How 401k’s & IRA’s Limit Both Your Control and Accessibility
Having access to and control over your assets is essential to stewardship. God owns everything, but He’s given you certain assets to steward. This term invokes the Biblical image of a great Lord with many properties and business affairs who puts a Steward (or Manager) in charge of them. (An example: Matthew 25:14-30) Can you imagine this steward locking this money away so that his master could not touch the money? Can you imagine this steward leaving this money in an account partially owned by and under the control of Caesar so that his master could avoid (until the future) paying taxes?
Let me ask you a question. Imagine that I approached you and said that I wanted to go into business with you. Let’s say you’ve always liked me, so you’re considering it. You would put up 65-75% of the money needed to start our business and I would supply the rest. In our business, I would pick the parameters within which we would operate, but give you a lot of the flexibility to make decisions about exactly what we do within the parameters that I’ve set. I would also retain the rights to decide when profits would be paid out to the owners. Finally, I would decide how much of the profits you get and how much I get depending upon how I’m feeling. Would you want to go into business with me?
You’d be crazy to, right? What right minded person would enter into a deal like this. No matter how much you liked me, you’re giving me every incentive in the world to take advantage of you. If anything goes wrong with my financial situation, I’ve got a contract that says I can simply keep more of our profits.
How well is Uncle Sam managing his finances? If you’re in one of these plans, haven’t you decided to take on exactly this type of deal with your Uncle? Didn’t you put the majority of the money into this account, but then leave all the real control over how funds are distributed within the account up to the government? Can’t the government change the age that they allow penalty-free distributions? Can’t they change the tax rate that will be charged when you distribute money out of the plan? This wouldn’t be a special tax, just simply a matter of increasing income taxes would do the trick of getting more of your money as it comes out of the plan. But what about special taxes? Have they ever charged an extra “success tax” on those who they feel like have accumulated too much money? It’s not the law of the land now, but will it be when you want your money out?
Even though it would be a first, what if the US Government doesn’t change the tax rates, laws, or rules, but the Lord calls you to make a dramatic change in your life? He might call you into the mission field, either at home or abroad, or might simply move you to another country. Maybe He calls you to give money to a person or charity which does not fit the definition of tax deductible charity (or the Government eliminates the charitable deduction which has always been an important part of our tax code (our new President has already spoken about reducing this.) In all of these circumstances, you would have put yourself into a trap by having your money locked into one of these plans. Is this a situation that allows for Spirit-lead stewardship?
Many people begin putting money into these plans when they don’t even have sufficient savings yet. If an emergency comes up, they must access the plan at a penalty. This happens all the time. These plans should never be entered into until sufficient savings are in place.
Tomorrow we’ll discuss the lack of velocity associated with 401k’s and IRA’s.
So if you know someone who should know about all this – share this post with them.
This is _Part 14_ in the series titled The Trunk. To continue with this series, click on Pt 15. To use this as a growth tool, please read Pt 1, Pt 2, Pt 3, Pt 4, Pt 5, Pt 6, Pt 7, Pt 8, Pt 9, Pt 10, Pt 11, Pt 12 and Pt 13.
Photo credit: blue ocean powder