Should You Invest Retirement Funds Into Cryptocurrency?

You’ve likely read the sensational headlines about Bitcoin and other cryptocurrencies in recent years. Yes, Bitcoin started trading at 8 cents per coin back in 2010, and quickly rose to an astounding high of $65,000 per coin by 2021. So that might make you wonder whether you’ve missed your chance to score big by investing in cryptocurrency, or if it’s still a viable option. And should you sink part of your 401k into the venture?

First, it’s important to remember the rule of risk versus reward. In nearly all investment scenarios, the potential for greater gains is paired with the potential for great losses. While Bitcoin did rise precipitously in just over ten years, it has currently dropped to a value of about $29,000 per coin. That’s still great for anyone who bought in early, but bad for those who bought in 2021 during the height of the crypto craze. So, timing your investment is essential.

Another essential component to any risky investment is diversity. It’s almost always a bad idea to sink too much of your assets into more volatile investments. Only risk what you can afford to lose. So in the case of cryptocurrency, most financial planners would probably advise you to continue to diversify your portfolio, placing most of your funds in more stable and reliable assets.

But yes, many 401k plan managers are now allowing for cryptocurrency investing. You must remember that all defined benefit plans are regulated by the Employment Retiree Income Security Act of 1974 (ERISA), which requires that plan managers must act according to fiduciary standards (the best interests of their clients). Some plan managers are still wary of investments like cryptocurrency, due to the personal liability risks to themselves. But others see Bitcoin and similar currencies as potentially promising assets.

Therefore, you should call your retirement plan administrator, and inquire whether investing in Bitcoin and other cryptocurrencies will be allowed by the plan. If you get a yes, then let’s schedule an appointment to discuss your plans. We can help you determine whether this is a worthwhile investment for you, and how much of your assets you should devote to the endeavor.