---
title: 'The Truth About Your 401k (Your Boss Doesn''t Want You to Know)'
source: 'https://youtube.com/watch?v=ScSqPs1NFIs'
video_id: 'ScSqPs1NFIs'
date: 2026-07-29
duration_sec: 948
---

# The Truth About Your 401k (Your Boss Doesn't Want You to Know)

> Source: [The Truth About Your 401k (Your Boss Doesn't Want You to Know)](https://youtube.com/watch?v=ScSqPs1NFIs)

## Summary

This video discusses common misconceptions about 401k plans and retirement, highlighting the limitations of tax-deferred accounts, the demographic challenges facing Social Security, and alternative strategies like CoastFIRE. The speakers critique the lack of control and high fees in 401ks, while emphasizing the importance of building wealth through asset ownership and disciplined investing.

### Key Points

- **Problems with 401k and Pensions** [00:00] — 401ks are tax-deferred but offer limited investment options and often hidden fees. 92% of Americans don't know their 401k fees. Money cannot be withdrawn before 59.5 without a 10% penalty.
- **Employer Match Benefits** [01:38] — Employer matching can make 401ks attractive, but risks and concerns similar to pensions exist.
- **Social Security Funding Challenge** [02:37] — Social Security is a government program where 6.2% of income is taxed from employees and employers. It pays current retirees, but the system is underfunded due to demographic shifts.
- **Wealth Building Through Assets** [03:37] — Wealth is built by owning assets like businesses. Starting a business is now more accessible with tools like GoDaddy's AI Builder. Sponsor segment.
- **Pension Misconceptions** [05:15] — Pensions guarantee lifetime payments but not purchasing power. Social Security checks lose value due to inflation.
- **Shift from Defined Benefit to Defined Contribution** [07:29] — Employers moved from defined benefit (guaranteed % of salary) to defined contribution (401k), shifting risk to employees. Average baby boomer 401k balance is ~$100k, insufficient for retirement.
- **Retirement Crisis and Ponzi-like Structure** [08:43] — The system resembles a Ponzi scheme because current workers fund retirees. With fewer young workers, the system is unsustainable.
- **CoastFIRE Alternative** [11:13] — CoastFIRE: save enough early so that investment returns cover future retirement needs, allowing for more career flexibility. Example: $150k at age 35 growing to $1.5M by retirement at 8% returns.
- **Discipline and Consistency** [14:11] — Disciplined saving and investing, along with derisking life, enables risk-taking and financial freedom.

### Conclusion

Traditional retirement accounts like 401ks and Social Security face significant challenges, but alternatives such as CoastFIRE offer viable paths if one stays disciplined and consistent in savings and investments.

