59 Comments

That example on maxing out your 401k should be a mandatory lesson in our education system. Thanks to my grandfather teaching me to “save a dime for every dollar I make”, my wife and I retired at 55 just like he did. We also should use behavioral economics and make 401k elections defaulted to the maximum contribution and go straight into VOO. I was shocked when I found out how low the 401k participation rate was at my company when I became responsible for payroll. Many of the people I worked with are still working and will be for a while because they didn’t follow this simple advice. We need to educate people on basic personal finance principles. It’s almost like we don’t want people to budget, save, and invest.

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Sarcasm? Lol

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A better way to think about the 401k is an insurance policy when your ecom website blows up, and you’re out of money to pay for basic bills and your kids. The odds of hitting 7-9% ROI YoY is greater than 50%, whereas the odds of you running a FCF+ ecom business for 3+ years is ~1%. For most people, trading off 401k contributions for Meta ads is a fool’s errand. But if you’re making $400k+ a year, you can do both - max out the 401k and still buy ads for your ecom biz. Or consider a margin loan against your stocks to fund the ecom biz, and have your cake and eat it too! Just don’t pick the wrong stocks.

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Did we read the same article? I thought the message was clear, invest to the company max (not IRS max) and use the remainder how you’d like (business ventures).

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We did. They’re suggesting that you should just invest up to the employer match limit (which is like 5-10% in most cases), not the employee contribution limit. For 99% of people, just investing to the match limit is insufficient (which is less than $5k). Trading the 401k investment for speculative ecom ads doesn’t seem like a smart bet unless you’ve already got a backstop. Using the example from the article, a better move at $400k would be to max the employer contrib limit and then borrow against it, so you get the benefits of both.

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You've never run a biz before it seems. It doesn't matter, just max it out in your case. Just remember that even maxed every year forever that'll get you about 3 median priced homes in the end assuming last 30 years is next 30 years pretty clean assumptions.

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Ad hominem from BowTied Bull? Come on now. I’m trying to engage you guys in a good discussion, but you can’t seem to take disagreement on a couple of your points?

401k in the long term is low value if you never have to touch it. Agreed. I just disagree with the suggestion that you should trade a portion of your 401k funds early on in your career for ecom investment, especially if it’s your first rodeo. That’s all.

FWIW, I have 1 exit, built a 7-fig ecom while working as big law attorney. Working to grow the biz to 8 figs and beyond. I’ve lived through all these decisions myself.

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They why do you care about your 401K not even sure what your point is. If you have a an exit already, you know it was worthless.

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It’s only worthless on exit, which is <1% of outcomes. Most fail. Those are the statistics. For HNW earners, I see the 401k as an insurance policy against your ecom biz flopping.

We can agree to disagree. It’s ok.

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At a $400k salary the point is moot since the 5% match isn’t that far from the annual limit.

While BTB audience skews higher income, I took this advice for those not making $400k

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At $400k, you’re most likely not getting a match from your employer anyways.

Here’s the bit in the article I’m really referring to: “Alternatively, you could start any basic online business and make a whopping $2-3K a month online. That would also dismantle any 401K returns ($2.73M in 30 years at 7% or $4.075M at 9%).”

They’re suggesting to take the $ you would otherwise invest in your 401k and put it into ecom--I.e., trading your employee contrib for ecom ads. For most people making low 6-figs, I don’t think that’s the best use of funds / best way to get rich because there’s too much risk at that income level if the ecom biz doesn’t work out. Would be better to grind your w2 income for a couple years and try to boost it, create some runway (24 months ideally) for your fam, before gambling away tax free (Roth 401k) gains.

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Dude the point is you could just do some BS fiver job for $2K a month and it'll be better than a worthless 401K.

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I guess I don’t understand what you’re saying. The Roth 401k is a savings vehicle that allows you to grow funds tax free on money you’ve already earned, while you do nothing. Fiver is literally trading your time for money? Pls explain.

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Can't comprehend that reply either.

FCF ecom biz can start within the 1st month if start small and continually grow (have done this twice already). This is all done with still doing full company match.

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Yup. You know because you see it live.

Lets see spend $10K on ads that make $2K in net profits (20% return in 1 day). Or other redacted ideas.

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It’s great if you can get there, but for most, the reality is it takes several swings and misses before you’re pumping out 20% net profits on meta ads.

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What exactly are you trying to prove? That it's hard to get rich? Yes we're aware...

If you're trying to say "average guy" should just max it out, we agree.

