6 Reasons Companies Must Make Employee 401(k) Plans Safe As Gold.

6 Crucial Reasons to Safeguard 401(k) Plans with Gold

Written by Luji Shofu - Founder, 401(k) Gold Group.

401(k) plans and investors lost 23% of their 401(k) savings in 2022, according to Fidelity Investments, the largest provider of 401(k) plans in the United States. The conglomerate reported a decline in both the average 401(k) plan balance and individual retirement account (IRA) balance in the fourth quarter of 2022.

While the average 401(k) plan balance saw a rise during the quarter, it ended the year down by 23% from 2021. Similarly, the average IRA balance fell by 20% in 12 months. Unfortunately, experts are predicting an inevitable market crash soon.

Here are the 6 crucial reasons companies must protect their employees’ 401(k) plans from a catastrophic market crash with physical gold.

1. Inflation

Inflation is the rate at which the general level of prices for goods and services is increasing, and it is measured by the Consumer Price Index (CPI). Core inflation has risen with the CPI increasing by 17.67% since 2019, the highest rate of inflation in 40 years.

Inflation erodes the value of 401(k) assets. For example, if core inflation is at 17.67% (which is negative), and the rate of return on a 401(k) is minus 5% (-5%), the rate of return is negative 22.67%, (-22.67%). That means $100,000 in any retirement account would only have the purchasing power of $77,330.

2. Dollar devaluation

Devaluation is a decline in the value of a currency relative to other currencies. This occurs for a variety of reasons, not limited to changes in interest rates, economic growth rates, and government policies.

The Federal Reserve provided trillions of dollars in economic stimulus and relief measures in response to the COVID-19 pandemic. As of September 2021, the U.S. government has allocated more than $5 trillion in COVID-19 relief spending, which includes direct payments to individuals, expanded unemployment benefits, small business loans, and funding for vaccine distribution and COVID-related research.

Some expenditures:

a. Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 was signed into law on March 6, 2020. This act provided $8.3 billion.

b. The Families First Coronavirus Response Act, 2020 was enacted on March 18, 2020. Most of this legislation's $192 billion of funding went to small businesses and state and local governments.

c. The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 was signed into law on March 27, 2020. The CARES Act provided the largest amount of funding, $1.8 trillion, to combat both the healthcare crisis, as well as the ensuing economic fallout.

d. Paycheck Protection Program and Healthcare Enhancement Act of 2020, went into effect on April 24, 2020. This provided $484 billion in increased funding.

e. Coronavirus Response and Relief Supplemental Appropriations Act of 2020, was signed into law on December 27, 2020. This provided $900 billion in funding that impacted 2021 healthcare expenditures.

f. The American Rescue Plan was passed on March 11, 2021. It provided $1.9 trillion in additional stimulus funding for vaccine purchases, testing, contact tracing, research and development, and manufacturing of pandemic-related medical supplies.

Source: https://www.cms.gov/files/document/accounting-federal-covid-expenditures-national-health-expenditure-accounts.pdf

In 2022, the federal government collected $4.90 trillion in revenue but spent $6.27 trillion. It spent $1.38 trillion more than it collected, resulting in a deficit. At the end of 2022, the government had $30.93 trillion in federal debt that can never be paid off.

Source: http://bit.ly/3JNCGCJ

These policies have increased the money supply in the market, devaluing the dollar tremendously. This is why 401(k) plans will continue to lose value and never recover.

3. Astronomical Fees

401(k) plan fees are the charges associated with managing the plan, including investment management fees, administrative fees, and other expenses. As a general rule, total plan fees typically range from 0.50% to 2.00% of assets under management (AUM) per year.

Here is a breakdown of the different fees and their typical ranges:

(a). Investment management fees: These fees are typically between 0.10% and 1.00% of AUM per year, although some actively managed funds may charge higher fees