So Money with Farnoosh Torabi – Ep. 1876
Crypto in Your 401(k)? What You Need to Know
September 8, 2025
Episode Overview
In this timely episode, host Farnoosh Torabi sits down with Tess Waresmith—accredited financial counselor, investing educator, and founder of Wealth with Tess—to demystify the new trend of alternative assets (like cryptocurrency and private equity) entering 401(k) plans. They break down what these legislative and industry changes mean for savers, how to assess the risks, and what practical steps everyone should take to protect and optimize their retirement savings as the year ends. The episode also addresses core 401(k) management strategies—from fees to allocation and auto-rebalancing—providing listeners with actionable, jargon-free advice to make the most of their workplace retirement accounts.
Key Discussion Points & Insights
1. Why Fall Is the Perfect Time to Review Your 401(k)
- Open Enrollment: Fall coincides with open enrollment at many workplaces, making it a great time to review benefits and especially retirement plans.
- End-of-Year Deadlines: The end of the year is the last chance to make 401(k) contributions that count for the current tax year.
- Proactive Management: Instead of waiting for January resolutions, this is an excellent time to optimize contributions, align with company matches, and review investment allocations.
- “Now is a really great, healthy time to be looking under the hood of your 401k. Or if you haven't started investing yet, look at your workplace benefits.” (Farnoosh, 03:36)
2. New Legislation: Crypto and Alternatives in Your 401(k)
Timestamps: 07:02 – 12:27
The Headlines
- A recent executive order aims to "democratize access" to alternative assets like private equity and cryptocurrency in 401(k)s.
- While the move is controversial, it’s not an immediate change, but it could impact your future investment choices and fees.
Risks and Considerations
- Knowledge Gap: Over half of Americans already don’t know their 401(k) fees or even what they are invested in.
- Potential Pros: Alternatives offer new diversification options and—possibly—higher returns.
- Major Cons:
- Higher Risk: Private equity and crypto are speculative and volatile.
- Fees & Liquidity: Alternatives typically carry much higher fees and may lock up your money, reducing transparency and access.
- Conflict of Interest: The push for alternatives (especially private equity) is backed by groups eager to access the estimated $9 trillion in 401(k) assets.
- “There's a reason why they [private equity advocates] want access to your money.” (Tess, 14:22)
Practical Advice
- Limit Exposure:
- “Most people shouldn't be putting more than 5ish percent...5% of your net worth or your assets into alternative assets because they are what's called super speculative.” (Tess, 11:47)
- Vigilance & Questions to Ask:
- What are the breakdowns of alternative assets in my plan?
- What are the specific fees and potential liquidity constraints?
- “Be proactive. Ask about the inclusion of alternative assets in your portfolio. What's the breakdown? What are the fees?” (Farnoosh, 15:55)
Notable Quotes
- “People that have some leeway in terms of their finances and big pensions and funds are able to take those risks because it's not going to impact them as much.” (Tess, 11:01)
- “The reality is that the market grows and so does [President Trump's] exposure to that market, which, again, he has a huge stake in.” (Farnoosh, 12:43)
3. 401(k) Best Practices for the Remainder of 2025
Timestamps: 16:54 – 37:13
1. Contribution Strategies
- Prioritize contributing enough to receive your full employer match—it's “free money.”
- Consider increasing contributions before year-end for maximum tax advantage.
- “The most overlooked benefit of a 401k is the tax savings.” (Tess, 17:21)
2. Investment Allocation and Target Date Funds
- Many participants are defaulted into target date funds, a "set and forget" solution calibrated to your anticipated retirement date.
- Pros: Automatic risk adjustment (more bonds, fewer stocks as you age), broad diversification.
- Cons: Can be too conservative, especially if you choose an early target date—could hurt long-term growth.
- Check the actual mix of stocks and bonds; standard advice: 70-90% stocks in younger decades for growth (adjust as you age/risk changes).
