Crypto options in 401(k) plans. Here’s what you need to know

The rise in prices of Bitcoin and other cryptocurrencies has sparked excitement among some investors, but so have investment advisors He remains highly skeptical Those volatile assets belong to a 401(k) plan or other qualified retirement savings plan.

Encryption was one of Fastest growing categories of exchange-traded funds in 2024. The most popular of these, the iShares Bitcoin Trust ETF (IBIT), has It has ballooned to over $50 billion in total assets.

Although cryptocurrencies represent a small portion of the 401(k) plan market, they could grow significantly in 2025.

President-elect Donald Trump He suggested that he would create a strategic bitcoin reserve for the United States and he nominated him Paul Atkinsa crypto advocate, to head the Securities and Exchange Commission. Securities and Exchange Commission approval The emergence of Bitcoin and Ethereum ETFs in 2024 marked a major change in the industry.

The law that covers 401(k) plans requires. Sponsors plan to act as fiduciariesOr in the interest of investors, by considering the risks of loss and potential gains of investments. Ministry of Labor Fiduciaries have warned to exercise “extreme caution” before adding cryptocurrency options to the core investments of a 401(k) plan.

However, Labor Department officials did not require fiduciaries to select and monitor all investment options, such as those offered through self-directed brokerage windows. According to the Government Accountability Office. Nearly 40% of plans now offer brokerage windows in their 401(k) accounts, according to a 2023 survey. Plan Care Council of America.

“However, investors need to ensure that they take into account their risk tolerance and the time horizon that will determine the target allocation,” said Johnson, who is also a member of the committee. CNBC’s Board of Financial Advisors. “The more volatile the asset class, the less you need it in the portfolio because you are supposed to get more bang for your buck.”

Johnson recommends that cryptocurrencies range from 2% to 8% of an investor’s portfolio.

Other experts point to volatility and risk as reasons to be conservative.

“People who are saving for retirement are likely to be more conservative, because adding cryptocurrencies to a 401(k) plan would significantly increase the risk of your retirement fund taking a big loss at the wrong time,” said Amy Arnott, a certified financial expert. Portfolio analyst and strategist at Morningstar Research Services.

Morningstar found that since September 2015, Bitcoin has been nearly five times as volatile as US stocks, and Ethereum nearly 10 times as volatile. This type of volatility adds significant risk to the portfolio even with a small amount invested.

Regardless of the assets in your 401(k) plan, There are limits to how much you can contribute. For 2025, an employee can contribute up to $23,500 to a 401(k) and other employer-sponsored plans — that’s $500 more than in 2024.

People 50 or older can make a “catch-up contribution” of up to $7,500. Those ages 60 to 63 can go beyond that, with a catch-up contribution of up to $11,250 for 2025.

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