💰 Bitcoin in your 401(k)

FIRE BTC #41 - A new $9 trillion source of demand is coming online

What happens when a $9 trillion retirement system collides with the hardest money on earth? We’re about to find out.

The Trump administration just cleared the way for employers and plan providers to offer bitcoin in 401(k) plans. That means steady, automated retirement contributions could soon start stacking sats every paycheck.

If you’re chasing FIRE, this is huge. 401(k)s have long been a staple of traditional retirement planning thanks to tax advantages and employer matches. But they come with limits and trade-offs.

This week, we’ll break down what a 401(k) really is, the pros and cons, how I use mine, and what this shift means for your FIRE plan—and for bitcoin’s future.

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🧐 What is a 401(k)?

A 401(k) is an employer-sponsored retirement plan that lets you contribute part of your paycheck into an investment account. It’s automatic, tax-advantaged, and often comes with free money in the form of an employer match. For traditional retirement planning, it’s a no-brainer. It’s still useful for people in the pursuit of FIRE too—but with some caveats.

Here’s the quick breakdown:

✅ Advantages:

• Tax perks: Traditional contributions lower your taxable income now and grow tax-deferred. Roth contributions skip the deduction today but let you withdraw tax-free later.

• Employer match: Instant return on your contributions. If your company offers one, never leave it on the table.

• Higher contribution limits: $23,500 in 2025 (plus catch-up if you’re 50+), way more than an IRA.

• Creditor protection: ERISA rules generally shield your 401(k) from lawsuits or bankruptcy.

⚠️ Disadvantages:

• Locked up until 59½: Withdraw early and you’ll pay taxes + a 10% penalty (unless you use advanced strategies).

• Limited investment choices: Most plans offer a handful of mutual funds, with a mix of equities, bonds, and target date funds.

• Fees: Administrative costs and fund expense ratios can quietly eat into returns.

• Required withdrawals later: Starting at 73, you must take Required Minimum Distributions (RMDs) whether you need the money or not.

For FIRE, the biggest trade-off is liquidity. If you max out your 401(k) and end up with a huge balance there, you can’t touch it during early retirement without onerous penalties. That means being a bit strategic with it: grab the match, leverage the tax break if it helps, but don’t overcommit money you’ll need in your 40s or 50s.

⚙️ How I use my 401(k)

I always contribute enough to get the full employer match. Most companies offer something like a 50% match on the first 6% of your salary. So if you contribute $3,000, they throw in another $1,500. It’s free money.

Beyond that, my tax situation each year plays a role. Extra contributions to a Traditional 401(k) (not Roth) lowers your taxable income, and might even push you into a lower bracket. That can save you a lot on taxes. If it’s needed in a particular year, I’ll add more. If not, I’d rather keep that value flexible, held in spot bitcoin (controlling the keys, of course), where I can access it anytime.

If you’re aiming for FIRE, liquidity matters. A 401(k) provides some great benefits, but funding early retirement requires having your savings available to access much earlier than age 60.

For me, the sweet spot is usually to grab the match (can’t turn down free money!), optimize taxes if it makes sense, then put the rest where you control it.

The next question is: What do you buy in your 401(k)?

I’ve mentioned in previous newsletters and various other venues that I don’t touch bonds. If all you have available in your plan is the fixed menu referenced above, go for an option that either tracks the S&P 500 or the total US stock market (like Vanguard’s VTSAX). Be sure to check the expense ratio as well. It should be below 0.10%. Things I avoid: international stock funds, bonds of any kind, target date funds, money market funds.

While most 401(k) plans offer a limited menu of options, some also offer a brokerage window—a feature that opens the door to a much wider range of investments. If your plan includes this, you can go beyond the standard mutual funds and buy ETFs or individual stocks.

My current employer, Unchained, offers this option through our Fidelity plan (called BrokerageLink), and it’s an absolute game-changer. Instead of exposure to stocks, I can purchase bitcoin ETFs and bitcoin treasury companies like Strategy (MSTR) directly in my 401(k). Of course, it’s not the same as holding bitcoin in cold storage, but it’s the next best thing. I highly recommend checking if your employer offers this brokerage window option.

Now, with the Trump administration clearing the path for direct bitcoin offerings, people may soon be able to allocate their 401(k)s to BTC as part of the limited menu.

💥 Bitcoin is back on the menu

With Trump’s change, bitcoin may be coming to the regular 401(k) menu.

When bitcoin shows up alongside the S&P 500 fund and target date funds in people’s 401(k) investment choices, the result will be massive. Most people follow a “set it and forget it” mentality. Contributions and company matches flow in automatically every paycheck, creating passive demand for bitcoin week after week, regardless of price or market conditions.

But the secondary effects might be even more important.

Everyone inside the system—HR teams, plan administrators, customer service reps at 401(k) providers—will now have to learn what bitcoin is. They’ll need to answer questions about it. Some will get orange-pilled just from doing their jobs. Some will start buying bitcoin themselves. And once people see that the bitcoin slice of their 401(k) is outperforming everything else, they’ll start buying it in IRAs, brokerage accounts, and eventually in cold storage.

It’s a waterfall effect. Exposure leads to curiosity leads to conviction.

There’s roughly $9 trillion sitting in 401(k)s today with zero access to bitcoin. If even 1% of that shifts over time, that’s $90 billion in new automated demand. A steady bid, built into the retirement system.

Bullish.

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That’s it for this week — thanks for reading!

Until next time,

Trey ✌️