Why You Shouldn't Contribute to a 401(k) Plan

What I've said may sound like heresy to most people, because it goes against "conventional financial wisdom" (which really isn't wise) and everything you've heard repeated from friends, family and the media.

However - in the next few minutes I'll make the case for why you shouldn't contribute to a 401(k), and you can judge for yourself. Here are the reasons why:

1) A 401(k) is a good savings plan - NOT a good retirement investment plan. Even with matching employer contributions, most plans only offer stocks or mutual funds to invest in. And if the stock market doesn't go up, your account won't either... and you won't have a comfortable nest egg for your retirement. Betting on the stock market to keep going up in these times is far from a sure bet.

2) Most 401(k) plans don't give enough investment choices. Most plans offer a basket of mutual funds to choose from, and I'm not a big fan of mutual funds. Why? Because they have annual fees that whittle away the value of your portfolio over time. And mutual funds only increase in value when the value of the stocks they're invested in go up.

3) 401(k) plans tie up your money until you get to retirement age. In the meantime, you could invest these funds in alternative investments that could provide passive income (and/or capital gains) - such as real estate (bought at a reasonable price/terms), buying or developing a business, or trading stocks, options and/or FOREX accounts.

4) The declining value of the US Dollar means that you'll lose purchasing power with all dollar-denominated assets. If - or more like when - the US Dollar declines further in value, it's a "stealth tax" on your wealth. The only way to hedge against a dollar decline is investing in tangible assets, such as physical gold and silver. Your portfolio will be a sitting duck if its in financial paper assets.

Some 401(k) plans allow investors the option to put their money in whatever profitable investments they want - such as residential/commercial real estate, precious metals and tax lien certificates - and that's good.

I prefer the "Rich Dad" philosophy of Robert Kiyosaki, where you develop one or more businesses or assets that provide recurring passive income that will take care of your in your golden years.

Kiyosaki's latest Yahoo column shows the "Lost Decade" where most investors in stocks didn't make that much on Wall Street-based investments. This is the biggest problem I have with financial media including CNBC - they always tout stocks and promote the stock market. Always telling you when to buy, but almost never when to sell - until its too late and the stock has plunged in value.

This is my two cents - and then some - on 401(k) plans. Leave a comment below whether you agree or disagree, and explain your position.