Should you put Bitcoin in your 401(k) plan? Here are the pros and cons.

Fidelity Investments wants to let investors own


in their 401(k) retirement accounts. This is a big milestone for crypto and could be a big win for Fidelity. Yet it’s also likely to spark a regulatory battle over Bitcoin’s suitability for company-sponsored savings plans, and it raises questions about whether investors should own a cryptocurrency.

If anyone can integrate Bitcoin into retirement wallets, it’s Fidelity. The company administers more than $2.7 trillion in 401(k) plan assets, overseeing approximately one-third of the $7.7 trillion held in 401(k) plans. Fidelity said last week it would give the 23,000 employers it works with the option to add “digital asset accounts” to their 401(k) plans. The company says it will charge between 0.75% and 0.90% annual fees for accounts. It aims to have them available by the middle of the year, with more cryptos potentially coming in the future.

Although Fidelity does not bless Bitcoin as an investment, its decision to incorporate the asset into 401(k) is heralded as a stamp of approval for the token. Fidelity’s first client for the accounts is MicroStrategy, which holds $5 billion in Bitcoins on its balance sheet. CEO Michael Saylor, a relentless Bitcoin bull, described him to CNBC as “the perfect asset for a retirement plan.”

Some crypto backers say Fidelity’s imprimatur could be the impetus needed to convince skeptical clients and advisors that it’s time to buy. “For a company of its caliber, size and reputation, offering Bitcoin to workers across the country sends a clear message that this is something they should seriously consider,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals, a crypto education group. But it’s far from certain that crypto will soon find its way onto 401(k) menus alongside mutual fund listings. It remains highly controversial as a long-term holding company. And there could be severe regulatory backsliding.

For most retirement savers, “crypto is a bad idea and not something the average individual should consider,” said Madeline Hume, senior analyst at Morningstar.

Bitcoin’s suitability as a 401(k) investment has prompted warnings from the Labor Department, which enforces federal rules for the plans. In March, the DOL warned employers against crypto, warning that they “should expect to be questioned as to how they can reconcile their actions with their duties of care and loyalty.”

The DOL continues “to have the concerns raised in these guidelines and stands by its findings,” Ali Khawar, a DOL benefit security official, said in a statement to Barrons.

Investor protection groups are also aligning themselves against this idea. More than a dozen backed the DOL warning in a letter to the agency last week. Discussions around cryptos “overshadow the facts that make them extremely questionable for retirement accounts,” said Dennis Kelleher, CEO of Better Markets, an investor advocacy group that signed the letter.

Employers often act as nannies to a savings plan, in part to shield employees from high-risk investments and to shield themselves from liability. Some plans won’t even make closed-end funds or preferred stock available in a 401(k), let alone something as risky as Bitcoin. “Offering crypto seems to add a layer of complexity that most plan sponsors may not want to consider,” said Wendy Von Wald, fiduciary product manager at Travelers, which sells insurance coverage to travelers. plan sponsors and can increase its bonuses on employers offering Bitcoin.

For now, Fidelity is not likely to open the floodgates to Bitcoin. Vanguard Group, one of the largest 401(k) administrators, does not intend to offer a crypto product, a spokeswoman said. Online brokerage Charles Schwab declined to comment. Empower Retirement, another major administrator, did not respond to a request for comment.

Loyalty, however, has much to gain. The company is building an institutional crypto services business, plans to launch a Bitcoin exchange-traded fund, and has already launched funds that invest in crypto-exposed companies. The 401(k) movement “is the next step in the journey in which we see blockchain and digital assets shaping and becoming a bigger part of the financial future,” said Dave Gray, head of mid-life retirement offerings. work at Fidelity.

Investors should not lose sight of the premise behind all of this, which is that owning Bitcoin will enhance their portfolio returns. With that, the jury is out. Some studies claim that Bitcoin is uncorrelated to stocks and bonds. That may be attractive in today’s market, with stocks down 12% this year and bonds averaging 9%. But Bitcoin, down 10%, is also faltering. Although its price has risen exponentially since its launch in 2009, this has come at a time when the crypto has grown from a fringe move to the upper echelons of the asset management industry, a move that cannot be repeated.

Even Bitcoin proponents say the crypto deserves no more than a small place in a retirement savings plan. Matt Hougan, Chief Investment Officer of Bitwise Asset Management, said Bitcoin should not exceed 5% of an investor’s portfolio. Spectacular Bitcoin pullbacks “are painful events,” he said. Indeed, Bitcoin is down 42% from its highs of last November, recently hovering around $39,000.

“It’s always tempting to cut corners with retirement savings,” Morningstar’s Hume said. “Everyone has a neighbor or nephew who has hit the bull’s eye in crypto. But there really aren’t any shortcuts to saving for retirement. b

Write to Joe Light at

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