This is not investment advice, but my general rule is to use 401Ks and IRAs for, high-risk, high-gain, short-term, tax-inefficient trades.
My traditional 401K is mostly unvested company match. If GME crashes and I lose all of it, bleh, I change jobs earlier, no big deal. If GME skyrockets, I sell, then stay at my current company and vest that shit.
As for the roth 401K, I believe there is a high chance in BTC going up drastically more in the next 1 year, in which case I'll sell and the government can't lay their rotten hands on a penny of it. If BTC crashes due to some short term economic crisis, I'll just hold until it goes back up some time in the next 25 years, which I believe is nearly certain.
My normal brokerage account is where I do long-term index funds and long-term investments, because they are already taxed much less at long-term rates, and I can sell them at a future time when they would be taxed even less (e.g. hypothetical future gap year with intentionally zero income, hypothetical future time I'm not living in California).
I'm sure you're already aware of the general consensus around how speculative cryptocurrency and meme stocks are but it's worth repeating that this is a very dubious approach. On GME specifically, this is a good documentary to watch: https://youtu.be/5pYeoZaoWrA?si=OuRp-NxyiYR8XmA0
I think it's worth it for you to consider reducing your allocation to these even if you have strong conviction in their long term success. If you do 25% GME/crypto and 75% index funds (or target retirement) then you're still going to be doing extremely well if these assets take off as hoped for but you'll be much better off in the alternative and less surprising scenario where they don't
Oof, no. I'm well aware of the advice and I don't agree with it.
I expect GME to crash and burn. I was going to change jobs at some point, in which case my traditional 401K funds will just disappear because they are not vested. If I happen to win the blue moon GME lottery I'll just stay a bit longer to vest the winnings. In my specific situation it's essentially buying memes with someone else's money at zero downside.
As for BTC, I don't use Roth 401K/IRAs as a retirement vehicle. I use it as legal tax avoidance on a very specific high-risk part of my portfolio that is tax-inefficient if it wins. Given the shitty 401K dollar limits I'm not going to put a cent of it toward stuff that's already tax-efficient if I have tax-inefficient stuff outside that can be swapped in.
The vast majority of my net worth is {municipal bonds, index funds, stocks} are all held in a normal brokerage account because they are not taxed as much to begin with. That's my actual stably-growing retirement fund, and much, much larger than my 401K.
This isn't investment advice, but if you are in a job where you are maxing out your 401K but saving much more outside the 401K than inside it, I'd encourage you to consider the math of doing all your index funds outside 401K and whatever high risk plays inside 401K/IRA. You may find the math works out better that way, like I do.
This is novel to me. The last line is critical though, this only works if you are out-investing a maxed out 401k. Meaning, after investing over $20k, if you are investing an additional $100k, you are better off taking risks in that 401k because a moonshot there would be well protected and a loss there would be minor relative to other investments you presumably have.
Thanks for sharing, but for most this is, as you said, terrible investment advice.
my traditional 401K funds will just disappear because they are not vested
Are you not contributing your own money (from your salary) to your 401k?
In every 401k I've seen it's only the employer matching portion that is vested, and the majority of the account is the employee contribution which they can take 100% with them when they leave (regardless of vesting).
I believe there is a high chance in BTC going up drastically more in the next 1 year, in which case I'll sell and the government can't lay their rotten hands on a penny of it. If BTC crashes due to some short term economic crisis, I'll just hold until it goes back up some time in the next 25 years, which I believe is nearly certain.
BTC is highly volatile but it has a more predictable cyclic behavior than any other investment in the past 3 decades, and for largely mathematical reasons.
Even if that cyclic behavior breaks, I think the US economy and foreign policy is so unhealthy right now that BTC is widely becoming a new store of value across the world. It's a lot easier to deal with than gold.
You can believe otherwise; I'm not here to argue, convince, or be convinced, for or against BTC and I'm not a crypto-nut. I'm just de-dollarizing and hedging against uncertainties in the US economy.
If I lose all of it, it's no big deal as my actual retirement fund isn't my 401K, I just use 401K/IRA to churn tax-inefficient high risk stuff.
None of this is investment advice. Do what you believe, I'm just stating what I do.
i'm not trying to argue, was genuinely curious to hear your thoughts. i sold all my crypto in 2021 so i could buy land with abundant water as a hedge against the uncertain economy, maybe a more extreme way to hedge.
