Can I Invest in Cryptocurrency Through My Retirement Plan?

May 16, 2023

Cryptocurrency has made headlines in the past few years, and stories abound of regular people who struck gold by investing early in currencies like Bitcoin. So you might be wondering if the craze is over, and you missed your chance… Or if you can still invest in cryptocurrency. More importantly, can you dedicate some of your retirement plan funds to this type of investment? And should you? 


First, you should remember that all defined benefit plans (like 401k) are governed by standards set forth in the Employment Retiree Income Security Act of 1974 (ERISA). These funds must be managed by fiduciary standards, meaning plan managers must act in the best interests of their clients. Due to the risk of personal liability, many managers are wary of investments like Bitcoin. 


On the other hand, some plan managers have perked up to notice the potential of cryptocurrency investments. Bitcoin, in particular, has been around since 2010. When it began trading, the currency was valued at 8 cents per coin. By 2021, the value had risen to a whopping $65,000. 


Of course, crashes happen, too. As of April 28, 2023, Bitcoin is valued at about $29,000; still good news for those who bought low, but perhaps not so thrilling for anyone who invested during the highs of 2021. 


Clearly, Bitcoin and other cryptocurrencies are volatile investments; the potential for great rewards is balanced with the potential for significant losses. Therefore, timing can be essential with this type of investment. Not to mention luck!


For that reason, many financial professionals do advise caution when considering cryptocurrency investments. In most cases it is wise to devote only a small portion of your investments to something like Bitcoin, and to diversify into more reliable types of assets. But if you do want to take the plunge into cryptocurrency investing, contact your plan administrator to discuss your options. 


And of course, let’s discuss this idea at your next appointment before you make a big decision. We can help you decide if cryptocurrency investments fit into your portfolio, and how much of your funds you should devote to the endeavor. 


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