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We help our clients pursue their wealth management goals through careful advice. We offer our customized wealth management solutions to wealthy individuals and families, family offices, charitable gift programs, endowments and foundations. Call us at 972-386-6639 to schedule a personal wealth review.
June 29,2011

Should you invest past your Company’s 401(k) Match? Probably not! 

First, let me explain. I am not telling you not to save for retirement. In fact, most financial planners will tell you to save and invest at least 10% of your income. And according to a Ask the Expert CNN article, you should invest more than 10%. What I am saying is the money past your companies match may be better off in another type of account. And if your company does not match at all, then you might be better off investing outside of your plan entirely. Why? Taxes! We have a way to increase your retirement income by 25-40% that we will discuss later but money withdrawn out of a 401(k) at retirement is taxed at your ordinary tax bracket. And, if you did not have to pay those taxes, you WOULD be saving or increasing your income by 25-40%. There might be a better alternative. Sure the money invested provides a tax deduction but are you better off taking a deduction on the seed but pay taxes on the harvest?  Again, probably not! Simply put, the major advantage to a 401(k) is NOT the tax deduction but the tax deferral on any gains. So what is the answer? Invest in a 401(k) or not? Well it depends. It depends on a few pieces of your financial puzzle. If your company matches, then we say to invest in your 401(k). And depending upon your situation, invest up to the match and invest the difference somewhere else.


For example, you're 35, earn $100,000 a year and immediately start socking away 10 percent of salary into a 401(k) account. Everyone will tell you to invest up to the match but what would be the difference if you invested the remaining $5,000 in another account.


In other words give up the tax deduction (the seed) on the remaining $5,000 and invest it elsewhere. In our opinion YES!


We have a creative strategy that will provide not only tax deferral like your 401(k) but also provide TAX Free withdrawals or tax free withdrawals on the harvest. Our program will out perform your 401(k) simply by not having to pay taxes on the withdrawals. 


If you compare $5,000 in your 401(k) and $5,000 in our program, the numbers would look like this. Giving the assumption that you want to retire at 65 and both accounts earn 6.35%, you would end up with around $650,000. But if you started to withdrawal $64,000 out of your 401(k) a year and had to pay 30% in taxes ($19,200) on those withdrawals, your 401(k) account will run out of money in just 9 years or when you are just 74 years old.


Then what?


Our solution, by giving up the tax deduction and implementing our program enabling you not have to pay taxes on the $64,000, your account will pay you all the way to 100 years old. And if you died at 100, it would still pay your family a death benefit of over $2,000,000.


So you can take the deduction now and pay later or give up the deduction and reap the rewards. We call this phenomenon the “Taxation Effect”


If your company has a 401(k) but does not match, our program will work for you as well,.


We have a Free E-Book that you can download that will walk you through our program step by step that includes interactive calculators. You will have the opportunity to provide your age and income and expectations. Email me at mark@universalfg.com and I will send you the free link.


My name is Mark S. Pincus and with over 25 years of experience in the financial services industry, I have been involved in almost every aspect in the business. From individuals saving for their children’s college to creating and structuring various complex business financing options, I have the experience to help you accomplish all of your financial goals.


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