'Never, Ever Invest Money In A 401(k)' — Grant Cardone Argues They're 'Traps Designed To Prevent People From Having Enough' — Is He Right?

Grant Cardone, the self-made millionaire and real estate mogul, is stirring up controversy with his unconventional stance on retirement savings. Contrary to traditional financial advice, Cardone adamantly opposes investing in 401(k)s and IRAs, calling them ineffective for building wealth.

Don't Miss:

Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you.

Warren Buffett flipped his neighbor's $67,000 life savings into a $50 million fortune — How much is that worth today?

"I would never, ever invest money in a 401(k)," Cardone boldly stated in an interview with CNBC. His reasoning? He believes these retirement accounts have locked away money for decades, preventing individuals from using them to generate more income in the present. During the interview, he argued, "Why would I go to work, have my employer give me another $6,000 a year, and then take that money and send it off to Wall Street, where I can't even touch it for 30 years? I wouldn't do that."

This wasn't the first time he addressed his distrust in 401(k)s. He has also referred to them as "traps that prevent people from ever having enough," according to CNBC in 2016. 

Cardone also criticizes the tax implications of 401(k)s, stating, "I believe that Wall Street and the IRS got together and said, ‘Hey, we want to capture this money for long periods of time and we'll benefit you by hammering these people [on taxes]." He argues that as tax rates could rise, investors might face higher taxes when they access their funds.

Trending: Many are surprised by Mark Cuban’s advice for lotto winners: Cash or annuity?

He highlights the impact of inflation, noting that ongoing inflation could erode the purchasing power of money saved in 401(k)s. Cardone believes that maintaining liquidity and the ability to invest in more immediate opportunities is crucial for wealth building.

Despite his criticisms, 401(k) plans remain immensely popular. As of the fourth quarter of 2023, Americans had $7.4 trillion invested in 401(k) plans. On average, employees contribute 7.4% of their pay to their 401(k)s, with employer contributions averaging an additional 4.5%.

Instead of following the typical path of gradual investments, Cardone advocates a more aggressive approach to wealth accumulation. He suggests substantially increasing earnings rather than making small, consistent contributions to retirement accounts.

He also recommends putting saved money into "secured, sacred (untouchable) accounts." He says not to touch these accounts, not even for emergencies. 

While Cardone’s approach may raise eyebrows among financial advisors, it aligns with his success story. He claims to have gone from being penniless with student debt to achieving millionaire status by age 30, boasting multiple successful enterprises worth billions at 66 years old. 

However, critics argue that Cardone's advice overlooks key benefits of 401(k) plans, such as employer matching contributions and significant tax advantages, which can enhance retirement savings growth. The disciplined savings these plans encourage can be crucial, especially for those less experienced with high-risk investments like real estate. 

Cardone's aggressive strategy may suit some, but it's essential to consider individual circumstances and the broader context of retirement planning. Consulting with a financial advisor can help you determine the best approach for your financial situation and goals.

Read Next:

• Are you richer than most people you know? Here’s the net worth you need at every age to be above average.
• Can you guess how many retire with a $5,000,000 nest egg? – How does it compare to the average?