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Some 401(k) plans may start offering cryptocurrency as an investment option. Why that’s a bad idea.
It’s not a bad idea at all. Yes, crypto is volatile, but the participants make the elections for their 401(k)s so if they are willing to take the risk then so be it.
I actually have a bigger issue with pensions investing in the space as they’re investing on behalf of others and the underlying frankly have no idea what’s going on with their money.
This is why I elected to go with the self-directed 403b ORP with my state university. If I'm going to make or lose money on investment decisions, I want to be the one responsible for it.
Not to mention, with few exceptions, I have little faith in the competence of state pension investment boards. Hell, many of them are enamored w/the proprietary nature of PE and still projecting 7-8 percent annual growth thesre days.
Not to mention, with few exceptions, I have little faith in the competence of state pension investment boards. Hell, many of them are enamored w/the proprietary nature of PE and still projecting 7-8 percent annual growth thesre days.
Other than David Swensen of Yale's endowment who was the early adopter of private equity as part of the portfolio, many pension plans lagged significantly. CALPER, California teacher pension plan, is a good example.
Cryptocurrency is too new and carry even more risk than private equity. My 401(K) plan use inexpensive index funds and target date funds. Getting marketing return is good enough for me.
Agree. Plan sponsors have fiduciary duty to the plan participants including investment choices they oversee. CALPER is projected to face a shortfall in paying out the teachers. Ironically they would do fine if they would just stick with the plain valilla broadly diversified index funds.
Seems really dangerous and a path towards potential employee lawsuits against 401k plan sponsors and administrators.
If it's just an option, I don't get how you can file a lawsuit. Complete BS if you ask me. Just make it clear that it is a high risk investment. Nobody is being forced into selecting it... IMHO, as an employer, if you have cheap passive index options available for your employees then you're doing your job. You can offer other more costly active funds for employees that want that as well as high risk investments. The onus is on the employees when it comes to their allocation to the different instruments. The employer can't be responsible for everything..... People need to take some personal responsibility these days rather than just say everything wrong is someone else's problem.
@JoJo26 who said "People need to take some personal responsibility these days rather than just say everything wrong is someone else's problem."
While I strongly agree with that statement that's hardly the way it's ever been e.g McDonalds having to tell people that the coffee they ordered is hot etc., etc., etc.. I don't expect that to change anytime soon. If you want to own cryptocurrency do it outside your retirement plan(s).
Seems really dangerous and a path towards potential employee lawsuits against 401k plan sponsors and administrators.
If it's just an option, I don't get how you can file a lawsuit. Complete BS if you ask me. Just make it clear that it is a high risk investment. Nobody is being forced into selecting it... IMHO, as an employer, if you have cheap passive index options available for your employees then you're doing your job. You can offer other more costly active funds for employees that want that as well as high risk investments. The onus is on the employees when it comes to their allocation to the different instruments. The employer can't be responsible for everything..... People need to take some personal responsibility these days rather than just say everything wrong is someone else's problem.
Most employees have no say into what their state pension board and their investment managers invest the pension funds in -- so they could be exposed to crypto/PE/whatever and have little to no recourse. I vehemently disagree with the infatuation state pensions have with paying high-priced advisors millions of dollars in fees to get 'exposure' to PE and hedge funds thinking - er, hoping - it will jack up their returns. Which is one of the reasons I didn't go into the state pension system and took the 403(b) option.
By contrast, if crypto is offered as an investment option in a state-provided 403(b) type plan, then sure, you can chose whether or not to add it to your holdings.
It’s not a bad idea at all. Yes, crypto is volatile, but the participants make the elections for their 401(k)s so if they are willing to take the risk then so be it.
I respectfully disagree. The "average" investor often buys high and sells low when using volatile investments. Since crypto assets are extremely volatile, this will lead to bad outcomes for certain investors. Most 401(k) plans are governed under ERISA and plan adminstrators have a fiduciary responsibility. IMHO, it would be reckless for a 401(k) plan to offer crypto investment options for participants. People who are inclined toward crypto assets can always purchase these assets outside of their 401(k) plans.
The average employee has trouble often understanding how a 401k works in many cases let alone cryptocurrency. I find the "personal responsibility" argument to be a hackneyed one I often hear emerging from libertarians. One response I have to that--as you can make a similar argument for almost any dangerous product--what is the personal responsibility of the drug dealer to the drug taker? Why is it always the consumer of the product that is blamed with that personal responsibility mantra? If you offer a faulty dangerous product and sell it to consumers, you should be blamed. And yes, offering crypto will be a magnet for lawsuits. 401ks are a common target for lawsuits as they work well in class action suits and the laws about what are suitable investments for retirement plans are strict.
