For approximately half of the limited-savings Americans, the design of the 401(k) plan directly addresses the challenges of saving:

• Forced savings and "lazy" investing: The plan automates savings through automatic salary deductions, effectively helping "living paycheck to paycheck" individuals overcome consumption temptations and accumulate retirement capital.

• Employer matching as “free benefits”: Many companies offer a certain percentage of matching funds for employee contributions, seen as an immediate 100% return, which is a powerful booster for individual account growth.

• Long-term compounding and tax advantages: Due to tax deferral, funds in the account can grow at a faster compounding rate. For low-income young people, even a small initial amount can yield considerable compounding effects over decades.

Incorporating the controversies and challenges of cryptocurrency

While there are opinions suggesting that including cryptocurrencies like Bitcoin in a 401(k) can enrich investment choices and potentially yield high returns, the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has issued clear warnings regarding this. Their core concern lies in the inherent high volatility, valuation uncertainties, and the unpredictability of the regulatory environment of cryptocurrencies, which contradicts the primary goal of retirement funds to prioritize safety and stability. Plan fiduciaries have a responsibility to act in the best economic interest of participants, and choosing such high-risk assets poses significant prudent challenges.

Conclusion and reminder

The 401(k) plan is an essential pillar of the American retirement system, and its tax advantages, employer matching, and long-term investment characteristics provide a vital retirement savings tool for a wide range of employees, including those "living paycheck to paycheck."

Regarding the discussion of incorporating cryptocurrencies, while it may present new possibilities, one must be fully aware of the risks that far exceed those of traditional assets. It is crucial to thoroughly understand the related risks and carefully assess one’s risk tolerance before making any investment decisions.