IS THE 401(K) A GOOD IDEA?

EFC’s Founder Late Mr. Nicholas Cokinos sent a letter to Kathy Olevsky, owner of Karate International, 7 years ago in response to her query about the viability of 401(K) plans. Since EFC believes this letter may be of use to others as well, It has decided to publish it on our blog.

Nicholas Cokinos

Nicholas Cokinos

Dear Kathy:

The subject of 401(K) or other “savings” plans is controversial at best. We do not subscribe to this concept, nor do we recommend it. We believe very deeply that every school owner should be very conscious of the importance of securing his financial future. Uncle Sam provides four areas for significant savings and investments:

1. Owning your business, which happily most martial artists do already.

2. Buying your own building. I am happy to say EFC helped 17 owners purchase their own buildings last year.

3. Investing in real estate rental property-great benefits, great deductions and appreciation of properties is always a serious benefit.

4. Investing in a good blue chip stock of well-managed companies. Over time the appreciation has been great and history has been great and history has it at about a 10% – 12% increase per year. Also, if you should decide to sell instead of putting your certificates up on the shelf, the tax bite of capital gain is only 15%.

Instead of providing a 401(K) plan at EFC, we have embarked on an attractive pay incentive closely tied to productivity. We are very conscientious about giving pay increases on longevity, but mostly on productivity. Financially speaking, I think one comes out much better in the long run by following a good investment policy.

I know you will continue to grow your school with the good leadership you provide.

Nicholas Cokinos, EFC Chairman

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