Cryptocurrency is coming to some small retirement plans. Starting in July, ForUsAll, a 401(k) provider that primarily serves small-to-medium-sized businesses, will allow plan participants to invest up to 5% of their assets in cryptocurrencies.
ForUsAll, with only $1.7 billion in retirement-plan assets, accounts for a small portion of the $22 trillion retirement-account market. Despite companies increasingly looking into alternative investments, such as private equity and environmental, social and governance, or ESG, crypto is still largely seen as too volatile and risky for most retirement plan providers.
Fidelity Investments and Charles Schwab don’t allow customers to buy or sell cryptocurrency in taxable accounts or IRAs, The Wall Street Journal reported. But they can purchase shares in trusts that invest in cryptocurrencies from companies including Grayscale Investments. Fidelity plans to offer a cryptocurrency exchange-traded fund.
David Ramirez, ForUsAll’s co-founder and chief investment officer, said he understands the hesitation “but if we do not, the average American may be at a structural disadvantage relative to large institutions and high net worth individuals, and we just don’t think that’s right.”
Department of Labor regulations don’t specifically address cryptocurrencies. But a spokesman said that fiduciaries must “act with prudence in making plan investments and overseeing the funds offered on a 401(k) lineup.” Fiduciaries may be subject to regulatory action if they fail to meet the standards, according to the department.
BitcoinIRA, founded in 2016, lets users purchase cryptocurrencies and physical gold for their retirement accounts. The company said it has processed nearly $1.5 billion in transactions and has over 100,000 users. “ForUsAll and Coinbase wouldn’t be doing this if there wasn’t a market,” said Chris Kline, co-founder and chief operating officer of BitcoinIRA. “There are people that want this with these types of funds. And they want to have access to new and exciting things with their 401(k)s.”
Given the extreme ups and downs of cryptocurrencies, not everyone is convinced they belong in retirement plans. “For retirement purposes, where you need a specific amount to try to build towards a secure retirement that supplements your Social Security and income, this is completely inappropriate,” said
a senior strategic policy advisor at AARP Public Policy Institute.
John cites a long history of companies attempting to add “bells and whistles” to retirement plans, such as when companies offered 401(k) debit cards around 2008. He regards the new plan to allow access to crypto in 401(k) plans as an unnecessary move designed to grab attention.
“There is no reason why an individual who is interested in cryptocurrencies shouldn’t be able to do that on their own with non-retirement money,” John said.
ForUsAll said it addresses some of these concerns by offering educational resources, including webinars, and plan participant access to financial advisors. It also caps the crypto portion to 5% of an investor’s portfolio.
Crypto may provide an incentive for people to put more money into their retirement plans, says Paul Selker, president of Spark Street Digital, a webcast production company.
“If the opportunity to put this tiny little slice of crypto into the portfolio makes them increase their contribution overall, they win. It almost doesn’t matter what happens to crypto,” said Selker. ForUsAll is the 401(k) plan provider for Spark Street’s 14 employees.
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