ISN’T CRYPTO RISKY? Why your 401(k) may be riskier – Part 1

I miss the days when the news was supposed to just merely report facts, and proof supporting those facts. Today, news gets better ratings when the reporters share their opinions on whatever topic it is that they are reporting. Conflict is just more entertaining I guess.

The reason I giggle is because these opinions that started the whole topic of “crypto being risky” is coming from the very people who’s 401(k)’s are actually robbing them of incredible investing opportunities. To explain why, let’s start with explaining what exactly a 401(k) is.

TSP and savings

When I enlisted in the military, I specifically remember filling out these financial forms that made absolutely no sense to me. What I didn’t realize was these forms were actually my 401(k). (Also known as a retirement savings account). In the military, they were called TSP’s, a Thrift Savings Plan. The very term was confusing to me. Why did I need one? Why was this required? What the hell is is a TSP or a 401(k)?

The thing is, when you fill out these forms, you are going through basic training. In basic training, you get yelled at for anything and everything. So asking questions was like asking to get yelled at. Any answer you are hoping to receive will come in various forms of “just fucking do it.” So if had I asked what a 401(k) was, my odds of getting a fully informative response was slim. So I never asked. I just did it.

It wasn’t until after I finished tech school that my supervisor had explained to me that a TSP/401(k) was money that is taken directly out of my paycheck, and put into a retirement savings account. At the time, it sounded smart. I didn’t have to worry about transferring money from my checking to savings every month. The military took care of that it for me, so I could go about my day, and not even have to think about saving.

Saving and investing

What I didn’t realize at the time, was that a 401(k) isn’t just a retirement savings account, it’s also an investment account. So while I was going about my military business, I was relying on complete strangers to decide how to spend my hard earned money.

What most people don’t know about a 401(k), is that they are ultimately managed by three major players… Wall Street, the IRS, and Your Employer. The real question is, do you truly believe these players are managing your money so it benefits you, or THEM?

Think of it this way. Would you lend $500.00 to a complete stranger, who claims they can make you more money? How do we know this stranger can make us more money? What credentials can they provide, that prove they can add a 0 to that $500.00 we gave them? How do we know this stranger is doing it legally? Why would anyone offer to manage our money for free? Wouldn’t they charge us for their services? How do we know what they are spending our money on, is actually making US more money, and not THEM? How do we know that when they are investing our money, they are buying the best stocks, bonds, or mutual funds at the best price?

Wouldn’t you rather know how much of your money is being spent, where it is being spent, what it’s being spent on, and when it’s being spent? I would.

401(k) and Taxes

401(k’s) are generally pitched to make you think that you get tax breaks. They are also presented in a way that make you think you have control over how your money is being invested. A lot of companies do this by allowing you to pick a financial retirement plan. The Vanguard 401(k) being a popular one.

Normally when these financial plans are presented to you, you probably don’t know anything about stocks, bonds or mutual funds, so you just tell them you want “whatever the safest plan is.” The problem with this, is that even the safest plans are still serving Wall Street, the IRS, and your Employer’s financial interests. Think about it, name one person who is poor, and broke, put their money into a 401(k) and eventually became rich? Should you really invest your money in ANYTHING you don’t understand?

Stocks and risks

Your 401(k) serves Wall Street, because it’s being invested in the wrong stocks at the wrong times. One real world example is the Airline stocks. Airline stocks seem like a pretty safe investment right? So who ever is managing your 401(k), decides to buy a good portion of Airline stocks for you. Then Covid-19 happens. All in one day, Warren Buffet decides to sell his entire $4 billion dollar stake in Southwest, United, Delta, and America Airlines. Your money, that your planner invested, completely disappears. Wouldn’t you be pissed? At that point, you would have been better served to just put your money into a savings account, then into a 401(k).

Sadly, this is a real scenario that actually happened. Any non-essential companies that required an in person interaction, were suddenly closed, and in some cases shut down permanently. Stocks dropped, workers were let go, thousands lost their entire retirement savings.

Society will tell you that a 401(k) is tax deferred, which leads people to think they pay less taxes. Really what it means is you are taxed the same, just later. If you cash out on a 401(k) before the legal retirement age of 59, the IRS takes an additional 10% in taxes. Even if you wait until the age of 59 to pull from your 401(k), the IRS still taxes you, just not as much. Either way, you’re taxed. You’re charged for doing the right thing, saving.

Employer benefits

Your employer benefits from your 401(k), because it’s cheaper to offer you a 401(k) than to offer you a pension. A pension is funded by the employer, a 401(k) is funded by the employee. Your employer also benefits because if you ever get fired, laid off, or even quit to work for a higher paying job, you immediately lose the right to any unvested money in your 401(k).

Your employer can hold your money for up to 60 days if it’s under $5,000.00. If it’s more, your employer allows you to roll it over to a different company, but your new 401(k) plan has to be with a company of THEIR choice, not YOUR choice. Even then, you still have to wait until the legal age of retirement to take it out. So basically, your money is held hostage the second you enroll in a 401(k) plan.

Cryptocurrency

This is why investing in a 401(k) is riskier than investing in cryptocurrency. If you were going to lose your money in the stock market, wouldn’t YOU rather know it was because YOU failed to invest it into sustainable stocks, versus relying on some stranger who gets paid hourly either way? If you wanted to pull your money out of your retirement savings account because you wanted to change your retirement plan, wouldn’t you want to be able to do it without being slapped on the hand? After all, you worked your ass off to earn that income.

Why are you being punished to take out money YOU earned? Wouldn’t you rather tell your employer that you would like to choose the company that manages your 401(k), and not them? That way you can ensure the company can’t hold it hostage for the next 30 years?

Now that you know about the stipulations that come with a 401(k), you are ready to learn about why you might want to consider investing cryptocurrency as an alternative. Stay tuned for my next article, and don’t forget to buy a copy of my financial planner Crypto Nerd. A Crypto Retirement Planner for Beginners via Amazon for $9.88.