Grant Cardone: The 401K IS A SCAM?!

Published on 4/16/2018 by Graham Stephan
I came across a Grant Cardone video where he explains the 401k is a scam…but is it? Lets do the FACTUAL analysis and find out ;) Enjoy! Add me on Snapchat/Instagram: GPStephan

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For those that don’t know, a 401k is basically just a type of retirement account where the money you invest is deducted from your total taxable income, and therefore you end up showing less income and paying less taxes…by doing this, you end up having more money left over so you have a larger amount to invest with. Then when you hit the age of 59.5, you can begin withdrawing that money - but you pay taxes at THAT time, instead of paying taxes upfront. So this gives you a larger amount upfront to work for you and make more money long term.

But Grant Cardone says it’s a scam setup by politicians to steal your money….hmmm….

Here’s the moral of the story here, from my perspective. And as always, I do my best to be as neutral as possible and just stick with the facts and the way I interpret these strategies. A 401k is a fantastic part of a well diversified retirement portfolio by investing with pre-tax money that’s allowed to grow at a quicker rate with more money in invest. It should not be the ONLY thing you invest in, and you shouldn’t rely on this entirely for a retirement. But it’s absolutely not a “Scam” by any way I see it.

The ONLY thing to out watch for is that many employers offer extremely overcomplicated, overly expensive 401k plans that aren’t worth it - namely because of management fees. If you’re paying a 1% annual management fee, with an actively managed fund that underperforms the stock market, adjusted for inflation, you could basically be sitting there earning only a few percent per year and tying up for your money until retirement. That’s terrible. Many employers have also been under fire for secretly PROFITING from your 401k plans, but using these companies to get free services elsewhere, but making up for that cost with high-managed 401k fees. This isn’t the norm, but it does happen…for employers, they don’t care what fund they use because it doesn’t effect their bottom line…but it effects YOURS. So it’s important to do your research and understand what the 401k management fees are and decide from there if it’s worth it. I pay 0.04% annually with Vanguard…although the average is 0.97%, which is over 2400% HIGHER than I pay…and that’s absurd.

So my biggest recommendation is to check what your employer offers, decide if the fee is worth it to you - but you may as well contribute up to their employer match, where they give you $1 for $1 what you put in, since this is absolutely free money.

And yes, it is true that I invest the MAJORITY of my money in real estate…but I utilize everything I can so I have as many options to chose from. I have a Roth IRA, which is money that grows tax free until 59.5…I have a SEP 401k, which is pre-tax money that is reduced from my earned income so I pay less in taxes, and I have real estate which is my focus. They each have their benefits, they each have their drawbacks, but nothing is a “Scam.” Except Bitconnect.

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Suggested reading: The Millionaire Real Estate Agent: Your money or your life: The Millionaire Real Estate Investor: How to Win Friends and Influence People: Think and grow rich: Awaken the giant within: The Book on Rental Property Investing:

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