The mainstream advice on using 401(k), 403(b), IRA, and Roth IRA accounts to build wealth is flat-out wrong if you want to retire early or achieve financial independence.  I talk through the reasons why you should limit your use of these types of accounts if you want to achieve better results than ordinary investors do.  I also explain the limited exceptions to my advice on retirement accounts.

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Section 1: Background

  • Strengths and weakness of retirement accounts
  • Annual contribution limits

Section 2: The Uncomfortable Truth: They Own Your Money

  • Never forget: Taking control of your own money puts you on the path to financial freedom
  • Mandatory contribution schemes – it’ll happen sooner than you think
  • Politicians are always thinking of ways to put themselves between you and your money

Section 3: It’s Better to Pay off Debt First, Including Your House

  • Most investors don’t achieve a high enough return in retirement accounts to beat what they’re paying on debt
  • There are plenty of very good reasons to rent – Just be aware that if you’re renting, you’re paying your landlord’s debt, and the balance isn’t dropping
  • A prolonged period of low returns is coming – or something much worse

Section 4: Max Out Your Health Savings Account First

  • If you have a qualifying high deductible health plan (HDHP), you are eligible to contribute to a Health Savings Account (HSA)
  • Limits and conditions
  • If spent on qualifying expenses, the money will never be taxed.  That’s never, not ever!

Section 5: A Better Way

  • Contribute enough to your 401(k) to get the employer match, not a penny more
  • If not covered by a 401(k), 403(b), or 457 plan, contribute $5,500/year to an IRA instead
    • If you are covered, only contribute if you don’t already have an IRA or Roth IRA yet
    • There are limited circumstances that let you take penalty-free withdrawals
  • Be an active investor
  • Build a truly diversified portfolio
  • Develop a business, or invest in someone else’s quality business
  • Invest in real assets that produce cash flows

Section 6: Exceptions

  • You are certain you will be in a lower tax bracket for a period of time, starting soon
  • Your company has excellent fund options in its 401(k)
  • You are already doing all the things listed above, have a high income with extra money to spare, and understand all the downsides of traditional retirement plans
  • You plan to work until you drop
  • You hate investing, and will accept mediocre to poor returns just to not have to think about your money


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