Crypto in Retirement Accounts? Are You Kidding?

Cryptocurrencies are the exact opposite of a prudent investment: They’re volatile, have little practical use beyond speculation and crime, often get lost or stolen, and lack the real-world cash flows that underpin the values of stocks and bonds.

It should thus go without saying that they have no place in a retirement savings plan. Unfortunately, it appears to require saying.

Increasingly, financial institutions are seeking to get crypto into the employer-sponsored 401(k) plans where workers set aside pre-tax earnings for retirement — and which, as of December, contained about $11 trillion in assets. Last year, the plan provider ForUsAll announced a partnership with Coinbase that would allow employees to put as much as 5% of their accounts into cryptocurrencies via a so-called brokerage window. Earlier this year, Fidelity Investments, among the country’s largest 401(k) providers, said it would soon let participants invest as much as 20% in Bitcoin, if employers choose the option. MicroStrategy Chief Executive Officer Michael Saylor, an outspoken Bitcoin advocate, immediately said he’d be in.

Advocates offer various justifications for this misguided idea. They say Americans deserve more choice, citing surveys showing that millennials in particular tend to see crypto as a desirable investment. They say digital assets can diversify a given portfolio because their price fluctuations aren’t synced with other markets. Proper financial education, they insist, can help people understand the risks.

Please, no. People have a hard enough time navigating the US retirement savings system — and merely saving enough for old age — without adding an option that even professional investors struggle to grasp. The diversification argument is specious at best: Crypto has a limited track record, and Bitcoin has lately plunged even more than other markets, down more than 50% from its November 2021 peak. Not to mention technical difficulties such as obtaining reliable pricing and ensuring safe custody in a largely unregulated realm.

To their credit, regulators aren’t buying the idea. The Labor Department, which oversees 401(k) plans, issued guidance emphatically reminding employers of their fiduciary duty to participants People should be free to squander their money, but not in their 401(k)s. and warning that including crypto among investment options will invite investigation. For the most part, companies seem perfectly willing to comply: In one recent poll, less than 2% of 401(k) plan sponsors said they were considering adding cryptocurrency as an investment option.

Yet the industry and its supporters keep trying. Congressional Republicans, for example, have introduced legislation that would prohibit the Labor Department from restricting 401(k) investment options, opening the way for crypto and much more. If lawmakers have a modicum of responsibility, they’ll let such initiatives die quietly. If not, one must hope employers will hold the line.

Of course, people should be free to invest their money as they please — outside their tax-advantaged retirement accounts. Someday, crypto may prove to be something more than a purely speculative instrument. It’s nowhere near that now.