Fidelity plans to offer bitcoin in its 401(k) retirement funds. But is it best for you?

Medora Lee
  • Fidelity plans to add bitcoin to its 401(k) options.
  • Fidelity says it's responding to high interest in digital assets.
  • But critics say investing retirement funds in bitcoin is too risky.

Bitcoin is down more than 16% this year, but that hasn’t dampened enthusiasm for the asset. That’s why Fidelity Investments is launching a bitcoin option for its 401(k) plans, but investors may still want to think long and hard about whether it's for them. 

The nation’s largest plan administrator said later this year, the 23,000 companies it manages retirement plans for will be able to offer their employees bitcoin as an investment choice. Investors would be able to allocate up to 20% of their 401(k) accounts to bitcoin, though employers will be able to lower that cap.  

Crypto curiosity remains strong 

Despite bitcoin’s sharp decline from its November all-time high, the share of adults who were considering purchasing bitcoin held steady at 21% at the end of January, a Morning Consult survey showed. 

“To owners, bitcoin’s current price represents just a dip, not a permanent loss of value,” wrote Charlotte Principato, financial services analyst at Morning Consult. “Bitcoin owners aren’t in the game because they view cryptocurrency as the future of payments or for other idealistic reasons. Instead, 70% of bitcoin owners say making money is their “major reason” for investing.” 

Fidelity estimates about 80 million Americans own or have invested in digital assets, which prompted plan sponsors to address the growing demand, especially among younger workers. 

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MicroStrategy, whose Chairman and Chief Executive Officer Michael Saylor has been one of bitcoin’s biggest cheerleaders and has added bitcoin to the company’s holdings, will be the first company to offer bitcoin in its retirement plan via Fidelity. 

'Grave concerns' 

 Dan Casey, an investment adviser and founder of Bridgeriver Advisors, doubts employers are asking Fidelity to make bitcoin available through their 401(k)s. 

“I find that hard to believe,” Casey said. “A lot of employers I know don’t want it because they are liable.”  

Plan sponsors are legally responsible for vetting investment options offered to employees to ensure they are “prudent,” according to the Department of Labor, which regulates company-sponsored retirement plans. And currently, the department doesn’t consider cryptocurrency and crypto-related assets prudent. 

“I do have grave concerns over this course of action,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, said. “Right now, these are speculative assets.” 

Person trading Bitcoin on a smartphone.

Cryptocurrency and crypto-related investments are too volatile and too unregulated, critics say, especially for retirement funds, that people need to live out their golden years. But marketing hype like Super Bowl ads and A-list celebrities hawking cryptocurrencies may be giving people FOMO, or fear of missing out, and making them jump in before fully understanding the risks. 

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“It’s easy to get swept up in the latest – and supposedly greatest – investment fad, but quick wins aren’t sustainable for long-term investing,” Vanguard says on its website about investing in cryptocurrencies.  

Digital assets also have a high potential for fraud, theft, and losses, naysayers note. Cryptocurrencies can be lost forever from simply losing or forgetting a password or theft from digital wallets, the Department of Labor said in a memo last month. Considering the risks, the department warned plan sponsors offering these investments to explain how they are adhering to their fiduciary responsibility to their consumers.  

Safety first 

Fidelity acknowledges not everyone may be comfortable investing in digital assets but for those who are, the company will provide educational materials so they can make informed decisions. 

The company also said each customer will invest through a Digital Assets Account, which will be held on Fidelity’s custody platform to ensure institutional-grade security for the assets.  

Fidelity says its new offering reflects “steadily growing demand for digital assets across investor segments, and we believe that this technology and digital assets will represent a large part of the financial industry’s future.” 

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Fidelity is probably right that digital assets will become a norm in the financial industry, but “what that looks like is not clear,” making it too early to invest retirement funds in them, Khawar said. 

Vanguard echoed that sentiment, saying “while we don’t currently offer cryptocurrencies as an investment option, we acknowledge the impact they’re making in the investing world. As cryptocurrencies and blockchain become increasingly mainstream, we’ll continue to monitor their development and discern the best path forward for our investors.” 

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.