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401K and IRA

You asked why I don't like to invest money into 401K and IRA funds. Well, I do. The problem with a 401K is in the government management and oversight. The small business I own is designed for heavy weight at the top of the salary scale as it's a Subchapter S corporation. That means all of the profit passes through to the principal shareholder at the end of the fiscal year. That pushes my income to very high levels sometimes, much higher than the employees. As a result, the audit on the 401K causes a reimbursement of funds to make it "fair."

Every year I get a fat check back out of the 401K that I don't want. So what' the point of investing money into a retirement fund that refuses to grow past an arbitrary limit. it's a waste for me and so I don't put excess money into it.

The IRA is another fun vehicle. There are limits on how much you can put into that type of fund. Then you have to hope that it grows. I have a Legg-Mason IRA and for about 5 years it did nothing. It lost some money and then finally started to get some life. I'd rather not put money into an idle account like that when I have more fun things to do with it.

The best investment for your money is yourself. I like to use my money to invest in curious business plans, new pursuits with technology, and keeping myself from getting bored. I've spent a good amount of money over the years creating mobile games, experimental web applications, and new business ideas. Some of those ideas were met with government resistance and so I am burned out on them. The mobile games were expensive, but fun. There's very little opportunity in the mobile space. You have better luck playing black jack with your money.

Instead of taking more money from my clients, I choose to throttle the money machine and slow down the burn. Helping my clients to maintain their cash flow means there is longer-term cash flow for my business too. Sure, I could take more money and put that into a 401K or IRA and get that reimbursement check every year. That doesn't really help me though. We all need long term cash flow opportunities, and we can get those only by taking what we need instead of taking all that we can get.

I hope that answers your question da, tineh, john, lucy ...

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