Can I Buy Crypto With My Fidelity 401k – From Dogecoin to Bitcoin to Coinbase, cryptocurrency is the hottest trend in investing right now. Here’s what you need to know before you buy.
Bitcoin is down more than 16% this year, but that hasn’t dampened enthusiasm for the asset. That’s why Fidelity Investments is launching a bitcoin alternative for its 401(k) plans, but investors may want to think long and hard about whether it’s for them.
Can I Buy Crypto With My Fidelity 401k
The nation’s largest plan administrator said later this year that 23,000 companies that operate pension plans may offer bitcoin as an investment option for their employees. Investors can allocate up to 20% of their 401(k) accounts to Bitcoin, but employers can lower that limit.
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Despite a sharp decline from bitcoin’s record high in November, the share of adults willing to buy bitcoin remained stable at 21% at the end of January, a Morning Consult survey showed.
“For owners, the current price of Bitcoin represents only a decline, not a permanent loss of value,” writes Charlotte Principato, financial analyst at Morning Consult. “Bitcoin owners are not in the game because they see cryptocurrency as the future of payments or for other idealistic reasons. Instead, 70% of bitcoin owners say making money is their ‘main reason’ for investing.”
Fidelity estimates that about 80 million Americans own or invest in digital assets, encouraging plan sponsors to meet growing demand, especially among young workers.
MicroStrategy, whose president and CEO Michael Saylor is one of the biggest cheerleaders of Bitcoin and added Bitcoin to the company, will become the first company to offer Bitcoin in a retirement plan through Fidelity.
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Dan Casey, an investment advisor and founder of BridgeRiver Advisors, is skeptical that owners will ask Fidelity to make bitcoin available through their 401(k)s.
“I find it hard to believe,” Casey said. “Most employers I know don’t want that because of the liability.”
According to the Department of Labor, which regulates company-sponsored retirement plans, plan sponsors are legally required to review the investment options for employees to ensure they are “prudent.” And currently, the department does not carefully consider cryptocurrency and crypto-related assets.
“I have serious concerns about this move,” said Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration. “These are speculative assets at the moment.”
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Critics say cryptocurrency and crypto-related investments are too volatile and unregulated, especially for pension funds that people need to see them through their golden years. But marketing hype, such as Super Bowl ads and A-list celebrities selling cryptocurrency, can cause FOMO, or fear of missing out, in people and make them jump in before fully understanding the risks.
“It is easy to get caught up in an investment frenzy that is fresh and big, but quick profits are not sustainable for long-term investments,” Vanguard said on its website about investing in cryptocurrencies.
Digital assets are also more prone to fraud, theft and loss than notes. Cryptocurrencies can be lost forever through the loss or forgetting of a password or theft from digital wallets, the Labor Department said in a memo last month. Considering the risks, the department warned plan sponsors who offer these investments to explain how they fulfill their fiduciary responsibilities to consumers.
Fidelity recognizes that not everyone may be comfortable investing in digital assets, but for those who are, the company provides educational materials to help them make informed decisions.
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Each client invests through a digital asset account managed on Fidelity’s depository platform to ensure institutional security for assets, the company said.
Fidelity said the new offer “reflects the increasing demand for digital assets among investor segments and we believe that this technology and digital assets represent a large part of the future of the financial services industry.”
Fidelity is probably right that digital assets are becoming the norm in the financial industry, but “it’s not clear,” says Khawar, that investing in pension funds is premature.
Vanguard echoed this sentiment, saying: “Although we do not currently offer cryptocurrencies as an investment option, we recognize the impact they are making in the investment world. As cryptocurrencies and blockchain become more mainstream, we will monitor their development and the best determine. . More way for our investors.”
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Medora Lee is USA Today’s money, markets and personal finance reporter. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning. An employer overseeing a retirement savings plan must decide to include a digital asset account.
Fidelity said its bitcoin-holding 401(k) offering addresses many of the concerns raised by the Labor Department about adding cryptocurrencies to retirement accounts. Credit… Alexi Rosenfeld/Getty Images
Fidelity, the nation’s largest provider of 401(k) plans, is allowing participants to put a portion of their retirement money into bitcoin — if their employers are willing to allow it.
The announcement brings millions of people closer to investing directly in Bitcoin this summer without setting up an account on a cryptocurrency exchange. But regulators have already said they are skeptical of the idea: Last month, the Labor Department, which oversees workplace pension plans, said it would take a critical look at plans to add digital assets to their investment menus.
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Fidelity — with $2.4 trillion in 401(k) assets in 2020, or more than a third of the market, according to research firm Cerulli Associates — said it has introduced a digital asset account to hold bitcoin. Account fees range between 0.75 percent and 0.90 percent of assets, depending on a number of factors, including the owner and the amount invested. Additional trade fees, which have not yet been disclosed, will be “competitively priced,” the company said.
“We’re starting to hear growing interest from plan sponsors organically as they offer bitcoin or digital assets in a retirement plan,” said Dave Gray, head of workplace retirement offerings and platforms at Fidelity Investments, in an interview.
MicroStrategy, a business analytics company, has already signed on – perhaps surprisingly, its CEO is a big supporter of Bitcoin and has invested the company’s money heavily in the digital currency. But Fidelity is in talks with several employers from different parts of the country, Gray said.
Fidelity said the digital asset account will be generally available by the middle of this year. It can be integrated into the 401(k) investment menu just like traditional mutual funds; For example, investors can choose to dedicate a percentage of their contributions to a Bitcoin account. This percentage will be capped: the employer will determine the cap, but the platform does not allow allocations of more than 20 percent, although this figure may vary.
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A number of traditional investment options with exposure to cryptocurrency have hit the market recently, including several exchange-traded funds last year. But Fidelity’s move is even more notable because it allows Americans to bet their sacred retirement dollars on a booming and highly volatile sector.
The Labor Department didn’t go so far as to ban crypto from pension plans when it issued a compliance advisory last month, but it reminded plan regulators — often employers who act only in the interests of participating workers — that they have a responsibility have to choose “careful” options. And it strongly suggests that cryptocurrencies have yet to reach this bar.
“These investments pose significant risks and challenges to participants’ retirement accounts, including significant risk of fraud, theft and loss,” the department said in its consent release. It said it will carry out an investigative program targeting schemes that offer crypto and related investments.
The agency said pension investors misunderstand the risks of cryptocurrencies and raised concerns about valuation, due diligence and record-keeping procedures.
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In a letter to the Labor Department this month, Fidelity said the agency has not provided guidelines on how plan managers should address these concerns or fulfill their duties when considering plan investments in cryptocurrencies. The organization asked the department to work with planning inspectors to develop steps to meet these obligations.
“The Department of Labor is replacing its own view of crypto with one that properly belongs to the sponsors of the sponsors,” Mr. Gray said, adding that Fidelity’s new account addresses many of the agency’s concerns.
For example, Fidelity said the digital account is valued daily and managed on its own depository platform to ensure “institutional security” – and baked into the offering are robust educational materials.
But little can be done about Bitcoin’s volatility: After hitting $69,000 on November 9, it recently traded at around $40,000.
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On Tuesday, a group of 13 organizations of investors, consumers, workers and pensioners sent a letter supporting the Labor Department’s cautious stance.
“We believe that the many uncertainties currently prevalent in digital asset markets make it extremely challenging for plan administrators to meet their prudential obligations when exposing plan participants to this class of assets,” they wrote.
While Fidelity is best known for its massive pension business, it was one of the earlier entrants into the cryptocurrency space. In 2018, it started offering trade and custody