Should I Invest In My 401K

What you most value should be a big part of how you analyze investments and assets like the 401K.

In today's Better Wealth Episode, I set up the framework that will be giving you clarity on making better decisions regarding whether you should or shouldn’t invest in a particular asset. Today I focus on using that framework to evaluate the 401K, which is a tax advantage defined contribution account offered by many employers for their employees. In our framework we look first at the clarity of what you want in life. Then you need to understand what an asset is and it should be something that is helping you get closer to your ideal life. Finally, we analyze the outcome of your assessment. Once we know our outcome if we hold the 401K up to the 11 Attributes of “The Perfect” Asset how well does this 401k hold up to these attributes?

The 11 Attributes of “The Perfect” Asset:

1. Safe (Low Risk) - Your money suffers little to no risk of loss. 
2. Liquidity (Control) - Your money is accessible either for emergencies or for opportunities. 
3. Growth - Your money multiplies at a competitive rate of return. 
4. Passive Cash-Flow - Your money produces income on its own. 
5. Leverageable - You can use your money as collateral.
6. Private - Your money grows without restrictions and has creditor protections. 
7. Tax - Deductible - You can subtract any money you put into the account from your taxable income.
8. Grows Tax-Free - Your money grows without being taxed. 
9. Tax-Free Distribution - You can access your money without paying taxes on it. 
10. Protection / Legacy -  You are provided for in the event of tragedy and are self completing.
11. No contribution limits  - You have no limits to how much you can fund in this asset. 

Episode Links & Resources: 

Episode #279: The 11 Attributes Of A Perfect Investment

Episode #192: Avoid Retirement Risk with Distribution Expert Wade Pfau

Episode #221: How Consumers Became Savers with the Father of the 401K, Ted Benna

Episode #231: How To Create Your Retirement Income Strategy with Jason Sanger

The 11 Attributes of “The Perfect” Asset:

1. Safe (Low Risk) - Your money suffers little to no risk of loss. 
2. Liquidity (Control) - Your money is accessible either for emergencies or for opportunities. 
3. Growth - Your money multiplies at a competitive rate of return. 
4. Passive Cash-Flow - Your money produces income on its own. 
5. Leverageable - You can use your money as collateral.
6. Private - Your money grows without restrictions and has creditor protections. 
7. Tax - Deductible - You can subtract any money you put into the account from your taxable income.
8. Grows Tax-Free - Your money grows without being taxed. 
9. Tax-Free Distribution - You can access your money without paying taxes on it. 
10. Protection / Legacy -  You are provided for in the event of tragedy and are self completing.
11. No contribution limits  - You have no limits to how much you can fund in this asset. 

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