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Today we're gonna be talking about whether Bitcoin and other speculative investments belong in your 401k. We're also gonna be talking about a recent study of high net worth investors. That show many people believe that retirement might take a miracle just to achieve all that and more on today's episode of The Retire One Show.

Hello and welcome to The Retire Once Show the show designed to help you get to retirement, but most importantly, stay retired. I'm your Jonathan Rankin. I am the founder and CEO of the And Wealth. And I am joined, as always by my lovely co-host. Hi, I'm Melissa Rankin. Thank you so much for joining us. Thank you for being here.

We know that there's a lot going on in the world and we appreciate you taking the time to join us every single week. And what do we want people to do? Just to make sure they don't ever miss an episode? We want you to subscribe. We want you to always know when we, you know, Introduce something new or have something very informative to share with you.

That's right. And one thing that is informative, if you didn't know, the 49ers just traded for Christian McCaffrey, and so this is such big deal. This I, you know, this has actually been quite a big event in our house. This has, this has been, but we've got bigger fish to fry in the retirement world than talking about the 49ers and how much they're gonna disappoint me this year.

So, moving on. Moving on. What's going on? So today we're actually gonna talk about a new bill that's being proposed that will allow different changes in your 401k stuff that is seemingly unheard of. It's the Retirement Savings Modernization Act, and let's get into it. What is it? So, among other things, we're gonna talk, we're gonna dig deep into this bill.

Uh, it is going to look at expanding the investments that are offered within four. Now the people that have been proposing this bill, say, and this is a direct quote from them, this reform will open the door to higher returns, any more secure retirement from millions of Americans. Now, that sounds great.

That sounds great on paper, but I just feel like, I don't know why I feel like we're being sold. I mean, with a catchy line like that, it's gonna help everybody. It's almost like the, this car's got everything, all the bells and whistles. This act has everything for you. But what they're actually saying is it would propose to allow investments like commodities, public and private debt, um, hedge funds, private equity, real estate, digital assets.

What digital assets in your 401k. That seems crazy. Also, insurance products, annuities, I. Is this even a good idea? Yeah. When I first saw this bill, I just completely thought, this is a huge mistake. I, I'm sorry. I get that. Their point is they want to expose everybody to these different asset classes, but first of all, you know, I think the big part of it is they're looking at, you know, things like cryptocurrency and bitcoin that have done extremely.

During a period of pure speculation when you had an easy monetary policy rates at near zero and a lot of speculative assets did well, but you look at a year, like right now, Bitcoin's down over 70% in the past year and all of these type of investments, yes, they have a place in someone's portfolio, but in my opinion, not in the 401k.

Because one of the changes that they're looking to make, and a lot of employers already do this, is what's called auto. So you think about, you start a new job and you're automatically put into a savings vehicle, like a 401k, and they're just putting your money in there. You know, maybe at one or 2% automatically into this vehicle, and now they're giving you the keys to a car.

It's like giving a five year old a key, the keys to your car, you know? And I'm not saying that somebody who is just auto enrolled in 401K is like a five year old, but investments like this are extremely complic. Plus if you're auto enrolled, I mean you, you yourself didn't actually take the time to go in and even select to be.

Put in that in the first place. I mean, so that alone, how do you go from something like that being auto enrolled to now you have all these different choices and that's the reason why when most 401k plans, they are pretty limited in what you can invest in. They typically have anywhere between. You know, on the low end, eight, up to maybe 20, if not maybe 30 different choices, because studies have been shown them more.

Choices you give people, the less likely they are to participate, the less likely they are to save. It's like it's overwhelming. It is overwhelming. It too much. I mean, there's supposed to be conservative. At least that's what we were always told. And that's the thing you think about some of these investments.

You know, they all, like I said, they all have a place in a portfolio, whether it's commodities or public, private debt, private equity, you know, maybe hedge funds to a degree. But you look at those and go, Okay, if you're just hearing something on the news, and I'm gonna keep going back to Bitcoin just because that's the, that's the headline one.

If for the longest time you, you know, for years you hear people saying Bitcoin doubled or tripled, it went up so much. You don't, you know, why don't you have this in your portfolio and you don't know any. And then you just decide, okay, well I'm gonna, I've got this 401k. I see it's one of my options. Let me just put it in there.

Well, you don't really understand the asset class. You know, a lot of people just put money into a 401k and they kind of set it and forget it. Like we talk about before, you know, retirement, we're not baking chickens here, but a lot of people invest that way. And so by having the, the access to these type of investments, that one on the private equity, private debt, private credit hedge fund side, you need to be a qualified investor or have a significant net worth, and they're usually.

