Damn The (tax)Man

Hiya!


I'm just going to get into it. When I quit my job, I had a little bit of money in a 401K account. My older brother told me over the holidays that he'd invested a couple thousand and doubled it in approximately six months. His investment strategy? Well, my bro isn't a finance guy, he's a graphic artist. He put his money into netflix, let it sit for several months and then sold shares to buy into Apple and Amazon. No rigorous prospectus analyzing, no algorithms to beat the market. Just, sound common sense. Someone in finance might say there are better ways to go about investing. And they might be right. But, in my book doubling your investment in under a year is a great return.


Now let's switch over to 401K accounts, these supplements to retirement income that every financial adviser will say should never, ever be touched until you're 106. These "safe" fund investments, that grow incrementally over decades upon decades, shouldn't be touched b/c they need umpteen years to amount to any kind of decent number. But, what financial advisers won't tell you is that index funds and mutual funds historically don't beat the market. If you monitor yours, you'll see that a "diversified" fund portfolio comes up short and then ahead and yes, theoretically, over 30 years it balances out and you have tidy sum and have made a profit. 


But, I ask, does it make any sense to let your money sit and gain (if you're lucky) 10% per year, when you can invest in stocks of successful, growing, companies and make a 100% return in one year? No. It does not.


And did you know the government penalizes you for withdrawing from your 401K before you're 59.5!? It's for your own good. Because you're an idiot. And mutual funds are what's best for you to build a nest egg outside of meager social security. And a 10% surcharge for withdraw is a big enough incentive to deter idiots from early withdraw, especially if they need the money, as is a 20% federal tax. Oh wait, no, no it is not. Because someone who doesn't know anything about investing, who thinks they're utility will be maximized for withdrawing it, will withdraw it anyway.


Not only do I find it a personal insult to my intelligence to be charged this 10%, but I find it unfortunate that people take it for granted that a 401K is sacred, especially when in the medium run, considering the opportunity cost of a lower return, it's not a good investment. 


So, for the 2.5 people who read this blog....I think you know what to do.