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How to Lose All Your Money: Put It in Your 401k

By: Steve Johnson

2/16/2010 - 59 Comments

I have never been a believer in the 401k government created saving plans.

I have written several articles about why I think 401k savings plan is a bad idea.

But worse than that is the idea that a 401k is perhaps the most risky place to have your money right now and the surest way to lose all your money.

As you know, I believe both the stock market and the bond market are positioned to crash as the deleveraging process cannot be stopped.  The only thing the government can do is print money and they have been. 

But they have only compounded to financial problems that have put tremendous pressure on central banks around the world to follow our monitory policies and create massive global inflation. 

Today the Fed reported that central bankers sold US bonds by a record last months.

That means, as I said a last week, that Obama’s budget is impossible to finance and Congress will be forced to start making drastic cuts.

At the same time the Fed will not be able to hold interest rates low for very much longer and they have already held them low for way to long

Stocks are going to sink and when they do, the Fed will be forced to let them sink because the only alternative is to create another round of inflation in the 100 trillion dollar range – pushing us to the brink of hyperinflation.

The US government is desperate for money and personal retirement savings plans are one of the last sources of funds they are considering ways to get a hold of.

Money in a 401k plan is trapped

First, the limited options don’t allow you to escape the pending market meltdown. Whether you move to bonds or stocks, you are going to lose a lot of money.

Second, you have few options to protect against inflation.  Government inflation options like TIPS are based on bonus government inflation numbers like the CPI, which clearly do not account for the trillions in new money that the government has added in the last few years.

Third, you cannot short the market to increase your money while the market sinks because 401k plans do not include options for betting against the market.

Fourth, you cannot stop the government to getting a large portion of whatever you manage not to lose.  For example, last month Obama proposed that 401k funds should be extracted in US Treasury Bonds unless you request to get your money in another way.  Another example is if you extract your money, you pay high tax rates plus a 10% penalty on your money.


Accountants and financial planners like to say that 401k plans are great for people that don’t have the discipline to save money on their own.   But that is not the case because those same people end up spending much more money with the confidence they get from contributing to their 401k savings plans, then they would without them.

A better plan is to learn to save your money and pay for your debts.  401k plan do not create more savings, they create less savings.  Learning to save money is not just for some people, it’s for everyone.  Everyone needs to learn to save money. 401k plans also reduce the financial education of the public by automating the process and convincing them that their money is safe.  

If the government was interested in the financial security of the public, they would stop telling us to spend and start training us to save.  Their example provides little hope for training the public to save money.

Yet our future depends on the ability of our leaderships to increase the financial education of the public, which they continue to completely fail.  It starts with each person learning to manage their own money, paying their bills and reducing their debts.  

The public needs to realize that the government has lost it's mind and we cannot follow their example. We cannot trust them with our money anymore and we cannot believe what they are saying.

The general lack of financial education and the high percent of the population that has money in their 401k plans, poses a serious concern for the coming market collapse as much of the retirement wealth is likely to be lost.  

I’m surprised that so many people are still investing in their 401k plans after the 2008 market collapse.  The financial planners, government intervention and propaganda has been successful at convincing the public to keep pouring money into the market – despite its imminent collapse.

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