A little bit more closed off for, There's a reason. I was just gonna say there's a reason for that. I mean, those things are highly speculative for a reason. And that's the thing is that I don't think that these are bad investments. And you know, if you go back and listen to, I think it was episode one or two, we talked about the new 60 40 portfolio introducing alternative assets into a portfolio.

But the reality is, you know, instead of this lodge, it's putting 'em into a 401k where everybody has access to 'em at a push of a button. You know, most people don't actively manage their 401ks. Why not allow people to save in the 401k, but make that portable, make you give them the ability to move that into an I.

Where the taxes are, you know, the same. But move that into an IRA where there you can access these different type of investment vehicles and that gives somebody the ability to, they have to go through a little bit of more of, you know, hoops to jump to, to invest in these things. But if they really were supposed to invest in this, that means that they did the due diligence, they put the time and effort into it, and they made an effort to actually move the money into those as opposed.

Hey, you know what? I heard about Bitcoin or, you know, uh, commodities on the news. I hear inflation's high. Should I just buy gold? All these different things. There's, in my opinion, this bill should not pass because of that. There's no space in a 401k for investments like this. Let it be accessed in an ira.

Let people move their IRA or move their 401k. A lot of companies, you don't get to move your 401K until you're 59 and a half or separate service, or you might be able to move a portion. If this bill really wants people to be able to invest in anything, let the 401k be mobile and give them the opportunity in an open architecture platform.

Don't just put it into a 401k with people who you know are auto enrolled into something that, and you know, and they're not gonna get the type of education for these investment products that it really takes to do the due. I think that's a really good point. On one hand, they're saying, Okay, your 401k is still a 401k.

You can't move it. You can't do anything. There's so many implications around it yet. Here's all the stuff that you can do with it. I mean, it's almost like you're getting conflicting information. Well, and not only that, but alternative investments, you know, especially private equity, hedge funds, private debt, they have a lot higher fees and 401ks, they're not the best at disclosing the cost anyway.

It's always hard to find. Within this, we also discussed that. We did. It's hard to find those things though in the summary plan description and just, just Google Forbes top billionaires. There's a whole lot of hedge fund managers on there. That's true. So who do you think has a vested interest in putting these investment vehicles into 401k plans?

To open it up to the masses. My guess is that it's not going to be, I would love to see who's proposing this bill, and then who's the lobbyist in that person's ear. With that in mind, is there anything else that this bill is proposing? Yeah, so we did talk about auto enroll. They are proposing larger tax credits because right now if you save, let's say you're saving $10,000 into a 401k and you're at a 37% tax bracket, so you're getting a tax, you're saving $3,700, your in taxes, and someone who is in a 24% tax bracket saving that same $10,000, they only get a $2,400 tax credit.

So this new law would propose a 50% tax credit up to 2000. , but that tax credit would be given in the form of a credit to your 401k. So it's just, it's putting those taxes back into your 401k. Uh, and then the other thing that it's, you know, talking about or proposing in the bill penalty free withdrawals.

So they're saying right now if you take a withdrawal before 59 and a half, you're subject to a 10% penalty. Uh, in the new law, you can take up to a thousand dollars out per year with the option to repay that distribution within three. Interesting. So it's just giving you a little bit of flexibility to tap into that.

I think the thought there is, well, if we're going to put money in there for you, if we're gonna auto enroll you where you have to opt out to have, you know, money go in there. Well, we're already taking money out of your savings plan. So if you are out of your pocket, if you need that money to live, We'll let you access it and pay it back at some point.

Uh, the last thing that they're proposing is to index the ketchup contributions for Roth IRAs and 401ks and index those two inflation. Because right now, you know, for a Roth ira, you can do a catch up contribution if you're over the age of 50 with an additional thousand dollars contribution and in a 401k, you can do a catch up contribution of 6,500.

They're going to index that amount to inflation, cuz right now it's just not index. And every now and again they increase it. . So this bill is actually, I mean, it's, it's proposing a lot of different changes. It is. With that in mind, there was a story that I feel like is almost completely contradictory to, to anything at all savings related.

There was an article saying that, um, people think it what you need a miracle. They actually used the word miracle. Yeah. So this was an article in investment news. So Nexus did a, they surveyed us investors with a million dollars of investible. And they wanted to get their feeling on retirement given where we're at in the market.

Look at what's going on today. The 60 40 portfolio is down over 21%. If the year were to end today, this would be the second worst record outside of 1931. 1931. Yeah. I mean, great. Depression times, right? That's, Yeah. I mean, that's terrible. Well, you look at the 60 40 portfolio and obviously for the longest period of time, it was the standard for retirement.