Comments
My 401K as of this moment:
Traditional 401K: 100% GME
Roth 401K: 100% IBIT/FBTC (bitcoin ETFs)
This is not investment advice, but my general rule is to use 401Ks and IRAs for, high-risk, high-gain, short-term, tax-inefficient trades.
My traditional 401K is mostly unvested company match. If GME crashes and I lose all of it, bleh, I change jobs earlier, no big deal. If GME skyrockets, I sell, then stay at my current company and vest that shit.
As for the roth 401K, I believe there is a high chance in BTC going up drastically more in the next 1 year, in which case I'll sell and the government can't lay their rotten hands on a penny of it. If BTC crashes due to some short term economic crisis, I'll just hold until it goes back up some time in the next 25 years, which I believe is nearly certain.
My normal brokerage account is where I do long-term index funds and long-term investments, because they are already taxed much less at long-term rates, and I can sell them at a future time when they would be taxed even less (e.g. hypothetical future gap year with intentionally zero income, hypothetical future time I'm not living in California).
I'm sure you're already aware of the general consensus around how speculative cryptocurrency and meme stocks are but it's worth repeating that this is a very dubious approach. On GME specifically, this is a good documentary to watch: https://youtu.be/5pYeoZaoWrA?si=OuRp-NxyiYR8XmA0
I think it's worth it for you to consider reducing your allocation to these even if you have strong conviction in their long term success. If you do 25% GME/crypto and 75% index funds (or target retirement) then you're still going to be doing extremely well if these assets take off as hoped for but you'll be much better off in the alternative and less surprising scenario where they don't
Oof, no. I'm well aware of the advice and I don't agree with it.
I expect GME to crash and burn. I was going to change jobs at some point, in which case my traditional 401K funds will just disappear because they are not vested. If I happen to win the blue moon GME lottery I'll just stay a bit longer to vest the winnings. In my specific situation it's essentially buying memes with someone else's money at zero downside.
As for BTC, I don't use Roth 401K/IRAs as a retirement vehicle. I use it as legal tax avoidance on a very specific high-risk part of my portfolio that is tax-inefficient if it wins. Given the shitty 401K dollar limits I'm not going to put a cent of it toward stuff that's already tax-efficient if I have tax-inefficient stuff outside that can be swapped in.
The vast majority of my net worth is {municipal bonds, index funds, stocks} are all held in a normal brokerage account because they are not taxed as much to begin with. That's my actual stably-growing retirement fund, and much, much larger than my 401K.
This isn't investment advice, but if you are in a job where you are maxing out your 401K but saving much more outside the 401K than inside it, I'd encourage you to consider the math of doing all your index funds outside 401K and whatever high risk plays inside 401K/IRA. You may find the math works out better that way, like I do.
This is novel to me. The last line is critical though, this only works if you are out-investing a maxed out 401k. Meaning, after investing over $20k, if you are investing an additional $100k, you are better off taking risks in that 401k because a moonshot there would be well protected and a loss there would be minor relative to other investments you presumably have.
Thanks for sharing, but for most this is, as you said, terrible investment advice.
Are you not contributing your own money (from your salary) to your 401k?
In every 401k I've seen it's only the employer matching portion that is vested, and the majority of the account is the employee contribution which they can take 100% with them when they leave (regardless of vesting).
curious why you think this?
BTC is highly volatile but it has a more predictable cyclic behavior than any other investment in the past 3 decades, and for largely mathematical reasons.
Even if that cyclic behavior breaks, I think the US economy and foreign policy is so unhealthy right now that BTC is widely becoming a new store of value across the world. It's a lot easier to deal with than gold.
You can believe otherwise; I'm not here to argue, convince, or be convinced, for or against BTC and I'm not a crypto-nut. I'm just de-dollarizing and hedging against uncertainties in the US economy.
If I lose all of it, it's no big deal as my actual retirement fund isn't my 401K, I just use 401K/IRA to churn tax-inefficient high risk stuff.
None of this is investment advice. Do what you believe, I'm just stating what I do.
i'm not trying to argue, was genuinely curious to hear your thoughts. i sold all my crypto in 2021 so i could buy land with abundant water as a hedge against the uncertain economy, maybe a more extreme way to hedge.