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MagicChances are – you’ve looked at your 401k (or similar) statement lately and noticed that it has gone up in value.  Congratulations!  But on further inspection, is that growth a result of your wise investing decisions – or is something else going on?

Before you conclude that your growing balance is a result of your investing prowess – remember – you’ve put more of your own money in since the last statement, and perhaps your employer has too.  That certainly makes your statement balance bigger. 

In fact, only after subtracting your new contributions and any employer matching contributions since last period – can you begin to determine how much true growth (or shrinkage) you’ve realized.

But you still have a problem.  If your plan is of the tax-qualified variety (401k, 403b, 457, SEP, SIMPLE, IRA) – you don’t own all the money your statement reflects.  A large chunk belongs to Uncle Sam – and has – since the day it hit your account.  You’ve just been acting as a custodian for his money.

How much belongs to him?  Who knows?  We can’t know until we know what tax rate will be in effect when money is taken out.  That means Uncle Sam has an open ended partnership position in your retirement account – and will determine how much that share it at some future point –at his sole discretion.   

And that doesn’t even take into consideration that you’re paying the investing fees and commissions on his money from the day it goes in – to the day it comes out. 

I know – “surely the tax deferral and matching funds outweigh those negatives” – right?

Again – who knows? 

Slowly but surely, evidence is mounting that the good old 401k and its cousins may not be the no-brainers they were made out to be – and people are searching for alternatives with lower fees, lower taxes, and less investment risk.

Maybe it’s time for you to do the same.  We’re showing these kinds of plans to savers every day.