Do 401k Investments
Promote Gambling?

slot machine

For some reason, 401k investments have been stamped with the "end all be all" strategy for retirement savings. I admit, I believed it. It seems so simple: Put money in a vehicle, get the employer match (if offered), defer taxes, and reap the rewards of your saving at retirement.

I bought into it. I didn't want to learn to invest my money.

But, as you dive deeper into the world of 401k retirement plans, you can really begin to unfold what this type of investing (And, I use the term investing quite loosely) may represent:


The Stock Market and Slot Machines

Slot machines are the game of my father's choice when he goes to the casino. I believe it's because there is no thinking involved and it requires little to no strategy.

Are people investing without thought and strategy?

Many 401k investors believe that since their 401k investments are in stocks, they are securing their retirement savings. How did stocks become the secure way of ensuring a comfortable retirement? Like slot machines in Vegas, you have little to no control of the outcome.

Sure, you can pick your stocks and where your funds go, but that's the same as being able to pick which slot machine you want to play. In the end, you have no way making that stock rise or ensuring a jackpot return.

If people wouldn't invest in the stock market alone, why does a 401k retirement plan somehow make it OK? Many have no knowledge of what they are doing and how it is affecting their wealth.

Are you winning with the 401k?

Per Wikipedia:

Slot machines are typically programmed to pay out as winnings 82% to 98% of the money that is wagered by players.

Meaning, you put $1 dollar in and you get $.82 back. You are losing money.

It is reported that from 1988-2007, the S&P 500 had annualized returns of 11.81%, while investment-grade bonds returned 7.56%. But, the average mutual fund investor only experienced a rate of return of 4.48%.

What about taxes? The 401k is a tax deferred investment. You eventually pay taxes. This isn't exactly a tax saving tip. What about inflation, an eroding factor of money? What about 401k administrations fees? Are people simply losing their retirement savings?

But even when people are blatantly losing big with their 401k planning, we typically hear the same 401 advice from popular financial pundits:

Buy more because it's on sale.

A slot machine will lose coin after coin but people keep playing hoping that things will turn around. Many use this strategy with their 401k plans. Who wins here? Are these safe strategies to save money for retirement?

Just like losing in gambling, losses in your 401k retirement plans are not tax deductible. There are no guarantees.

As I started studying 401k planning, things began to make sense as to why the 401k is not right for me. The question is:

Is it right for you?

If I asked you, Would you gamble with your retirement savings? What would you say?

I stopped contributing to my plan and eventually took a 401k withdrawal when I left my employer. There are too many strings attached and too much uncertainty to me. We are now using those funds to build our infinite banking system.

Now, I'm not saying that gambling is better than putting your money in a 401k plan. In fact, if you have no other strategy for saving, put your money in your 401k. Keep doing what you are doing.

But, if you want to stop gambling on 401k investments, educate yourself on how these plans affect your wealth and if the 401k advice you hear benefits you.

Don't gamble on your future.

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