A 401(k) is not a scam. It’s a subsection of the tax code that allows you to pay LESS tax on your investments through a plan provided by your employer. You’re FULLY WELCOME to not take advantage of your 401(k), but it will probably mean you’re paying more taxes. And if someone is pitching you this idea, it likely means in addition to paying more taxes, your investments will do worse.

I’ve seen a rash of these “your 401k is a scam” type viral videos. They’re usually pushed by insurance salesmen or get-rich-quick gurus. They don’t like 401(k)s because 401(k)s are PROTECTED. They’re protected from taxes. They’re protected from creditors, bankruptcies, and lawsuits. And they’re protected from the scammers getting their hands on your money! They’re kind of this super charged, super protected account. Good investments, less taxes, more protections. Your 401k is there so you can build WEALTH and prosper in retirement.

401(k)s generally don’t have salespeople. Other than your employer or HR rep encouraging you to take advantage of the benefit they’re providing, no one is going to push it on you or will get a commission from you signing up. That’s why these types of “401k is a scam” videos can be confusing. These smart-sounding internet people are telling you it’s a scam, and there’s no sales pitch on the other side making the case FOR them.

But, as with fighting most scams, team 401(k) does have one powerful ally: The truth! The truth is, your 401(k) is a great way to mitigate your taxes while investing and building wealth. Many millionaires have gotten there solely through their 401(k)s! If your employer has one, you should be taking advantage of it.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy