The 501k Explained and Plan Review

The 501(k) retirement plan is gaining a lot of traction as it claims to offer more advantages than the traditional 401(k) retirement plan.

These claims have been backed up by the very person who created the 401(k) plan, Ted Benna, who says that Wall Street and Big Business debauched the 401(k) concept and it should be destroyed.

In an interview with the Palm Beach Research Group, Ted Benna reveals 3 risk factors that could affect your 401(k) plan. He also says that these risk factors could reduce your savings by almost 40%, which is significantly high.

In the interview, he explains why the 501(k) plan is a much better retirement plan alternative than the 401(k) plan because it’s not government sponsored.  

Ted Benna, a retirement consultant is highly acclaimed for finding an ingenious way people can increase their retirement savings based on the stipulations of Internal Revenue Code Section 401(k).

What is 501k?

The 501(k) is a name that the Palm Beach Research Group has given their concept, which is similar to the Bank On Yourself concept.

The Bank On Yourself concept is a strategy whose focus is on safe savings and building of wealth. This strategy is purely based on a high cash value dividend paying whole life insurance. The 501(k) is based on the same whole life insurance policy.

A cash value dividend paying whole life insurance is an insurance policy that helps you build up your savings, much like a savings account. But the money you accrue is not taxed.

The policy does more than pay out a death benefit. It also a source of an income. So if you have a cash value whole life insurance policy and you want to retire, you never need to worry about cash because the policy provides living benefits.

With this type of policy, when you pay your premiums, your cash value increases each year. But this cash can also grow in many other ways.

The 501(k), according to Ted Benna, is a better retirement plan alternative compared to the 401(k) plan. And these are his reasons:

  1. The 401(k) plan could be repealed by the government – in other words, the government could overturn the tax-advantages that come with these plans. This means you will not be able to feed your 401(k) account with more cash or the amount you put into your account will reduce significantly.
  2. An imminent market crash that could see all your savings in your 401(k) account wiped out.
  3. Hidden fees that could reduce your retirement savings considerable. And most people do not even know about these hidden fees.

My Opinion on the 501k

The 501k plan is a copycat version of the Bank On Yourself concept. So despite the fact that Palm Beach Research group is trying to get people to think that it is a new concept, it is not.

Nevertheless, the 501k plan has proven to have greater advantages than the 401k plan in these ways:

  • You can contribute after-tax income, which you can access later without paying income tax
  • There is guaranteed growth of your retirement income
  • 501k plans are not volatile. So you never have to worry about losing money even when the marketing is performing poorly. Your principle remains intact and every coin of growth you have earned in your 501k plan is yours for the keeping.
  • With 501k plans, you don’t have to worry about by penalized by the government. There are also no restrictions. If you want to withdraw money from your plan early, you can do it and you’ll not be penalized. So in case of emergency and you need money quickly, you can take it out of your 501k plan.
  • 501k plans have tax advantages. You can access your principle and interest without paying any tax.
  • You can take out money from your plan any time you want.
  • The death benefit that goes to your family could be way more than you paid for during your lifetime. Your beneficiaries will continue to receive the money tax-free and without having to go through probate.
  • With 501k plans, you can be guaranteed a peace of mind. This is because there is no volatility and there is guaranteed growth of your money.
  • He 501k plan avoids the pitfalls of the 401k plan.

When you compare the 501k plan with the 401k plan, a number of things stand out. For example, with the 401k plan, you cannot access your money whenever you want or when you really need it. In other words, you cannot withdraw your money early. If you decide to withdraw your money early, you’ll be penalized.

The other thing is with the 501k plan you can borrow money from your account whereas, with the 401k plan, you can only borrow if your plan enables you to do so. If it does, the money you borrow, you will have to return it with interest.

The other issue with 401k plans is the high fees associated with them. Surprisingly, not many people are aware of the hidden fees that come with 401k plans. A survey done by the American Association of Retired Persons found that over 65% of the participants believed that there were no fees associated with the 401k plans.

Should you get a 501k retirement plan or stick with a 401k

Given the advantages the 501k plans have over the 401k plans, it would make sense to go for the 501k retirement plan. But before you go putting your money in any retirement plan, make sure you know everything you need to know about the plan.

Find out every bit of information about the retirement plan you are considering buying. Find out about its pros and cons, and if there are any fees associated with it.

In short, consider all your options before settling on a retirement plan including your goals and what you expect in terms of cash flow. The 501k plan concept is viable and you can easily fit it into your financial plan.

Robert Taylor Smith
 

Robert's motto is to start "with the end in mind." He married the love of his life in December 2016. Together with his wife Tanya, they're putting the building blocks in place for their eventual retirement. He's taken over the mantle at retirementsavvy.net and hopes to share his experiences with our readers.

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