- “...What happens then is because bonds are less risky, they also have a lower return. And so if you're feeling like your 401k isn't growing like it should be, one of the first things you really want to understand is how much of my money is in stocks and how much is in bonds.” (Tess, 21:11)
- WARNING: After rolling over accounts or switching jobs, confirm you are actually invested—your money could be sitting in cash, earning nothing.
- “I didn’t realize that all the investments were now in cash in the IRA. For a year... billions of dollars sitting in cash.” (Farnoosh, 23:09)
3. Fee Awareness
- 401(k)s have two types of fees:
- Administrative Fees: Charged by plan administrators. Little flexibility, but knowing the fee matters if you leave a job.
- Investment Fees (Expense Ratios): Vary by fund; actively managed (sometimes >1%) versus passively managed index funds (often <0.2%).
- Expensive funds do not guarantee better performance; most index funds outperform high-fee options in the long run.
- “Fees compound just like our money does. If you’re paying 1%, I personally think that’s very expensive...Anything above 0.2% these days is pretty high.” (Tess, 30:38)
- Regularly audit your investments for expense ratios. If possible, swap high-fee funds for cheaper index funds.
4. Is Your Portfolio “Set and Forget”?
- Some platforms auto-rebalance, others don’t. Rebalancing ensures your chosen allocation (e.g., 80% stock/20% bonds) remains on target as markets move.
- Review and rebalance 1-2 times a year unless you’re in an auto-rebalancing plan or a target date fund.
- “You can always change that as you learn more...I don’t think agonizing over the allocation is a good use of your time.” (Tess, 35:47)
- Major life changes (getting older, buying a house, changing risk tolerance) may warrant a portfolio shift.
- “As you get older or as your life circumstances change...I want to be a little bit more conservative. I’m going to go in and...change the proportion of stocks to bonds.” (Farnoosh, 38:06)
- Don’t over-manage:
- “The whole point of investing in a broad, diversified portfolio ... is that you don’t have to go in. That’s the whole point of the portfolio...” (Tess, 39:20)
Memorable Quotes & Moments
- Tess on Alternative Assets:
- "I look at it like Vegas odds gambling.” (Tess, 11:17)
- Farnoosh on Surprise Fees:
- “Some that were like two and a half percent...I did the math and this one fund is going to cost us, like, X thousands of dollars whether it makes money or not for me.” (Farnoosh, 29:32)
- Tess on 401(k)s:
- “I think 401k is like my favorite account out there because we already have it, it's automated and it's such a great gateway to learning about how to build wealth outside.” (Tess, 41:10)
- On the Big Picture:
- “I really believe that you shouldn't have to be an active participant in the market to have a comfortable retirement. But that's where we're at. ... If we have these tools and we can make the most of them ... then I want to help people do that.” (Tess, 42:54)
Tess’s Resources
- Free 401(k) Mini-Course:
- wealthwithtess.com/401k
- “It’ll take you like 40 minutes max to look at your account. Probably the hardest part will be resetting your password.” (Tess, 41:10)
- Instagram: @WealthWithTess
Action Steps for Listeners
- Check your 401(k) before year end:
- Confirm your contribution levels and strive to maximize tax-advantaged savings.
- Ensure you’re receiving your employer’s full match.
- Audit your investment allocation:
- Identify stock/bond mix and ensure it aligns with your age, horizon, and risk tolerance.
- Watch out for default allocations, excessive bonds, or cash positions.
- Review your fees:
- Look up administrative and expense ratio fees for all underlying investments.
- Swap expensive funds for low-cost index funds whenever possible.
- Investigate portfolio rebalancing:
- Use target date funds or the auto-rebalance feature if available.
- Otherwise, check your allocation once or twice a year and rebalance as needed.
- Ask about upcoming changes:
- Inquire proactively about whether alternative assets (crypto, private equity) are being introduced—ask about associated risks and costs.
Final Thoughts
Farnoosh and Tess provide a calm, practical, and empowering roadmap to reviewing and optimizing your 401(k) in light of upcoming legislative changes and common pitfalls. Listeners are encouraged not just to react, but to proactively “look under the hood” of their retirement accounts—ensuring their money is growing, risks are understood, and costs are as low as possible.