1. Common sense
The government penalizes you for touching your money before the age of 59½. That is enough for me to be wary of retirement accounts. It's my life, my money, and if I want to access it, I should be able to. The insinuation that I can't handle having money to my name without spending it is insulting. To boot, Wall Street makes out like thieves under the IRS rules. They get to play with your money for decades and never have to worry about you coming to ask for even a dime.
2. The tax lie
We hear all the time about the great tax benefits that come with retirement accounts (investing pre-tax dollars). What we don't hear about is that you pay taxes at 59½ when you withdraw. Do you know what the income tax brackets will be 20, 30 or 40 years from now? Me neither. And neither does the government. Considering the direction of our country's debt, I'm not willing to assume taxes will be lower.
We need a better system. Ten thousand baby boomers retire every day, and they are the 401(k) and IRA guinea pigs. At any moment their portfolios could drop to zero. In my opinion, the government — not Wall Street — needs to come up with a plan. Social Security hasn't worked, and the current system is too precarious since it could leave millions of Americans with nothing at anytime. Not that the current system is even working. The Insured Retirement Institute says 35 million baby boomers have zero saved for retirement, Fidelity says over half of Americans won't be able to cover basic expenses in retirement, and Vanguard says boomers over the age of 65 have an average 401(k) balance of $196k.
We are told not to time the market, but that is precisely what retirement accounts force us to do. Every eight to ten years, there is a bear market. During that time, many retirees will have no choice but to sell (yes, you are actually forced to sell at a certain age or else you are penalized by the IRS). And if the time you have to sell the market is at bottom lows? Or if the bear market lasts ten years? Oops, guess you better start looking for a job. This is quintessential market timing that the government and Wall Street are encouraging.
5. The winner is always wall street
Today, everyone is expected to learn to invest if they want to retire. If you don't learn? You pay someone on Wall Street to do it for you. If you do learn? You still pay Wall Street: Every time you buy a stock, mutual fund or exchange-traded fund (ETF), someone on Wall Street gets paid. This is whether you make money or lose money. Wall Street is the house, and we are the gamblers. The government watches from the sidelines and hopes the market keeps going up.
6. We are set up to fail
Not only is the government supporting a system that largely enriches Wall Street, but it isn't even leveling the playing field for the rest of us. Investing 101 and financial education should be required in schools. Retirement accounts came to life in the '80s, and last time I checked, there has been no reflection of this type of education required in public schools. Of course, the financial services industry is grateful for our ignorance.
7. It's not always a good time to buy
I'm writing this in August 2018. The stock market could be considered expensive. A problem I have with retirement accounts is that Americans contribute to the stock market regardless of price. This statement is aimed largely at the increasing popularity of index funds that buy the entire stock market. It's possible the stock market could go up forever, but according to most measures, we are nearing the top or are already there. Americans are encouraged to make contributing to their retirement accounts a habit, when is not always sound advice.
8. I have bigger plans
A friend of mine is 25 and doesn't invest in retirement accounts. One day I asked him why. His response? If by the time I'm 60 years old I am relying on a 401(k) or IRA account to fund my life — it means I failed. He articulated my sentiments exactly. I have aggressive net-worth goals and plenty of ideas for how to get there. Putting aside 10% of a salary for 30 years and hoping it's enough to support me when I'm old is setting low life standards. Every dollar in a retirement account is a dollar not being used to invest in myself, in real estate, in my business, etc.
So, do I not save for the future?
When I was first heard about retirement accounts at age 25, they seemed like a great deal (company match! pre-tax investing!). However, as I mentioned, the more I learned, the less sense they made to me. Plainly speaking, I think they are a giant marketing scam created by the financial services industry that the government went along with because it lacked any better plan.
The idea of putting all our eggs in a stock market basket is asinine. What happened to saving cash? Owning physical assets? Starting a business? Yes, cash isn't ideal in the long run, but having a pile of cash on hand comes in handy when a good opportunity comes along. People who put all their money into retirement accounts miss out on seizing many opportunities because they aren't liquid. I also just can't make sense of the fact that everyone is encouraged to invest in the stock market when so few people actually understand it. Why would you trust something you don't understand?
So do I not save for the future? Of course I do. And yes, I even invest in stocks. I buy individual companies that I have researched and believe am buying at a good price. This can be done through taxable accounts, and I pay a capital gains tax of 15%, which is lower than I have any chance of paying through retirement accounts. I also own real estate and have my own business. I have plenty of plans for my money, but none of them will involve locking it up with Wall Street and hoping it's more valuable and taxes will be lower 30 years from now.