. The hope is that you won't notice the $7-$25+ gallons of milk when you cash out at "a profit."

Add to this the very real tail risk of US currency collapse, loss of global reserve status, geopolitical shifts, and a whole host of other unknowns and the value proposition looks truly awful. I'd rather be in most cryptos than a 401k or IRA I'm locked into for another 4 decades.

So, in short, I've been telling people to cash out these junk accounts at penalty for years. Nobody listened, but I did...and that's the main reason I had the funds to buy in to Steem.

Suddenly, people are calling me telling me they wish they had listened and how do they do it now? Guess all it takes is a 1000% year to get someone over the "pain" of that 25% (or whatever) early cash-out penalty.

What do I tell them?

I tell them this post, and this phone call, do not constitute financial advice, so do your own due diligence as I've learned that people don't value advice that goes well enough to counteract when it doesn't (especially given how often they fail to even implement it accurately, then blame others for it.)

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