Our audience hates average people and they earn $250K+. 401K won't matter

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One of your other readers mentioned they thought the advice was geared towards lower earners. If you’re making $250k+, you likely don’t get a match in the first place, but it’s also way easier to max out the 401k and also build your ecom biz in tandem because $22.5k is a rounding error in the long term.

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Very good post and I strongly agree with all points. Unfortunately, I am going in the complete opposite direction financially relative to many of the points you have made over the years and more recently…Lifestyle/kids forcing my hand a bit…

I am in my mid 30’s, been working for over a decade and have only rented… being in a large city for most of that time, the math never remotely made sense to buy. I was able to invest all those excess savings over the last decade and have benefited from this nearly uninterrupted decade plus bull market in equities.

However, I have two young kids, who are each under the age of four. We moved down to FL from Boston about 2 years ago and quickly watched real estate values, at minimum, 2x in a matter of 24 months… Hard to even type that with a straight face… It has been remarkable. In a perfect world, I would have gotten long the moment we moved down, but it took time to figure out where we wanted to be.

I took an alternative approach recently and bought a teardown in an A+ part of town…location about as good as it gets (non waterfront)….The dirt is quite expensive, but I will have around $200 a foot of equity on day one. I have done over a year of research and intimately know what my costs will be and what the value of my finished product will be in TODAY’s market. Thing would have to get really bad for me to lose $…not so relevant as I plan on living there etc…It is obviously tempting to build bigger, given the $spread between building costs and market value, but I am already far higher than I ever imagined I would be from an “all in” cost… While I feel extremely blessed to be in a position to do this, I am very nervous regarding my personal finances…especially given how I have lived the last decade plus…the macro backdrop doesn’t help either.

I have always prioritized saving… I have saved about $4M in after-tax savings, of which I will use about 25% to put down and finance the balance… However, my pretax income, while very stable and likely to grow, potentially significantly over time is only in the 500K-$570K range… $360Kish after tax range… I do have infrequent lump sum benefits as well.

While we are not “big ex housing spenders” we will certainly not be saving much money (if at all) outside of principle pay down, unless I get a meaningful increase on the work side or my wife allows us to rent out our home every once in a while..even 2 weeks a year to take advantage of the Augusta rule. After going from saving well over 50% of my after-tax income, for nearly a decade, I imagine our savings will be extraordinarily modest, if at all after we finish building…

It seems the time to splurge given the kids are so young. I enjoy what I do for work, don’t have any early retirement/turn down the temp aspirations …it seems I have talked myself into this despite my relatively more modest income due to my net worth… granted my liquid net worth is going down 25% for my large down payment..,It will just be really weird to basically be living cash flow neutralish for an extended period of time. Additionally, given I am going the building route, it seems I will conservatively have a decent amount of equity if I ever need to downsize, etc.

I am extremely emotionally mixed, but trying to just enjoy the process and can always sell if the nut becomes too large of a burden!

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You will have $3M liquid + a home and a stable $500K/year income?

You're going to be fine. Just don't make any crazy decisions and keep positive increase in net worth going forward.

Not sure what you do but a stable $500K is insane, never lose that

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Don't forget about Social Security

if you were to invest the same money contributed to SS at 5%/y returns, you would have a much higher withdrawal rate than you get in the system.

It's underfunded. Ponzi scheme to fund the boomer's retirement

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For those of us who are collecting a high match (50%), what sort of funds should we consider? Obviously low net expense ratio (0.0104%).

E.g. Cash, SP500, Target date funds?

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Bit off topic, but some of the annuities right now are looking really good. For example - Nationwide is giving 20% bonus plus 8% guaranteed for 10 years. After that you can take lifetime guaranteed income or take money out and do something else.

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BTB | This may sound stupid but I have to ask; what's the best thing to do with WiFi money while still working? W2 is currently +600k. Just pile it up in the business bank account? I have already achieved over 2k monthly based on evergreen commissions that require no additional work once deals are done but I need a way to pour more energy into this to scale higher.

Also, is there a post on best gameplan for ads? I am running a service based business not ecom; trying to figure out how to drive traffic for leads, etc.

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Hi - do you have any thoughts around the idea of buying a property and then after, let’s say, 2-4 years turning it into a rental, while buying another? Eventually, i would assume, the constant moving would become pretty burdensome but if you are young and able do this 5+ times to acquire rental properties, I am curious your thoughts.

