TikTok claims 401(k)s are a scam — financial experts strongly disagree

TikTok claims 401(k)s are a scam — financial experts strongly disagree

Viral posts on TikTok and other social media platforms are claiming 401(k) retirement plans are "scams." Financial professionals say those claims are misleading.

WASHINGTON, D.C. - Despite viral social media claims calling 401(k) retirement plans a "scam," financial professionals say these accounts remain valuable long-term saving tools when used appropriately.

What we know:

Some content on social media platforms like TikTok has suggested that 401(k) plans are fundamentally flawed or scams — a narrative that has gained attention and clicks online. These posts often highlight issues like early-withdrawal penalties, fees or limitations on investment options.

However, financial advisors and investment firms caution that these claims oversimplify or misrepresent how 401(k) plans work.

According to Charles Schwab, a 401(k) is not a scam, but rather a retirement savings vehicle with well-documented benefits, especially when used wisely.

Experts point to several key strengths of a 401(k):

• Employer match: Many employers offer matching contributions up to a percentage of salary. Schwab notes that not contributing enough to get the match is essentially leaving free money on the table.
• Tax advantages: Traditional 401(k) contributions may reduce taxable income today, while Roth 401(k) contributions can grow tax-free, giving savers flexibility depending on their tax situation.
• Automatic saving and compound growth: With payroll deductions, a 401(k) makes saving easier, and decades of compound investment growth can significantly boost retirement balances.
• Institutional investment options: Some plans offer access to low-cost institutional funds not easily available to individual investors.

Financial professionals emphasize that while 401(k)s aren’t perfect and fees vary by plan, they are neither fraudulent nor inherently harmful when understood and managed properly.

Why people may think 401(k)s are a "scam"

Critics on social media sometimes claim that 401(k)s are bad because of fees, market risk or limited access before retirement. Others push alternatives — like life insurance policies — as superior savings vehicles, but experts stress these are fundamentally different financial products with different purposes.

Some of the misleading TikTok content also frames 401(k) tax benefits or withdrawal rules out of context, which can confuse viewers and lead to poor financial choices, according to Schwab.

What they're saying:

Financial planners advise savers not to take viral advice at face value, especially from unverified social media sources.

"You don’t have to defer to the ‘experts’ on TikTok … because what’s right for one person might not be right for someone else," one financial coach notes, urging viewers to build knowledge from trusted sources.

What you can do:

Financial experts say there are several practical steps workers can take to make the most of their 401(k) plans.

• If your employer offers a match, try to contribute enough to capture it.
• Understand your plan’s fees and investment options.
• Treat your 401(k) as part of a broader retirement strategy, not the only piece.
• Seek advice from certified financial professionals rather than social media influencers.