Roughly 80 million U.S. investors own or have invested in digital currencies, and with a growing appetite for such alternative investments, retirement savers can now benefit from yet another way to invest. Financial firm Fidelity Investments has announced an expansion of its cryptocurrency platform, unveiling a first-of-its-kind Bitcoin offering for the company’s 401(k) investment lineup. Here’s how it works.
A financial advisor could help you plan for retirement and determine if investing in cryptocurrencies aligns with your financial goals. Find a qualified advisor today.
Fidelity Launches Digital Asset Accounts For 401(k) Plans
According to the Fidelity 2021 Institutional Investor Digital Assets Survey, seven out of 10 institutional investors expect to buy or invest in digital assets in the future. Of those, more than 90% expect their institutions’ and clients’ portfolios to allocate funds to those investments.
“Increasingly, we are seeing interest from leading employers to add digital assets to their 401(k) plan,” said Executive Vice President Chris Call of Newfront Retirement Services, in a statement. “As companies consider alternative investment options in their plan design, we believe digital assets are worthy of consideration.”
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Earlier this year, the Department of Labor (DOL) issued a strict compliance warning about including cryptocurrencies in defined contribution plans like your 401(k), as multiple sources reported heightened interest in the subject. Indeed, more than half of institutions surveyed by Fidelity reported current investments in digital assets, with participation rates jumping more than 10% in Europe and the U.S. compared to 2020.
As a result of increasing demand, Fidelity has announced a first-of-its-kind ability to invest in Bitcoin through your retirement account, allowing retirement savers to benefit from tax-leveraged accounts while further diversifying long-term holdings.
“We are thrilled to be the first to offer employers exposure to bitcoin for the core lineup of 401(k)s,” said Dave Gray, Head of Workplace Retirement Offerings and Platforms at Fidelity Investments. “[The new Digital Asset Accounts reflect] our belief in the promise of blockchain technology for the financial industry’s future.”
How Retirement Savers Can Take Advantage
Fidelity has partnered with business intelligence giant MicroStrategy to offer its first Digital Asset Accounts (DAAs) through the company’s 401(k) program. Broad availability will roll out to employers mid-year.
The new offering will allow retirement savers comfortable with cryptocurrency volatility to invest in Bitcoin through a Digital Asset Account within a 401(k). The DAA is a custom plan that will hold Bitcoin in an institutional-grade, offline vault, as well as short-term money market investments for liquidity. Employers will be able to establish contribution and exchange limits for the account.
Enrolled employees will receive Bitcoin units in their account, bought at the market rate at the time of contribution. This allows savers to benefit from dollar-cost averaging and smooth out some of the price fluctuations for which cryptocurrencies are infamous. Fidelity will also offer a trove of educational materials so that interested investors can learn more, even as it expands use cases beyond Bitcoin in the coming months.
However, it pays to remain cautious when investing retirement funds in such a volatile asset. In the small print, Fidelity notes that digital assets are speculative and highly volatile, can become illiquid and are slated for investors with high-risk tolerance. Investors could lose the entire value of their investment at any time.
Bottom Line
Investment firm Fidelity has announced a new way to invest in Bitcoin with tax-leveraged dollars. Starting with MicroStrategy and rolling out to all employers soon, retirement savers will be able to buy and hold digital assets through their 401(k) plans, allowing them to benefit from the increasing demand for alternative investments. Bitcoin is a highly volatile asset and may not be an appropriate choice for all investors, but with this new offering, Fidelity has made it easier for you to add crypto to your retirement mix.
Retirement Planning Tips
- Not sure what investments and strategies will set you up for a smooth retirement? For a solid, long-term financial plan, consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s free retirement calculator to get a good first estimate of how much money you’ll need to retire.
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