Someone I know (and trust) did this with 4 properties from age 25-35. She is now 60 and looking towards retirement and is happy about how this has played out. Was not her goal in the beginning, but ended up being the outcome. She is married now, but acquired the first 2 herself (pre marriage) and then her and her husband acquired 2 more together through this process. Note: they have a 8+ rental properties now, but acquired the first 4 through the process I outlined.

I guess as a follow-up, do you have any thoughts around acquiring a rental property while facing the continuous decision of rental vs. ownership.

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A humbling chart that shatters the index fund myth. A small quibble but assuming the person is 25 in 1993, shouldn’t you include about 5 years of the post 50 year old catch up contribution limit?

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Sure that isn't going to add up to much though since it doesnt compound (5 years) and the catch up is tiny as percent of $1M+

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Really the key takeaway here is that anyone prudent should not rely on a fully-funded 401(k) to be anywhere near sufficient to fund a comfortable retirement. That is sound advice.

There might be exceptions on occasion - for example if you can contribute after tax dollars through a mega back door roth setup you might be able to put in an extra @$40K per year and have it all be tax free on the back end. Most plans don't allow this but it's worth checking.

PS - if you think the eroding purchasing power of dollars in a 401(k) sucks ass, compare social security contributions to payouts...

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Good post. Take the 100% as noted. You’ll know when you make enough for it to be worth maxing out a 401k…basically at the point the money doesn’t matter is when you might as well start doing it. Won’t change your life but tax free gains on 20-30k per year…why not?!

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I know you guys aren't a fan of leverage, but what about TQQQ/UPRO?

TQQQ has made insane gains since inception (2009) and is at around 120% YTD. That's double Bitcoin's return. They seem to follow the same basic premise as index investing with a few caveats (1% fee, volatility decay, massive swings, etc.). But I invest in them for the same reason I invest in Bitcoin. We believe the Fed will eventually print which will send asset prices skyrocketing.

As long as you can DCA into the funds and keep the cash flow going, eventually it will pay off. With this strategy, I have one foot in the Trad-Fi and one foot in Crypto.

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It's still a levered fund so if there is a correction you'll be going down multiples more. Should use caution

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The fact that BTB always says "Maths" instead of "Math" gives me the idea that he's from the UK. Just sayin'.

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Thank you for the detailed post!!!

Maybe I’m doing something wrong and would love to hear your thoughts...As a physician I have my own business and I’m able to contribute 61k pretax which is protected from creditors in case of a malpractice lawsuit. I’m still investing outside retirement accounts as well and looking ways to have another business outside medicine.

Being exposed to frivolous lawsuits is always a possible risk that I’m trying to avoid.

Im not striving for “average”. Do you think is a “mistake” to contribute that amount to my retirement account ?

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Too hard to say, if you're able to put away $61K+ consistently you're going to be fine. Just remember that you need enough money to reinvest into your practice and expand it.

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In a similiar situation, are you using a solo 401k or something else?

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Profit sharing plan

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If you have a financial advisor versed in this, please send along their info. I’m looking for a new one.

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Hello sir, I don’t believe we’ve ever directly interacted on Twitter yet I am somehow blocked from seeing your tweets. Could you please find it in you to unblock? I really do miss your content a lot.

https://twitter.com/endurance831

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You are unblocked. We've marked the account if it endss up being another troll account will be re-blocked and no unblock in future.

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Appreciate it sir, can confirm non-troll, possibly a miscommunication on my part with whatever it was. All the best.

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@BTB

Just discovered, the jungle few months ago. Thank you so much for everything. 27 YO asian born and bred in France from immigrant family and trying to launch wifi business during my spare time.

French education system is incredibly long (+ 1,5 years of internships in M&A, consulting and all the bullshit prestige thing) just to align logo and work on Excel. Currently working in Transaction Services but would have been way better if I had chosen to be a plumber as BtBroke said on twitter 😂😂😂

Just wondering if wealth range according to age described in efficiency still applies to France due to Tax and Education system ? If not what would be the discount ? Feeling left behind even though I am probably way ahead when I look at 27yo people in France

Anyways. thank you so much !

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No clue how france works, its all the same concept though. If you want to be *rich*, all the value is in equity.

The funny part about this whole article is both Broke and Us have admitted to maxing it for years yet it was a waste.

You should just start trying over and over again until you succeed with a biz venture. Keep the W-2 in the mean time. Same strat.

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And btw, asian dude with a Russian girl is way more alpha lol

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