Coinbase has recently teamed up with a 401k provider to offer Bitcoin and other crypto assets into 401ks. For the most part however many people don't understand the real workings of a 401k and how it operates so let's take a look into that first.
The world of finances is a complicated and confusing place for the everyday person who works full time. The days of pensions are gone and the 401k was invested as a type of stop gap to try and get people to start investing towards their own retirement. However even 401ks and matches on them are starting to disappear.
If you are getting a 401k from the company you work for make sure you are at least putting in what they match. It's a free 100% bonus on your money.
There are two 401k options
Traditional
and
Roth
What's the difference?
Traditional 401k are 401ks where you put money into your 401k before you pay taxes on it. This means MORE money is added into the account so it can accumulate faster as you now have 20%+ more funds in the account to invest with. However that also means you have to pay taxes once it starts coming out of the account. Want to dip your hands into it early? now you pay full taxes plus a 10% penalty!
With a Roth 401k you pay taxes now before it enters the account. This means less money into the account 20%+ so less money to be put to work for you. However when you start taking money out of it you no longer have to pay taxes on it. That means every dollar you get out is actually yours you get to keep. This can be effective if you believe taxes will be higher in the future. Want to dip your hands in early though for whatever reason? You get slapped with a 10% tax penalty.
The first 401k provider to team up with coinbase is ForUsAll Inc. which is in control of roughly 1.7 billion + in funds. However here's the real kicker. Only 5% of those funds can be used to invest into the crypto markets. That means just 85 million has the possibility to be injected into the crypto economy a small amount.
So what does crypto mean in a 401k?
Access to more funds and the start of possibly more fund injection through more 401k providers. There is a total of 22 trillion dollars locked up in 401ks at the moment. If just 5% was opened up that would mean crypto would have easy access to 1.41 trillion. That would push our market cap up to roughly 3 trillion a number we have yet to see.
Posted Using LeoFinance Beta