The recent surge in cryptocurrency prices, particularly bitcoin, has stirred interest among some investors. However, many investment advisors remain skeptical about including these volatile assets in retirement savings plans like 401(k)s. The cryptocurrency category, especially with the rise of funds like the iShares Bitcoin Trust ETF (IBIT), is growing rapidly, amassing over $50 billion in assets. Potential political support, including plans by President-elect Donald Trump to establish a U.S. bitcoin reserve and the nomination of a crypto advocate for the SEC chair, could further expand crypto’s role in retirement accounts.
Despite the growing interest, the Labor Department warns fiduciaries to exercise “extreme care” regarding crypto inclusion in 401(k) plans due to inherent risks. While some advisors advocate for a modest allocation of 2% to 8% of a portfolio to cryptocurrencies given their non-correlation to traditional markets, others caution against the increased risk caused by their volatility—bitcoin being nearly five times more volatile than U.S. stocks. Retirement savers are advised to be particularly careful, as adding crypto could jeopardize their nest egg. Furthermore, for 2025, employees can contribute up to $23,500 to their 401(k), with additional catch-up contributions available for those aged 50 and over.