## Transcript

pension. I think you guys call it a 401k. much the same across the western world anyway. >> If I'm 25 or 30 or whatever, should I should I be paying into my pension as a
way to generate to make myself wealthy someday? >> Is that a smart idea? >> I don't have a 401k. I don't have an IRA. But the reason why people like these accounts and why they can work for
some people is because they are tax deferred accounts. Meaning I can put my money in whether I pay taxes now or later. The money will then sit there, grow, and I don't pay taxes until I pull my money
out. But there's a couple problems. Problem number one is I have very little control where my money can be invested. Maybe this will change. Uh the Trump administration has
passed a new executive order on 401ks to change what you could potentially invest in 401ks, but that hasn't happened yet. You have very limited options. They're primarily just mutual funds and many of them have a fee. I think Nerd Wallet
said 92% of Americans don't know what the 401k fees are. So, if you don't have know what your 401k fee is, this is your uh notice to go check what the expense going to have to pay a fee, which means somebody on Wall Street is going to be
paid forever until you retire. Number two, I can't touch this money until I'm 60 years old, 59 and a half. If I do, I have to pay a 10% penalty. But kind of like we talked about earlier, there's a lot of tax benefits
that you can get outside of a 401k, which is why for me, I don't like it. But I'm not everybody. For some people, it can be a great place because your employer might say, "We're going to give you a 3% match." So, if you invest,
let's just say, $3,000 into your 401k and and they match it 100%. They might also just throw $3,000 into your 401k, but you have the same risks and concerns a pension is, to be honest. I think we pay into it, but we don't really know
other day >> where someone was a guy was saying in the UK I've paid into my pension my whole life. Um so I deserve it and it'll
be there when I'm ready. And then everyone underneath it was telling him that by the way it's not like some piggy bank that you get to break open. The pension when you were working. So you're talking about social security in the
United States because as an employee in the United States, you have to pay into social security. So 6.2% of your income. So you you have a lot of taxes. You're security tax. So on your income, you're going to pay 6.2% of that separately
from your income tax, but 6.2% into this social security fund. And then your employer is also going to pay 6.2% 2% into this fund. and compound. That way when you retire, you have this retirement fund that's
choose when you pull it out, but you don't get to do anything with it. The >> This is what is running out of money in the United States today. Why? Because
people that are in their 20s, 30s, and 40s that are paying into it today, it's today to pay for their social security benefits. The way you build wealth is by
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They think they're paying [clears throat] into a piggy bank that they get to crack open and that will pay for them as long as they live for the and the first one was that my pension is guaranteed money for the entirety of my
life once I retire. >> Well, there there is some truth to that. the part in in the United States at least that you are guaranteed what what you pass away. But the part that they never tell you and does there's no
asterisk about this either is how much that value of the check will be. So here's what's going on. People are paying into the social security fund financial adviser historically has said that retirement is a three-legged stool.
You have your 401k, your your personal retirement, you have your own personal savings, and then you have social security. Well, you pay into social investor. You don't have to pay your social security income or social
hit retirement age and then you get to pull this money out. Well, the that because they say, "Oh, that means the government's no longer going to pay
social security." That's not true. They'll still pay it, but they'll just they they're giving you a bigger check. The problem with that bigger check is
that bigger check can't buy you as much stuff. So, yeah, you're based off what going to get the Social Security check. is it's not going to be able to buy you
as much as you thought before. >> The other big misconceptions are that retirement. They think it's the same as a savings account. They think they can access it whenever they like. Um the government will cover them when it runs
out and I don't need to think about it until I'm older. And lastly, my pension pot is taxfree. So the big shift that happened around 20 years ago was a shift from what's known as defined benefit to divine contribution.
So defined benefit used to work for Ford or an American Airlines or whatever company. You retired, you got 60% of your final year salary forever. pension plans because people were living longer all the other stuff. And so they
what you put in plus the investment returns, but there's fees. Maybe you do you want to put it in bonds or equities?" You like bonds. And it didn't
grow as much or whatever it was. And in the end, you just not sure that your the average 401k in the United States for a baby boomer, I believe, is about $100,000. >> What age? a baby boomer like 65.
>> 200 enough to retire. >> 200 is not enough to retire. There's 10 >> So there's so little money in the US pension system particularly um that
retirement crisis became a huge kind of viral success years ago just explaining there is no way out of this for the pensioners, the boomers or the
stuff out. >> I think you said it earlier today. You were talking about a Ponzi scheme here. You have one, but nobody wants to say that. But everyone is paying in to keep funding this thing. But the only way
enough money coming in >> because demographics there's less and less young people >> but there's tons of these retired people so and this keeps going in perpetuity
because we're having babies so that's workers in 20 years time the babies now workers in 20 years time we can forward project this it doesn't stop so how the hell are we going to pay for this massive amount of baby boomers which is
in the United States is 78 8 million of them, largest cohort in history at the time. We can't pay for them. >> And this is where the proposals are to tax your Bitcoin, the value of your Bitcoin or tax the value of your assets
wealth that everybody's got the same problem. Everybody >> I think that so I have a different take on Well, I think first of all I think
security, right? >> Yeah. But I I I have a different take on retirement altogether. I think uh I think 401ks are good for the average contribute to a retirement account unless they the employer offered it,
right? And so the the whole match thing is a great thing for behavioral behavioral finance. It's like okay, if I if I do this, I get some free money from my employer and at least I'm saving some money instead of nothing. You are
understand is you agree to invest in a investment pot alongside your employer. >> It is more like an individual retirement account that is awarded to you because
you work for an employer. You have the option to invest within a 401k and that 401k is typically tax deferred >> uh which means that you pay taxes on it and a social security? A social security is a government program where you are
required to pay into it every paycheck that goes into this big pot and then when you do retire the government will send you a social security check every >> But I I still think that there are plenty of ways to retire and retire with
some sort of freedom. Retire early. Have you heard of Coastfire before? >> No. Coastfire is another newer thing that's uh that's kind of on Reddit, but it's a variation of financial independence retire early and it's
dollar into it after that. But because you get it to let's say a certain number and that number is usually pretty reasonable, the investment returns if
you're invested in the S&P 500 will get you to a full retirement by the time completely, but it means that if you get to your Coastfire number, which is what it's called, maybe you have more freedom of choice in what you're working on. So
You can maybe go do something that's a little bit more suited to your lifestyle. You're still working, but you're not working to save for retirement anymore because you hit that coastfire number. So for example, at the
age of 35, I think the coastfire number is like $150,000. If you can hit 150k by 35, if you have 30 years of investment returns at 8%, you'll have $ 1.5 million by the time you retire, which is a little bit more
palatable for people that are having a hard time wrapping their heads around am I ever going to retire. They're not going to retire in that they're not going to be kicking up their feet on the sand beaches of Aruba, but you're still
be so bored out of my mind doing nothing, right? So, I'd like to work on something. The idea is you just don't have to work for maybe the job you hate I put it into the S&P 500 and get the >> 8% return
>> 1.59. Yeah. >> What's that worth then? >> That's true. There that is another part of the equation is with inflation what Cuz I remember an hour ago you said I'm just trying to retire earlier words to
Coastfire and uh Coastfire is you know however you would like to define it. But you know I already think I'm pretty close or if not I've already reached it retirement nest egg will eventually grow to a point where by the time I hit 60 65
I'll be able to coast. >> Did you create a number do the math on >> Okay. >> Yeah. So you can project out your then kind of work backwards to that number.
>> A lot of math involved, but you kind of have to do it. >> Retirement crisis. Hm. That's concerning.
>> That's concerning. So your approach is to do the Coastfire thing. My approach is let's stay disciplined, consistent with our savings and investing and idea and that's the same as when I started with the manifesting your your
grow it via investments, right? It's it's brilliant to do that capital I build now, I can do whatever I want.
>> Um, that was the same idea that I had with the home. It's exact. It's like I've derisked my life now. I can take risk. And that's a really nice thing to saying, well, my future self wants this. >> For me to do that, I need to do this
>> it's there's always risky imagine, but yeah. [clears throat] So, >> I also love that you've been disciplined on like what you like and what you know. >> Yeah. And uh I appreciate that. Thank
you. Because you said I think 90% are in index funds and ETFs. I'm like 50 60% index funds, >> but still that's that's pretty high and call it. I mean that that shiny
age everybody here, but but whatever it might be um to to to be disciplined, I mindset. I think that's also a discipline mindset that you have that.
>> I think personal finance is personal. >> It's official. President Trump's plan to abolish the IRS is progressing. Why? Over the last few days, he has renewed
or increased tariffs on dozens of countries around the world. And he says that this is his way to potentially [music] replace the IRS or at least the income tax with the