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Crypto Retirement Plans Upend Skittish 401(k)s Averse to Risk (1)

July 29, 2021, 9:26 AMUpdated: July 29, 2021, 5:00 PM

The cryptocurrency boom that’s elevated a few lucky at-home investors into overnight millionaires should be used to shore up workers’ retirement savings, say advocates of getting digital money into employer-sponsored 401(k)s.

Plan sponsors are feeling pressure from workers and a growing number of fintech firms to incorporate cryptocurrency into their investment lineups. A burgeoning tech-based 401(k) market wants to level the playing field by offering the working class a chance to cash in on the same growth billionaires and big-name companies have enjoyed for years.

401(k)s, which account for the vast majority of Americans’ retirement savings, have persisted on tried and true investment strategies that rely on proven, long-term growth. Hardliner policy advocates fear that early crypto adopters could be exposing retirement plan participants to a dangerous level of risk.

“You have to differentiate between money that you put in for your future with steady growth that compounds year after year and quick money that you can afford to lose,” said David John, a senior strategic policy adviser at the AARP Public Policy Institute. “Retirement savings are supposed to be about what happens over 30 years, not day-to-day swings and fad investments.”

Low-cost 401(k)-provider ForUsAll Inc. partnered with the nation’s largest digital currency exchange platform Coinbase Global Inc. last month to offer an in-plan brokerage window that allows employee investors to transfer up to 5% of their nest eggs directly into more than 50 different cryptocurrencies. ForUsAll and its 400 employer clients are among the first to give workers direct access to crypto holdings through their qualified retirement accounts.

Traditional securities exchanges still lack any meaningful financial assets that track the enormous returns decentralized digital currencies have experienced over the last decade. That’s led institutional investors such as banks, endowments, and insurance companies to tap that growth via alternative investments like unregulated exchanges and coin purchases. Now more than half have a stake in digital assets, and nearly all global money managers say they expect to allocate some crypto assets in their clients’ portfolios over the next five years, according to a recent Fidelity Digital Assets survey.

Little Goes a Long Way

Bitcoin and Dogecoin made headlines last year for wild price fluctuations that connected them at least circumstantially to volatile meme-stocks such as GameStop Corp. and AMC Entertainment. App-based financial services company Robinhood Markets Inc. rode that wave to an IPO this month propped up by cryptocurrency trading that experts worry is too volatile for safe betting. Billionaire Tesla Inc. CEO Elon Musk alone has both tanked and rallied digital currencies with an offhand comment or a Tweet.

“I don’t think we have enough information about these cryptocurrencies yet,” John said. “It’s not helpful to have an asset class that changes value based on a billionaire’s tweet.”

ForUsAll CEO Jeff Schulte thinks cryptocurrency has already proved itself as a reliable investment alternative because it’s a countercyclical asset class insulated from stock and bond market downturns. That’s why the company designed an Alt401(k) cryptocurrency brokerage window with guardrails like a 5% limit and handpicked digital coins that ensure exposure without getting carried away.

“It is a volatile asset class,” Schulte said. “There’s no denying that. But a small amount can insulate your savings.”

Interested But Worried

Employees are intrigued by the cryptocurrency craze, and plan sponsors are paying attention, says Sarah Keibler, a retirement plan adviser at Alliant Retirement Consulting.

“They’re curious and they’re worried,” Keibler said. “They’re hesitant to pull the trigger, because they ultimately don’t understand how it works.”

For now, investing in digital coins is a lot like investing in their physical counterparts. Workers are owning and trading individual tokens, not indices that track prices like traditional securities. The Securities and Exchange Commission still hasn’t acted on an outstanding proposal to form the first exchange-traded Bitcoin fund, dashing crypto advocates hopes that a Biden administration would be immediately friendlier to digital currencies.

Cryptocurrency securities would be a big relief to day traders who have to store the tokens they buy, but they’d also likely reshape the way retirement portfolios treat them, Keibler said. Plan providers like ForUsAll are skirting strict regulatory oversight by offering cryptocurrency through brokerage windows that trade outside the scope of other default investments. Sponsors are relieved of the fiduciary burden that comes along with vetting individual investments, and they aren’t responsible when one of those investments goes south.

The U.S. Labor Department has toyed with regulating brokerage windows, but practitioners say they doubt the DOL would act on crypto investments ahead of the SEC.

“From an investment perspective, employees want to have more control, and employers need to be aware of that,” said Phillip Bauknight, a partner at Fisher & Phillips LLP in Murray Hill, N.J.

Companies behind cryptocurrency and blockchain technologies are seemingly well positioned to disrupt markets with major returns. Those technologies are being implemented in other ways, like the development of smart contracts that can streamline human resource and data privacy practices.

But investing in cryptocurrency directly is more complicated than using those technologies to improve day-to-day business, said John at AARP. As money managers toy with implementing funds that do index cryptocurrency values, workers will have to navigate the price to pay for that kind of exposure.

“To be blunt, the people who are offering these investments are in it to make money, and they can structure these investments—especially when you have volume and volatility—in a way that an individual investor may be losing out.”

(Updated with additional reporting beginning in the 17th paragraph.)

To contact the reporter on this story: Austin R. Ramsey in Washington at

To contact the editors responsible for this story: Martha Mueller Neff at; Andrew Childers at