In this episode of Financial Advisors Say The Darndest Things, host A.B. Ridgeway explores the complexities of 401k plans, focusing on whether they are always a good investment—especially when there’s no company match. We dive into Dave Ramsey's advice to a caller, examine the difference between low and high returns, and unpack the concept of compound growth versus compound debt. A.B. Ridgeway also offers insight into the tax benefits of contributing to a 401k and why the performance of the investments inside the account matters more than the 401k itself.

Key Takeaways:

Company Match Isn't Everything: Even without a company match, contributing to a 401k offers significant tax advantages like pre-tax contributions and tax-deferred growth.
Compound Growth Works Both Ways: Compound interest can significantly accelerate wealth accumulation in investments, but it also applies to debt—creating what A.B. Ridgeway calls “compound debt.”
It's Not the 401k, It's the Investments: The performance issues aren't with the 401k itself but with the investments inside. Moving funds into an IRA post-employment can open up more diversified investment opportunities.

Memorable Quotes:

"The 401k itself is not an investment; it's just the coat that keeps the investment warm."
"Compound growth doesn’t just happen on the positive side. We might even coin a new term—compound debt!" — A.B. Ridgeway
"Four and 12 percent isn’t three times more; it's like 30 times more, because compound growth works on a curve, not a straight line." — Dave Ramsey

Stay tuned as A.B. Ridgeway delves deeper into how to navigate your financial future with wisdom and strategy, reminding us that understanding the fine print can make a world of difference in our investments.

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*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.

video/audio credit: Dave Ramsey