Are 401k Plans the Best Investments for Retirement?

Posted by Grace under Investing on October 11, 2014

What are 401k Plans? Find out 401k contribution limit. Learn how does a 401k work today. Find out if 401k is good investment for retirement.

Do you have 401k plans contributions for “retirement”? Retirement planning is one of the best plans you should have in your life, agree or disagree? If you are agree, then keep on reading and decide if 401(k) is still the best or worst investment vehicle to retire rich and wealthy. While I am reading the book of Robert Kiyosaki’s Rich Dad’s Cashflow Quadrant : Guide to Financial Freedom. I decided to inform the readers of from (USA) United States of America about 401k plans.


One of my goals in life is to retire rich and achieve financial freedom. I am on my way to that goal, through studying, reading books and magazines and attending investing seminars, I gain a lot of knowledge but the skills in investing and business management of course are gained from my own experience.

GSIS and PERA in the other country has similarities to 401(k), my husband is contributing in GSIS Personal Share amounting to P1,669.41 ($38) per month or equivalent to 8.12% of his gross compensation as a government employee. This is automatic deduction from his salary every month, but aside for GSIS Personal share, he is investing in stocks, mutual funds, some real estate properties and trust accounts in the banks.

What is a 401k?

Going back to the topic about 401(k), this is for any citizens of USA who are employed or self-employed that want to make a contributions, and this contribution is for their retirement age. Is 401k the best or worst investment for your retirement? Let’s continue this topic, and ask yourself after you read what Robert Kiyosaki’s says about 401(k).

401k Plans – Best or Worst Investment?

Simple Definition of 401(k)

A 401(k) is a long term savings plan for employed individuals in USA sponsored by an employer. It is an automatic savings plan made before the paycheck is received by an employee. This simply means, the money saved is for retirement.

Benefits of 401k Plans

There are lot of benefits if you contribute to 401(k) plan, benefits such as tax advantage
and employer match programs,investment choice of the contributor and flexibility of terms, loan opportunities and hardship of withdrawals wherein it is good if you will use the funds for your retirement.

The contributor can choose low to high risk investment instrument depending on how capability in taking such risk. Some example of low risk investments are short-term bonds.

Who Can Contribute to 401(k) Plans?

Anyone who wants to participate in 401(k) plans should be at least 21 years old and employed full time.

Are 401k Plans the Best Investments for Retirement

Image Credit: Investment zen via Flickr CC 2.0

Some companies with the best 401(k) plan matches United Airlines (pilot, flight attendant and ground employee plan), Nucor Corporation, Shelter Insurance Company, ManTech International Corporation, Brunswick Corporation, Hercules Incorporated, etc…
Example of Future Value Computation of 401(k) contributions.
Years Until Retirement: 25 years
Annual Salary: $35,000.00
Annual Salary Raise: 2%
Pay Period: Monthly
401(k) Contribution Percentage: 5%
Current 401(k) Balance: $0.00
Employer Match:  100%
Max Employer Match: 20%
Annual Savings Return: 8%

Data Analysis:
Contributions: $1,750 Per Year or 5% of your annual salary ($35,000.00)
Employer Matching: $7,000 per year at 20% of $35,000.00
Value of Your 401(k) plan in 25 Years: $826,769.04
Total Interest Earned: $546,503.92

Note: Taxes are not included in this sample 401(k) computation. This computation is for information purpose only and not guaranteed to acquire the said future value. We’ll talk about future value of 401(k) that can also be found at blog.

Are 401k Plans the Best Investments for Retirement?

Robert Kiyosaki’s Talks About 401k Plans

In his book Cash Flow Quadrant, he talked about 401(k), and it makes me feel excited to write about it. I know you are familiar with this rich guy investing in the real estate, teaching people how to become financially free and really wealthy through publishing business and finance books such as “Poor Dad, Rich Dad”, “Retire Young, Retire Rich” and “Cashflow Quadrant”.

Trivia: Robert Kiyosaki, was born on April 8, 1947 in Hilo, Hawaii United States and married to Kim Kiyosaki. Robert Kiyosaki, a former U.S. Marine Corps, a real estate investor, entrepreneur, active in spreading financial literacy all over the world and has a Net Worth of 80 million dollars as of October 2014. An American Multi-Millionaire.

If you think Robert Kiyosaki has the rights or (in the authority) to talk in a different ways (let’s just use the word “constructively” not “negatively”) about 401(k), now keep on reading and decide whether you continue to contribute in 401(k) plan or not.

