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Why Do TikTok Users Hate 401(k) Plans?

401(k) Plans Financial Planning

For those like Nevin Adams, the retired former Chief Communications Officer at The National Association of Plan Advisors, that have more valuable and productive things to do with their time than spend it on TikTok - there is indeed a wave of resentment towards 401(k) plans eating up the algorithm. And of course, it is not because there is some magical new financial hack, well, at least not that kind of hack.

So why do TikTok users seem to collectively "hate on" 401(k) plans?

  1. 401(k) plans are DESIGNED for the individuals that make up a company- this means plan design is never one-size-fits-all, most especially not the communication of such. Or at least, it shouldn't be if you want to establish your plan prudently and correctly- ergo it's best to steer clear of the larger providers that attempt to put you in that box.
  2. You have to pay taxes on your 401(k) plan when you withdraw the money in retirement, or you have to pay a penalty fee if you do so before retirement. The financial influencers of TikTok cast this negatively mostly because they are usually not financial professionals- they don't understand why that is actually beneficial. Meaning they also don't realize that once you save a sufficient amount in your 401(k) plan, you are able to have more financial options such as: 401(k) loans, employer matching, tax deductions, hardship withdrawals, roll-overs to an IRA or HSA, etc. A 401(k) plan is just a type of account, it is up to you and your financial advisor to use it wisely.
  3. They are pushing "too good to be true" products such as fixed/ variable annuities that are only meant to SUPPLEMENT not REPLACE a qualified retirement plan, and most certainly not replace your consistent income altogether. Most financial influencers are pushing these products because they are not regulated like 401(k) plans are, they have uncapped commission rates, and do not have to adhere to fiduciary ethical standards. They can legally sell you an inferior product that isn't liquid (you cannot easily resell it), that you are obligated to FOR LIFE, and they'll make a fortune doing so. Then they'll also collect the residuals from their "affiliate marketing" and high social media following making bogus financial freedom videos.

Ultimately, TikTok financial influencers that are not financial professionals, nor CPAs/ CFAs, will hinder your financial literacy more than they help it. Because they have no idea what they are talking about, and the social media platforms themselves are not checking facts nor credentials; stop giving your money to modern Rumpelstiltskins.

*Commence resident Gen Z'er Hannah Gutrich screaming how much she hates TikTok from her office*

To read Nevin Adam’s article in full:

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