Your 401k Isn‘t Freedom

Your four oh one k is the most money you'll ever own and the least money you're actually allowed to touch.

Nobody tells you that part when they sign you up.

Welcome to The Real Jason Duncan Podcast.

Today's episode is a Wednesday Special Edition. Every week I write a newsletter called What's Real? where I expose the lies most people believe and reveal the truths they were never taught. And every Wednesday, I bring that week's edition to you in audio, right here.

Because the most dangerous lies don't look like lies. They look like golden cages. They look like success. The most successful people are the most deceived, because the lies that trap them look like achievements. That's what this whole show is about.

On Mondays I sit down with somebody who believed one of those lies and discovered the truth the hard way. Wednesdays, like today, I bring you the Wednesday Special Edition. Either way, the mission is the same.

Go to therealjasonduncan.com/articles and subscribe for free to get the What's Real? newsletter delivered to your inbox every Wednesday morning before this episode drops. That's therealjasonduncan.com/articles - link is in the show notes.

This week's post is called "Your four oh one k Isn't Freedom. It's a Locked Box, and You Don't Hold the Key."

Picture that number for a second. It's a good number. Bigger than it was a few years ago. And it feels like proof you're doing this right, that future-you is going to be just fine. Now actually try to use a dollar of it. You can't. Not really. Not without a penalty and a tax bill, and not for years, sometimes decades.

Pull money out before you're fifty-nine and a half, and the IRS hits you with a ten percent penalty, on top of the regular income tax you already owe. So on a fifty-thousand-dollar withdrawal, a typical earner walks away with around thirty-four thousand. I know that one from experience. About seven years ago I cashed out a four oh one k and a four oh three b for a specific reason, and I paid that ten percent penalty on my own money. It's your money. Your name is on the account. And you're still looking at it through glass.

And it isn't just the early years that are locked. Leave the money alone like a disciplined saver, and the government still won't let you just sit on it. At seventy-three, it starts forcing taxable withdrawals out, whether you need them or not, with a twenty-five percent penalty if you don't take them. So you're penalized for getting your money early, and penalized for leaving it too long. That's a strange thing to call an asset you own.

Then there's the defense everybody makes. The tax break. You defer the money now and pay it later, supposedly in a lower bracket. Except a four oh one k doesn't erase your taxes. It just postpones them. Every dollar you defer is a bet that the rate decades from now will be lower than it is today, and nobody who sets those rates can promise you that.

Now, I'm not saying taxes always go up, because they don't. But Social Security went from completely tax-free before nineteen eighty-four to as much as eighty-five percent of it being taxable today, on income thresholds that were never adjusted for inflation. So the share of people getting taxed on it climbed from about twelve percent back in nineteen ninety-four to over thirty-eight percent by twenty twenty-two. The rules changed. They always can.

That right there is the golden cage of the responsible retirement plan. The gold is the employer match, the deduction today, the balance climbing on the screen, the warm feeling of finally doing the smart, grown-up thing everybody told you to do. The bars are the penalty to get in early, the forced withdrawals later, and a tax bill handed to a future Congress that will never know your name. And the gold is the lie.

So before you pour another dollar into the locked box, ask the one question that actually matters about any money you're building. Can you get to it, on your terms, when you need it, without asking permission or paying a toll? If the honest answer is no, then whatever else that account is, it isn't freedom.

I'm not telling you to torch your four oh one k this afternoon. I'm telling you to stop assuming it's the whole answer just because everybody said it was. For years I believed all of it too, until I started asking who actually held the keys to my own money. And what I found, and what I use now, works almost backwards from a four oh one k. It also happens to be what this week's sponsor does, so let me tell you about it.

But first, let me be straight with you. I'm not a financial advisor, and this isn't financial, tax, or legal advice. It's my opinion and my own experience, meant to make you think, not to tell you what to do with your money. Everybody's situation is different, so before you change anything, sit down with a qualified financial, tax, or legal professional who knows yours.

There's a proverb that fits this whole thing. Proverbs twenty-seven, verse twelve. "The prudent see danger and take refuge, but the simple keep going and pay the penalty." The prudent one looks down the road, sees what's coming, and adjusts. The simple one just keeps marching the way everybody else is marching, never asking where it actually leads, and pays for it at the end. And look at the word that proverb picks for what the simple one pays. The penalty. After everything we just walked through, that word ought to land a little differently now.

Read the full post at therealjasonduncan.com/articles. Link is in the show notes.

So here's the other way I was talking about, the one that works backwards from the locked box. Which brings me to this week's sponsor.

I'm a practicing Bank On Yourself client. Bank On Yourself is a branded version of what's called infinite banking, where you use a specially designed, dividend-paying whole life policy from a strong mutual company as your own private financing system. And it answers almost every problem we just walked through. It grows at a guaranteed minimum that doesn't ride the market, plus dividends that aren't guaranteed, but that the strongest companies have paid out for more than a hundred years straight.

The growth isn't taxed year to year. You can borrow against your own cash value almost any time, with no penalty and no credit check, on your own terms, and the policy keeps growing as if you never touched it. No waiting until you're fifty-nine and a half. No government deciding when the money has to come out. And as long as it's structured and kept in force the right way, it passes to your family income-tax-free, so in a lot of cases nobody ever pays income tax on the growth at all. It's the locked box turned inside out.

My financial advisor is Mark Willis at Lake Growth Financial. If you want to find out what this could look like for your situation, you can get a free consultation with Mark by going to therealjasonduncan.com/bankonyourself. That's therealjasonduncan.com/bankonyourself. Link is in the show notes.

Build wealth that serves your life, not the other way around.

That's a wrap on this Wednesday special edition, and on a whole month about what freedom actually costs. If today you saw that the account you were told sets you free is really a box you can't open, send this episode to one person who needs to ask who's holding the key to their own money.

The gold is the lie.

As always, I am your host, The Real Jason Duncan, and Jesus is King.