And the reason why is because we were in a 40 plus year bull market for bonds. Interest rates peaked in the eighties over 18%, and when they do nothing but fall, as interest rates go down, value of bonds go up. And as we talked about before, like I said in episode one or two, I believe, uh, the now people are anticipating the 60 40 portfolio to give somewhere around a four to 5% rate of return, where it used to be six and half to seven to even 8% rate of.

going back to the um, the survey though, 60% are saying that they might actually have to work longer because of the market. 60%. Yeah. And I think this is, That number sounds about right to me. And when you think about people when they look at their mar, their portfolio at the all time high the market. Yeah.

Everybody's feeling like, You know what? I think I could retire. You know, and a lot of people, they don't necessarily stress test their their retirement against a market correction of this magnitude. And this is something that we beat the drum on. It's all the time, all the time about stress testing your portfolio against market crashes like this.

What does your retirement look like if your portfolio drop by 2025? 30% today? Does retirement. You know, happen for you? Is it still intact? And I think a lot of these people that, you know, almost 60% that are saying this, I don't think that they've gone through that exercise and they're looking at the value of their portfolio going, Yeah, things are down.

I, I, I think I'm going to hold off for a little while. 60% still seems very high to me. That is a, that is a lot. But what, what else do they say? So, another point, this is where it comes in more than a third, believe that it will take a miracle, an actual miracle. To have a secure retirement re remind you, these are US investors with over a million dollars in investible assets and they think it's gonna take a miracle.

So they, they did survey high net worth investors, and it's going to take a miracle. I, I don't know why they're using the phrase, a miracle to retire, but that goes back. Is your retirement realistic? You know, I wonder what type of, I would love to have follow up conversations with the people that are surveyed to say, Why do you feel like it's going to take a miracle?

Was your retirement plan unachievable from the beginning? Was it unachievable? Were you gonna set yourself up for failure if, you know, if you retired in January of this past year? Because that was when the market hit all time high. You know, December 31st, and then it did nothing but fall. So imagine someone who probably would've answered this as saying yes, it would take a miracle to retire, but they did retire December 31st, 2021 because they were retiring with this notion of asset prices high and I can live off this high amount of income, and then now the asset prices have fallen.

That's why I think you're seeing some people that might need to go back to. I would also be interested to know what people actually constitute as a miracle, because for me, I don't know why that's just such a strong word. It's a strong word. I mean, and to think about that having any place in your mindset with retirement seems crazy.

I got it. A miracle to me on the investment front. The Fed pivoting, going back down to zero in straight policy, and, uh, taking the 30 year mortgage from over seven back down to in the twos. Uh, let's see the market going to all time highs within the next six months, and, uh, all companies allowing or giving out pensions and social security, you know, funded and increasing for the next.

A hundred years There you, there's no, That is a miracle. That's a miracle. That's actually, Thank you. Thank you for putting that in perspective for me. That's, that's exactly what that is. That would be a miracle. That would be a miracle. All right. What else did they say? So they also said that 42% of the high net worth investors are so worried about retirement, that they avoid thinking about it all together.

They just wanna put their head right down in the sand. That's right at ostrich poach. Put it in the sand if it didn't happen. It's like that one, uh, what was that? Dumb dumber. La la, la . . I, I just, I love that scene. Uh, that's what it is. A very timely reference. It's one of the best comedies out there. Dumb dumber.

They fantastic comedy. I don't care what you say. Uh, she doesn't like it. I don't get it. It makes me question. That's okay. It makes me question our marriage. Let's just be honest. Uh, but fair enough. So in thinking about this, you know, not thinking about it, not thinking about retirement just because you're.

That's not the approach you wanna take. I get that things are worrisome right now. The market's down and investments are down, housing prices are falling. But have you gone back to your actual financial plan? Have you looked at, I would imagine a lot of these people that are entering this, they, they aren't looking at it, They aren't considering it, They aren't thinking about it.

Oh, they're not. They're, they just don't even think about it. So there's certainly not looking at it if they're not even thinking about it. But I would venture say that, you know, maybe half or even more are probably more on track than they think they. Because they're probably not actually engaging in active financial planning, so they don't really know if their goals are achievable because they just look at the asset prices and go, Well, my stocks are down, my bonds are down, my house is down.

Everything's down. I'm never gonna retire. I just don't wanna think about it. Let me live my life. I was just gonna say, now I get it. It does sound exactly like that. Sounds horrible, but now, You know, is the best time to start building that financial plan if you've never done it before. Look through your retirement plan.

Understand, okay, where do you really stand today? This is the best time to, you know, start retirement planning because you can, you know, hopefully over the next three to five years, as I've said on this channel before, at some point we're going to see the market at an all time high when I have no clue.