The 401(k) company makes money, even if you lose money.
A 80% over 20% investing game and a 100% over 0% risk taking…

A typical 401(k) plan takes 80 percent of the profits. The investor may receive 20 percent, if they are lucky. The investor puts up 100 percent of the money and takes 100 percent of the risk. The 401(k) plan puts up 0 percent of the money and takes 0 percent of the risk. The 401(k) company makes money, even if you lose money.
35% Taxed for 401(k) Gains
15% over 35% gains…

Long term capital gains are taxed at a lower rate of around 15%. But the 401(k) gains are taxed at the ordinary earned income-tax rate of around 35%, the highest of the three types of income, which are ordinary earned, portfolio, passive. If you want to take the money out of your 401(k) early, you’ll have to pay an additional 10% penalty tax. Aside from profits and risk issue and 35% taxed for gains, what else do Robert Kiyosaki says about 401(k)? Interesting, right?

401k Plans and the Stock Market Crash Issue

Such interesting issue about insurance, for your money when there is a crash in the market place.

To drive a car, I must have insurance in case there is a crash. When I invest in real estate, I have insurance in case of fire or other losses. Yet the 401(k) investor has no insurance to prevent losses from market crashes.

401k Plans are for People who Plan to Retire Poor

Agree or Disagree? It is up to you, you can ask Robert Kiyosaki or read his book cashflow quadrant to learn more about investing aside from your 401(k) plan…

That is why financially planners often say, “When you retire, you’ll be taxed at a lower tax rate.” They assume your income will go down in retirement into a lower tax bracket. If, on the other hand, you are rich when you retire and you have a 401(k), you could pay even higher taxes at retirement. Smart investors understand taxes before investing.

Tips for 401(k) Contributors

It is up to you if you continue to contribute to your 401(k) plan, if that’s what you want. It is your money, and you can do whatever you want for each dollar you make. However, you have to think if the plan can help you meet your retirement goal or financial freedom.

If you just want to, you can contribute to 401(k) and at the same time start investing in stocks and real estate, but investing require financial education. Learn to invest your money the smart way. In investing, you can maximize your hard-earned money to grow, simply means, you can retire as rich as you want to be. As Robert Kiyosaki stated in his Cash Flow Quadrant book;

I am not saying 401(k)-type plans are bad, although I would never have one. For me, they are too expensive, too risky, too tax-inefficient and unfair to the investor. I am saying there are ways to invest, but they require financial education.

401(k) according to Robert Kiyosaki
1. The 401(k) company makes money, even  the investor lose money
2. 35% taxed for gains
3. No insurance during stock market crash
4. 401(k) is for Poor People Planning to Retire Poor

Reference: Rich Dad’s Cash Flow Quadrant: Guide to Financial Freedom, by Robert T. Kiyosaki, page 127 – 129 Plata Publishing, LLC 4330 N. Civic Center Plaza, Suite 100, Scottsdale, AZ 85251

Now, as I have said awhile ago, after you have read what Robert Kiyosaki says about 401k in his book Cash Flow Quadrant, you have to think and decide if 401k is the best or worst investment for your retirement. What do you think about the statements of Robert Kiyosaki? Share your opinion.

Did you find this article useful and worth reading? Consider sharing to your friends and loved ones especially for those who are contributing to 401k plans in USA.

Disclaimer: Trademarks, business names, logos, slogan, some quotes and other photos you found at are owned by other people or their respective companies. Ask financial experts about 401(k) to get a full understanding about investing and have a better plan for retirement.

Update: I would like to share some comment from Facebook. He has a good point of view here.

“Baby boomers in US will soon exit the market due to old age.. They must enjoy now the money invested in 401(k). The Philippines has a different profile, our demographic ‘sweet spot’ is about to enter the labour force for the next 1-2 decades. Let us see these ‘big’ fundamentals on how will they affect the overall scheme on pension plans as time goes on.” – Allan Miranda

Find Out an 401k Advice from Suze Orman if this article make you confuse what to do about your retirement savings account.

Robert Kiyosaki’s Quote to Ponder

“The main reason people struggle financially is because they have spent years in school but learned nothing about money. The result is that people learn to work for money…but never learn to have money work for them.”

May our Almighty God prosper you financially, health and in spirit. Good luck to your financial freedom journey. To get more Robert Kiyosaki’s Quotes and Topics about 401k plan in USA, please subscribe to and like its Facebook page or follow it on Twitter.

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