Transcription
A bad investment, it costs you money. A bad system, it costs you decades. Now, you can recover from picking the wrong stock. You can't recover from running the wrong playbook, especially for 30 years.
Now, the most dangerous wealth system in America right now isn't a meme coin, not a sketchy real estate deal, it's the 401k.
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Today, I'm going to show you why the most responsible thing in personal finance is also the most expensive one. I'm going to show you why the bill comes due at the exact worst possible moment. So, let's go.
Now, we're talking today about the dangers of using a 401k. And there's a lot of reasons why it's dangerous, so let's just dig in and talk about a couple of these. Now, the first one is pretty apparent. The return profile that you're expecting to get on your 401k is not keeping up with the rate of the cost of living increase. That's just the number one. The math isn't mathing. So, if you put 5 or 10% of your savings in every single year, and it's growing at your 6.5 to 8% return, but the cost of living is going up at 8 to 10% a year, how's the 401k going to make any sense? Number one, that's a big problem.
Number two, the 401k has a lot of fees that are put on top of that. So, on top of the money that you're making, now you're forced to be paying fees with part of those returns, which are already less than the cost of living increase.
But ultimately, why I think the 401k is even more dangerous than either of those scenarios is because while you may have a high-value asset, you could have a pretty good stock portfolio inside that 401k, you have low control over the asset. And so, when we look at the assets that we want to use to build our wealth system, we want to think about them from multiple ways. So, for example, what type of asset is this? And then I want to rate it in a matrix of control and value. And so, what happens is, well, maybe it goes up faster than the rate of of cost of living. Maybe it does go up by 10% or 12%. I still have no control over the asset. And what happens is, when I don't have control over the asset, I can't use it in my wealth system to continue to build more wealth. It limits what I'm able to do with it. It limits how I'm able to use it as a tool in my total toolbox of wealth building. And so, while it gives me this sort of false hope of that I'm doing the right thing, and certainly it's better than doing nothing, don't get me wrong. It gives me this false hope that it's what I need to do, it's all that I need to do. And the reality is, if I really want to build wealth, and I need to build a wealth system to do that, the 401k is very difficult to make it work.
So, if the 401k is not the way to do it, and again, certainly better than doing nothing, the goal is that we have to have wealth that compounds faster than the rate of monetary debasement, faster than the rate of the cost of living increase.
Now, again, the government's going to point you at their CPI, consumer price inflation. And they're going to tell you it's 2%, it's 3%, it's 4%, or whatever number they want to tell you today, but that's all a lie. CPI, or as we call it CP lie. If you really want to understand the cost or the rate of inflation, you have to look at the rate of monetary expansion. How fast is the money supply growing? And what you can see, if you look at a couple basic charts from FRED, and we can look at the Fed balance sheet, we can look at the US M2 money supply going up. And what we can see is that over time, the rate of increase increases. And so, it used to be 4 or 5%, then it was 6 or 8%, and currently, over the last 5 or 6 years, is 8 to 10% per year. That's the real rate of monetary debasement, which is the real rate of inflation, which is the real rate of your cost of living going up. And the way you can see this is stop looking at the cost of your chicken McNuggets, or your TV dinner, or your Netflix subscription, and start looking at the cost of the home, start looking at the cost of the S&P 500, the cost of the gasoline going into your car, or the cost of the energy for your home. Look at the real things, and you'll see the cost of those are going up 8 to 10% a year over the last 5 or 6 years. That's the rate I have to beat. So, I need to build a system that can enable me to do that.
Here's the problem. When I look at all the different financial assets that I have to invest into, gold, S&P 500, and Nasdaq, and Bitcoin, and emerging markets, or whatever, only two of them have consistently beat that number over the last 5 to 6 years. That would be Bitcoin and the Nasdaq. The S&P 500 is sort of like a perfect proxy for inflation. It goes up at about that same rate. The same with the median US house. So, if there's only two assets that will actually beat that, what do I do? Well, I could go way out further on the risk curve and I could go into meme stocks like GameStock and I could try to roll options against those meme stocks and I could try to go chase crypto pumps and I could do micro cap stocks, but all of those are very risky. Or, I could take a different strategy and I could take my assets like my real estate and my NASDAQ and my Bitcoin and I can stack them in a vertical stack instead of investing horizontally like most people do and I can engineer a better return profile to beat the cost of living increases and to engineer my ideal outcome. That's the structural difference that we want to do. We want to take the traditional assets, but we need to have control over those assets, which is why the 401K is bad. We have no control over what we can do with that. We can't engineer the outcome that we want, but that's what that's how we need to move forward.
Now, of course, when you're hearing this, you can understand why that the problem for most people isn't that they picked the wrong investment. It's that they were put into a system that is slowly draining them over time and at the worst, it's even convincing them they're doing the responsible thing, right? And that's why a 401K can look great on paper for decades right up until inflation rises, right up until taxes hit, right up until markets drop and then suddenly you're forced to start liquidating assets at the worst possible time. Rule number one, never be a force seller.
So, the wealthy, they build systems differently. They focus on cash flow, they control, they have liquidity and assets that can continue compounding long-term instead of slowly being sold off. Now, that's exactly what I break down inside the wealth operating system. I'll show you how high-income investors structure wealth differently where most retirement plans quietly break down and what a system designed to actually pay forever looks like. You can sign up, there's a link in the description down below if you want to check it out.
Okay, so now let's make this practical for everybody listening right now. So, you have a job, you've been using the 401K, you've been piling in the van for 5, 10, 20 years. What do you do? Well, the first thing I would do is I would try to understand, where is it that I'm even trying to go to? How much income do I need and how much wealth do I need to support that income and by when? That's number one. Where am I trying to go? Then I would look at the plan that I'm on, maxing out my 401k, and try to understand is that going to get me to my goal by the time it's required. If the answer is yes, then great, stay on that track and keep going. If the answer is no, like it is for most people, then the next question becomes, well then, how do I change my trajectory to get to the goal that I want by the time that's desired.
If that's you, like it is for most people, then the question is, how do I do that? How do I engineer a wealth system to get me the additional returns I need to change my wealth trajectory to reach that. So if that's you and then you've realized that shoot, my trajectory I'm on is not going to get me to my goal in time, and you're 20 years into it, well, you could have just wasted 20 years of your life.
Now the problem is that while we can certainly engineer different outcomes, and that's the entire purpose of the wealth OS, there's only so much we can do. If I want to get to London from California, to have to take a plane. But if I want to be there for dinner in 5 hours, that's just not going to happen. It's just not realistic. And so don't spend 20 years on a trajectory that's not going to get to your goal. And if you are right now figuring out that you are not going to reach your goal at the time, time to take action is right now. Don't waste another year. Time is not going to be your friend at this point.
Now most people hear this video and you know, they agree with it and they're nodding their head as they're listening and they're thinking, yeah, I should do something. But then after it's over, they go right back to running the exact same financial system they've been running. But look, you want to change your outcome, you have to do something different. So don't do that. You want to dig in and take the next step, at least watch this video right here that breaks down the actual framework that wealthy people use to build cash flow, preserve assets, and create long-term wealth. Check it out right here and I'll see you over there.