The average employee has trouble often understanding how a 401k works in many cases let alone cryptocurrency. I find the "personal responsibility" argument to be a hackneyed one I often hear emerging from libertarians. One response I have to that--as you can make a similar argument for almost any dangerous product--what is the personal responsibility of the drug dealer to the drug taker? Why is it always the consumer of the product that is blamed with that personal responsibility mantra? If you offer a faulty dangerous product and sell it to consumers, you should be blamed. And yes, offering crypto will be a magnet for lawsuits. 401ks are a common target for lawsuits as they work well in class action suits and the laws about what are suitable investments for retirement plans are strict.
Financial literacy... The world's most serious issue.
Financial literacy... The world's most serious issue.
Not even close. See how folks in Portland are handling 115 degree weather today. Now Imagine ten or twenty degrees hotter in places that have no electricity. Imagine living for generations by a river that suddenly dries up or floods so badly your village is washed away. Or an ocean devoid of edible fish. Also, financial literacy is pointless if employees aren’t paid enough wages to have anything left over to save at the end of the month. About half of America lives paycheck to paycheck. I know—“personal responsibility.” Let them live on top ramen and gruel.
Financial literacy... The world's most serious issue.
Not even close. See how folks in Portland are handling 115 degree weather today. Now Imagine ten or twenty degrees hotter in places that have no electricity. Imagine living for generations by a river that suddenly dries up or floods so badly your village is washed away. Or an ocean devoid of edible fish. Also, financial literacy is pointless if employees aren’t paid enough wages to have anything left over to save at the end of the month. About half of America lives paycheck to paycheck. I know—“personal responsibility.” Let them live on top ramen and gruel.
I think there is a bit of a balancing act here... It may be wage-related for some, but how about those living paycheck to paycheck (or close to it), but they still have iPhones, iPads, go out to eat and drink regularly, and basically just spend frivolously 100% of the time.... People still have to live within their means.
It may be wage-related for some, but how about those living paycheck to paycheck (or close to it), but they still have iPhones, iPads, go out to eat and drink regularly, and basically just spend frivolously 100% of the time
Are you with every American living paycheck to paycheck 100% of the time? Or are you just monitoring all of them from your Orwellian control tower at Fox News? Also, do you think it's possible for any young American to hold down a job and perhaps juggle their family responsibilities today without a cellphone?
The brand most predictive of top income in 1992 is Grey Poupon Dijon mustard. By 2004,the brand most indicative of the rich is Land O’Lakes butter, followed by Kikkoman soy sauce. By the end of the sample, ownership of Apple products (iPhone and iPad) tops the list. Knowing whether someone owns an iPad in 2016 allows us to guess correctly whether the person is in the top or bottom income quartile 69 percent of the time. Across all years in our data, no individual brand is as predictive of being high-income as owning an Apple iPhone in 2016.
While I know some poor people probably do buy an iPhone--for the same reason poor people used to want high-end Nike and Addidas sneakers--to pretend to be rich, most people buying these phones are middle-class or wealthy.
Comments
I actually have a bigger issue with pensions investing in the space as they’re investing on behalf of others and the underlying frankly have no idea what’s going on with their money.
This is why I elected to go with the self-directed 403b ORP with my state university. If I'm going to make or lose money on investment decisions, I want to be the one responsible for it.
Not to mention, with few exceptions, I have little faith in the competence of state pension investment boards. Hell, many of them are enamored w/the proprietary nature of PE and still projecting 7-8 percent annual growth thesre days.
Cryptocurrency is too new and carry even more risk than private equity. My 401(K) plan use inexpensive index funds and target date funds. Getting marketing return is good enough for me.
While I strongly agree with that statement that's hardly the way it's ever been e.g McDonalds having to tell people that the coffee they ordered is hot etc., etc., etc.. I don't expect that to change anytime soon. If you want to own cryptocurrency do it outside your retirement plan(s).
By contrast, if crypto is offered as an investment option in a state-provided 403(b) type plan, then sure, you can chose whether or not to add it to your holdings.
The "average" investor often buys high and sells low when using volatile investments.
Since crypto assets are extremely volatile, this will lead to bad outcomes for certain investors.
Most 401(k) plans are governed under ERISA and plan adminstrators have a fiduciary responsibility.
IMHO, it would be reckless for a 401(k) plan to offer crypto investment options for participants.
People who are inclined toward crypto assets can always purchase these assets outside of their 401(k) plans.
Also, financial literacy is pointless if employees aren’t paid enough wages to have anything left over to save at the end of the month. About half of America lives paycheck to paycheck. I know—“personal responsibility.” Let them live on top ramen and gruel.
Regarding who are the primary owners of iPhones, I would suggest reading this: https://nber.org/system/files/working_papers/w24771/w24771.pdf While I know some poor people probably do buy an iPhone--for the same reason poor people used to want high-end Nike and Addidas sneakers--to pretend to be rich, most people buying these phones are middle-class or wealthy.