But at some point it's going to be there. So I would say for those people, if you're avoiding thinking. , just start building out a plan that's going to, It's like if I just started eating cake for the next year and I got extremely overweight and I go, You know, I really wanna lose some weight. But I've never stepped on a scale cuz I just don't wanna look at it.

It's the same type of thing. At some point you might be unhealthy, but you gotta step on the scale. You've gotta start somewhere. Yep. And thinking about, it's probably a good place to start. It is being aware, but also I would not let you eat a cake every single day. But I love cake. It's bad for your heart, but I love cake.

I love. No, you don't have to. You know my heart's fine. It's fine. Your cholesterol isn't, My cholesterol is fine. It is being managed. Next topic, next point. That was made. 31% of the people responding to this believe that it would be difficult to make ends meet without social security. First of all, that's saying meeting a, having ends meet.

I never understand that, but okay. Either way. Social security being such a big part of people's retirement, I mean, it's been like that for a long time, but these are people with a million dollars, invested a million dollars. These were high net worth individuals and, and they're worried about making ends meet.

And that's, that's the surprising part, because if you're making, let's say you're making $150,000. Social Security is only designed to replace about 20 to 25% of that income. It's not, It was never designed to replace a large chunk of your retirement or of your income in retirement. If you're making a hundred to $200,000 or more, you know, if you're making $50,000, it's there to replace about 51% of your income.

So by people saying that they find it difficult to have ends meet without social security. What are they actually needing to live off of? You know, I, I just, I wonder about that and so, which it actually makes me think of a bigger question is a million dollars, even what it used to be, you used to hear that and think, Oh, okay, that person's wealthy, or that person's.

Probably well off are gonna be okay. And I mean, I've talked to a lot of people over the past, you know, 15, 16 years of doing this where they say that's the target, that's the goal. I want to get to a million dollar portfolio. But I think that is a question you have to ask yourself nowadays, because a million dollars now in savings.

That savings has to carry so much more of a, a burden on, you know, fulfilling that income gap. Because most people nowadays, they only have social security. You know, pensions just aren't really there anymore. Very few not popular, you know, very few companies offer pensions. So with no pensions, with higher inflation, with asset prices that have gone up, you know, over the past, you know, over the past decade, you, you have these lifestyles that are probably a little bit more.

I don't wanna say extravagant, but people are spending a little bit more than what they probably initially used to, and you don't have those guaranteed income streams. So I, I do think that a million dollars is not what it used to be because it has to carry so much more of a burden now. It's gotta carry the weight of fulfilling more income than what it.

I mean, that kind of goes back to what we touched on last week with even the cost of regular things going up so much. I mean, gum, I don't know why that one just sticks with me. The cost of gum was up, what, 13% or something crazy. No pun intended. With the gum that sticks to you, . So, Sorry I had to do that.

But that you do make the comedy you never knew you needed. That's right. That's why we've got, uh, right behind Mel. There's that Jerry Seinfeld book. Uh, you know, so I love, I love all comedy, but you do make a good point that with everything going up in price, you know, and now someone who has a million dollars might feel like there is that squeeze.

And pensions were a way of forced savings. For a lot of people that was, that was looked at as a guaranteed bucket of money that they would have for the rest of their life. Well, or when you're just investing in a 401k or the savings is all on you and the investing is all on you. Well, there's a lot of people who might have made investing mistakes back in 2008 if they pulled outta the market and they didn't experience the bull market that we saw from oh nine through last.

There might be people right now that are making investment mistakes by getting overwhelmed with what's going on, and they stop saving or they just, or they stop thinking about it. Yeah, there's huge mistake, whereas pensions before you didn't, It didn't allow you to make a mistake. You think about it, you know, if a company was funding a pension, you had no choice in that.

There was nothing that you can do now. With a 401K or with a whatever savings, the burden of responsibility is on you. And that goes back to what we talked about in the beginning. That's part of the reason why speculative assets like Bitcoin, you know, hedge funds, private equity, all this, they don't belong in 401k.

You know, the goal is be disciplined, keep saving, and start building your retirement plan. Now, you haven't done that. What should people do? Well, I was just gonna say, that kind of leads back to our general theme all. Stress test, call us. We wanna walk you through it. We wanna help you with this. We wanna make sure that you're on target.

That's right. There's a link in the description or the bio below where you can schedule some time for us to connect. We'd be happy to go through a free retirement analysis with you if you've never gone through this process before. If you don't have a retirement plan, now's the best time to reach out.

Schedule that time for us to connect, and we look forward to chatting with you soon. Uh, with that, I am Jonathan Rankin. And I'm Melissa Rankin. Thank you so much for joining.

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