Crypto In Your 401(k)?
Newsweek|May 20 - 27, 2022 (Double Issue)
Just because you may soon be able to buy Bitcoin in your workplace retirement plan doesn’t mean you should.
KERRI ANNE RENZULLI

MILLIONS OF RETIREMENT SAVERS MAY SOON be able to invest in Bitcoin as easily as they now buy stocks and bonds, following an announcement last month from Fidelity Investments, the nation’s largest retirement-plan provider, that it will add cryptocurrency as an option to the 401(k) plans it offers companies later this year.

“This will be remembered as a seminal moment in the evolution of crypto,” says financial advisor Ric Edelman, founder of the Digital Assets Council of Financial Professionals and author of The Truth About Crypto. “For the average American worker, their only place to save for retirement is through a company retirement plan. Millions of workers will now start to buy Bitcoin who never would have otherwise.”

Just because you can buy cryptocurrency in your retirement plan—whether in the future via your 401(k) or now in an IRA—doesn’t mean you should, though. While investing in Bitcoin, Ethereum and other digital currencies can help diversify your savings and possibly hedge against inflation and boost overall returns, financial advisors say anything more than a small stake is risky for a long-term goal like retirement given how wild the price swings can be.

The trick is to find that sweet spot.

Even before Fidelity’s decision to add Bitcoin to its 401(k) menu, interest in crypto as a investment for retirement had been rising sharply, especially among younger savers. A survey last month by Investopedia, for example, found that one in four millennials say they are relying on crypto to help fund their retirement.

If you’re among those interested in adding crypto to your long-term savings, here’s what you need to know to get the biggest bang for your investment buck without blowing up your chances for a comfortable retirement.

Expect Turbulence

Only a quarter of Americans feel they have strong knowledge of digital assets, like cryptocurrencies, and even fewer (16 percent) have actually invested in or used digital assets before, according to surveys from Investopedia and the Pew Research Center, respectively. That unfamiliarity was one of the top reasons the Department of Labor warned the retirement industry in March to use extreme care when offering crypto investments, as Fidelity will be doing, since inexperienced investors are likely to underestimate just how volatile the category is.

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