US "opens" pension funds to cryptocurrencies

US "opens" pension funds to cryptocurrencies

“We’ve probably lost a fair amount of our retirement savings in the last few days due to the tariff uncertainty,” said Cathy, 56. “I know a lot of other people my age who are thinking about retirement are watching this very closely. I have two children in their 20s who are paying close attention to this because their financial freedom and independence will depend on it.”

"I'm a part-time yoga teacher and I have to work because my social security income isn't enough to live on," said 70-year-old Vicki Knight. "I'm extremely worried about my investments right now. They're diversified into stocks, annuities and bonds. But I'm very worried about the current situation."

"When we were getting close to retirement, everything we needed in the short term, we had to take money out of our pensions," said Victor Fettes, 54. "That's right. Most of our 401(k)s we weren't planning on using until I was at least 60. But when we looked at that account, it was scary to see it start to run out. You know, that's money you're not going to be able to count on later."

It can be seen that many middle-aged and elderly people are worried about their livelihood after retirement and old age. Pension is the lifeline. If the savings for old age are too little or suddenly lost, what should we do?

In the US, nearly 90 million workers participating in the private retirement program called 401(k) are facing a rather risky turn, when US President Donald Trump signed an executive order on August 7 - allowing money from this retirement fund to be poured into cryptocurrency investments, real estate or private funds.

US "opens" pension funds to cryptocurrencies

What is a 401(k) retirement fund?

In the United States, 401(k)s are a major pillar of the private-sector pension system. At $9.3 trillion—an amount equal to the combined GDP of Germany and Japan—the new order is expected to shake up the retirement investment landscape, allowing more speculative, sometimes illiquid, investments into an industry that has traditionally been cautious and conservative.

Typically, 401(k) participants like Tucker Balch are offered a safe investment portfolio, including stock funds and bond funds. But the executive order signed by President Trump will allow those funds to be invested in other, riskier alternative assets, including cryptocurrencies, which the White House says offer competitive returns.

Professor Tucker Balch - Goizueta Business School, Emory University, USA commented: "I think a lot of businesses, politicians ... have seen what Mr. Trump promised if he was elected and they thought he would do good things for our workers and businesses."

A 401(k) is a type of retirement savings plan established by US companies for their employees.

The name 401(k) comes from Section 401(k) of the US Tax Code. It allows employees to contribute a portion of their salary to an investment fund, often accompanied by corresponding contributions from the employer. The money in the 401(k) account will not sit idle, but will be invested by a system of fund managers in public assets such as stocks, bonds, mutual funds, etc. with many tax incentives.

When you retire, you can withdraw money from your 401(k) account to cover your living expenses later. This is considered the main tool to build your own retirement fund besides your government pension.

It also reflects a trend: encouraging workers and businesses to proactively share the burden of retirement security with the State.

Many controversial debates in the US

President Donald Trump’s decision is causing a lot of controversy in the US. Supporters, including large financial corporations such as BlackRock, consider this a revolutionary step, expanding investment opportunities and possibly helping workers increase profits in the long term. However, experts warn that this is also a “risky gamble”, because cryptocurrencies are volatile, easily lose value and currently have no clear legal framework to protect them.

Meanwhile, some labor unions strongly objected, arguing that pension funds, which are savings for old age, should not be put at risk in volatile markets like cryptocurrencies.

Overall, the new policy expands investment rights, but the risks are still considered higher than the opportunities, especially for those who are placing their trust in their pensions.

Pensions - a lifelong personal financial strategy

Population aging is becoming a major challenge in many countries. Life expectancy is increasing, and the State's social security fund is not enough to ensure the living standards of the elderly. Therefore, private pension models have been born to share responsibilities between the State, businesses and workers. The mindset about retirement is also changing dramatically. Pensions are not only social benefits, but are becoming a personal financial strategy throughout the working life.

In developed countries like the US, Japan, or Singapore, young people are proactively saving early. In the US, most young people start contributing to a 401(k) private retirement fund as soon as they start working. They choose their own investment portfolio, from stocks to bonds, or mutual funds. If things go well, the accumulated amount can increase 5-7 times after 30 years.

“It’s a good thing to be financially secure in retirement,” said Jay Maddock, professor of public health at Texas A&M University. “So that when you’re 50, you have some growth from your individual retirement account and retirement savings. So you can really look at that and put a few thousand dollars in there.”

In Singapore, the Central Provident Fund requires contributions from both employees and employers, so all Singaporean workers have a personal pension fund. However, the investment and use of the fund is very flexible: people can use the money in the fund to buy a house, pay for medical expenses, or invest for the long term.

The Japanese government has encouraged people to open individual pension accounts, which are tax-deductible and allow them to choose their own investment funds. This has encouraged the younger generation to become financially independent, not relying on a public pension system that is under great pressure due to an aging population.

Instead of "the State taking care of everything" or "people taking care of everything themselves", many countries are following a combined pension model, between the State - ensuring basic social security - and corporate pension funds or retirement savings accounts actively accumulated by individuals.

Source: https://vtv.vn/my-mo-cua-quy-huu-tri-cho-tien-ma-hoa-10025101011075054.htm