What is a 501(k) Plan – Is it a Safe Retirement Strategy?

by | Aug 7, 2019

If you have arrived at this page you probably have read about the 501(k) plan from the Palm Beach Research Group that has been flooding the internet and their readers in boxes with a “warning” issued by Ted Benna the “Father of the 401(k).

Is a 501(k) a New Plan?

The short story is that the 501(k) plan is just another name for the Infinite Banking System that was originally made popular years ago by Nelson Nash in his book Becoming Your Own Banker and more recently by the likes of Pamela Yellen in her book The Bank on Yourself Revolution.

The fact is that these “Plans” are all based on a properly structured high cash value dividend-paying whole life insurance policy.  Here at Alliance Group Financial we refer to this as The Family Banking System™.

If you landed on the Palm Beach Research Groups page you were probably forced to watch a lengthy video that provided little information but spoke about how Ted Benna and over 54 different congressmen and White House officials are using this strategy that the Government “does not want you to know about”.

They say the reason you have not heard about it is because it is a non-government plan, which is true and that it is a very safe alternative to the risky stock market, which is also true.  What they fail to tell you is that a great portion of Americas wealth was actually put into these high cash value life insurance policies prior to Congress passing the Revenue Act of 1978.

When the Revenue Act of 1978 was passed there was a provision that was added to the IRS code – Section 401(k) that has become one of the most popular ways for employees to save on a tax deferred basis, commonly known today as the 401(k) plan.

Speaking of IRS codes, The Palm Beach Research Group has actually done a disservice by referring to this strategy as a 501(k) plan as there is already an IRS Code 501(k) and it has to do with Child Care Organizations and their treatment as educational organizations under IRC 501(c)(3), I guess some people will go to any length for marketing.

Other names that the Palm Beach Research Group has used to market this excellent strategy are the “770 Account” and President Regans Secret 702(j) Retirement Account.

The bottom line is that the strategy of using a properly structured high cash value dividend-paying whole life policy for safely stashing large amounts of cash away has worked for decades in the past and it will still work for you today no matter what you choose to call it.

Times are changing and we feel that we need a New Paradigm for Deferring Taxes.  The stock market is unsettled and it appears that we are once again on the precipice of the next Big Fall.

Let’s face it when the market drops 700 points in a day it is enough to make your heartbeat skip and give most people second thoughts about how secure their retirement plan is. We need to remember what Warren Buffet says about Investing.

One of the great benefits of The Family Banking System™ is that it is designed to create financial certainty for you and your family.

If you are like most people then you want to know how you can take the right steps to make sure you are protected when the next big downturn happens in the market.  We have outlined these strategies in our FREE REPORT Creating Financial Certainty in Uncertain Times.

The good news is that this little know strategy is available to almost everyone.  You don’t need to be Daddy Warbucks for this to make sense and you don’t need to be making obscene amounts of money either.

With The Family Banking System™ you can easily take control of your retirement in a non-government plan where you decide how much you can contribute and when you will take distributions.  Additionally you will have the benefit of having your assets protected from market volitility, lawsuits (in most cases) and you will be leveraging your assets into the future.

What are the Risks of a Traditional 401(k) Plan?

When Ted Benna the “Father of the 401(k) first looked at the IRC Code 401(k) he saw it as a way for the everyday worker to save more and supplement thier pension plans.  He could have never dreamed that Corporate America and Wall Street would together use this as a way to shed risk and make obscene anmounts of money off of the unsuspecting American workers.

In fact in a 2018 Barron’s article The Inventor of the 401(k) Thinks It Has Gone Awry, he discusses how Americans have socked more than $5 trillion into 401(k) plans and how there are many issues with the way these funds are currently managed.

A few of the isses that Ted talks about are:

Stock Market Volitility

As we have been able to see from current economic events we are getting close to the next major correction in the market, it is just a matter of time.  If we have a major correction and 40%-50% of your portfolio happens to get wiped out as it did for a number of people on the verge of retirement in 2008 what are you going to do?

Most financial planners will show you getting a 5% to 6% return on average.  What happens to your retirement plans if this is not the case?

Government Sponsored Plans Could Be Repealed

Since the government is is charge of these plans they make the rules and they can change the rules.  For example they could decide that they no longer want to allow pre-tax money to flow into these plans as they need to increase revenue.  They can also change when you can start to take withdrawls and more importantly they can adjust the Required MInimum Distributions to get those untaxed dollars out of the retirement accounts regardless of if you need the money or not, thus making it taxable now and penalizing you if you don’t. 

Did you know that the current tax rate for not taking the RMD is 50% yes 50%!

“If an account owner fails to withdraw a RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%.”

Fees, Fees and More Fees!

The third risk is fees. Fees are more than a ‘hidden’ danger. While the annual fees might not seem like that much at first glance they are called a lot of things: Fund Management Fees, Advisory Fees, Trading Commissions, Transfer Fees, Custodial and Service Fees.   According to FeeX.com “The average household is paying $155,000 in fees over the course of their lifetime”. That’s a lot of cash that could be growing for you and your family but instead it is going to Wall Street.”

If you want to learn how to position yourself during these turbulent times ahead then make sure to get the FREE report below.

Ted Benna Says that plans like the 501(k) also know as The Family Banking System™ Avoid Risks of Traditional Qualified Plans.

In a recent CNBC interview he said that “Traditional 401(k) plans are too complex and expensive for small businesses”  He said that he has run into 401(k) fees that are as much as 2.7% annually, that is if the market goes up or down!

He also feels that there are other alternatives to investing your entire retirement savings in the stock market which is very volatile at times.  One of the alternatives is using a plan like The Family Banking System™ which is similar to Bank on Yourself and uses a properly structured high cash value dividend-paying whole life insurance policy based on Section 7702 of the U.S. Internal Revenue Code.

How Does a 501(k) Plan Work?

Section 7702 of the IRC determines how the cash values within these high cash value permanent policies are taxed, and they are very advantageous.  Simply put this is a very safe savings and wealth building strategy that has been used for decades by those who have been fortunate enough to know about it.

It is important to understand that this is not the same type of permanent life insurance policy that some of the “financial gurus” love to hate and call a waste of money.

It is also important to understand that you can not do the same thing with ain IUL or Indexed Universal Life life policy, even though there are those out there who will tell you otherwise.

How Do I see if a 501(k) or Family Banking System is Right For Me?

The process is pretty simple, we get you connected with one of our specially trained Family Banking System™ Advisors and they will lead you through what we call the Wealth Transfer Analysis process.  Remember it is very important to use an Advisor who has been trained on how to properly structure your plan so that you build cash values as quickly as possible.

There are never any upfront fees to talk with one of our Advisors and we will always work with your best interest in mind,  Our Advisors are specially trained in the Family Banking System™ and will prepare your FREE Analysis and personalized recommendations.