About Rupert Johnson
In a December 2022 interview, Franklin Resources Vice Chairman Rupert Johnson discussed his views on 401(k) plans. Johnson stated that 401(k)s made sense when tax rates were declining, but argued that because taxes are likely to increase in the future, deferring taxes on contributions may not be advantageous. He suggested that if an employer offers a matching contribution, employees should contribute enough to receive the full match, describing that as a 100% rate of return.
Johnson recommended that beyond the employer match, individuals should consider putting additional money into cash value life insurance instead of a 401(k), citing a desire for control and tax-free income in retirement. He characterized 401(k)s and IRAs as "chains around people's necks" and predicted that people would regret contributing as much as they did to those products.
Source: AI-verified profile updated from Rupert Johnson's recent appearances.
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Transcript (1 segments)
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Rupert Johnson0:00
401ks made sense when tax rates were coming down. You get a tax deduction up here, it's gross tax deferred, and you retire and you pay tax down here. But we know taxes are going to have to go up. So how much sense does it make to take money out of your check today, defer that, but if taxes go up to 50 or 60 percent, then you take it out and pay that? That doesn't make any sense. So what I tell people is: does your company have a 401k? Yes. Does it have a match? Yes. Explain the match. Well, if I put in four percent, they match with four percent. Okay, good. I do that, that's a 100 percent rate of return. But above the match, I wouldn't put in my 401k anymore. I would put that into cash value life insurance because I want to be in control. I want to have tax-free income in retirement. And that 401k and that IRA, those are going to be like chains around people's necks. They're going to regret that they put as much money in those products as they did.
