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  • Writer's pictureJeran Van Alfen, CFP®

Should I Use 401(k) Money to Invest in Crypto?

Cryptocurrencies have continued to gain momentum lately, with recent regulatory approvals of bitcoin ETFs.  These rulings broaden access to cryptocurrency and have many people interested in making crypto a fixture in their portfolio.  One question that often comes up is whether it's a good idea to use 401(k) funds to invest in cryptocurrencies. 

Does Crypto make sense in a 401(k)? 

  • As cryptocurrencies, such as Bitcoin, reach new highs it’s difficult to ignore the opportunity to make money. This potential for high returns can be particularly appealing for those looking to boost their retirement savings [1]

  • However, cryptocurrencies have been highly volatile and risky investments so far. Even the most well-established cryptocurrencies, like Bitcoin and Ethereum, have exhibited wild price swings. This instability can be particularly concerning when considering crypto's suitability for 401(k) accounts, which are typically focused on investment options that have a longer track record of returns in order to measure risk [2]

  • But, those with long time-horizons until retirement may benefit from an asset class that has a potentially high risk-reward profile. 

So why have 401(k)s been slow to adopt Crypto? 

  • A significant concern is the regulatory uncertainty surrounding cryptocurrencies [3]. There are requirements around what kind of assets employees can hold (and employers can offer) in their 401(k) accounts, and the U.S. Department of Labor has cautioned employers against crypto, warning that if crypto is offered plans they "should expect to be questioned about how they can square their actions with their duties of prudence and loyalty"[4]. 

  • Most 401(k) plans do not allow cryptocurrency due to these risks and regulatory concerns. The fiduciaries who make decisions about retirement plans must account for how they act in the best interest of the plan participants. Given the volatility and regulatory uncertainty of cryptocurrencies, many fiduciaries deem it imprudent to include crypto in 401(k) plans. 

  • This is not unique to crypto.  Many types of assets are prohibited from being owned in a retirement plan including life insurance, derivative positions, antiques/collectibles, precious metals, or personally owned real estate. 

Access to crypto may soon become more popular 

  • In 2022, Fidelity was the first company to allow access to cryptocurrency within their 401(k) by making bitcoin available as an investment option.  This access came with allocation limits and Fidelity leaves the decision of offering bitcoin up to the employers sponsoring the plan.[5] 

  • With the SEC approvals allowing spot bitcoin ETFs, it is expected that more plans will have access to funds that provide exposure to cryptocurrencies in the future. 

  • Some plans allow employees to open self-directed brokerage accounts within their 401(k).  These brokerage accounts allow the employee to purchase securities such as stocks and ETFs that are not in the standard lineup of investment options.  With brokerage firms providing access to spot bitcoin ETFs, this allows another way that employees can gain exposure to crypto with their retirement account money. 


Where does crypto fit in your portfolio? 

It’s important to cover some bases before you start funneling all of your money to crypto.  As discussed, crypto is a speculative investment.  It is a good idea to make sure you have some security before you add risk to your portfolio.  Here is a hierarchy of investing that can be helpful to use as you make investing decisions: 

The objective of this visual is to make sure that you allocate money to priorities first before you are exposed to significant risk.   

Volatile investments can take a toll on our emotions.  As shown below, our emotions can sometimes get the better of us leading to poor investment decisions.  Having a system really helps! 


While the potential for high returns can make cryptocurrencies seem like an attractive investment, the risks and regulatory concerns associated with them have prevented wide-spread adoption as 401(k) investments.  This will continue to evolve and if you would like access to cryptocurrency in your plan, it is important to let your company know. 

The risks and benefits of any investment should always be considered and evaluated before you invest.  It is important to review your ability to take risk and the amount of money that you are comfortable putting at risk before you decide to add a volatile asset class to your portfolio. 

It's essential to do your research and it is recommended to consult with a financial advisor before making any significant investment decisions. 

Centered Financial, LLC is a registered investment adviser offering advisory services in the State of California, Utah, Texas and in other jurisdictions where exempted. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques, strategies, or investments discussed are suitable for all investors or will yield positive outcomes. To determine which strategies or investment(s) may be appropriate for you, consult your financial adviser prior to investing. Any discussion of strategies related to tax or legal planning is general and is not intended as tax or legal advice. Please consult appropriate tax and legal professionals for recommendations pertaining to your specific situation.

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