Crypto in Your 401(K)? What the New Rules Mean for Retirement Savers
Key Takeaways
- The DOL has shifted to a more neutral stance on cryptocurrency in 401(k) plans.
- Fiduciaries must still act prudently, evaluating risks.
- Crypto offers potential gains but carries high volatility.
- Educated investors should consider small, strategic allocations.
The U.S. Department of Labor (DOL) has changed its view on crypto for retirement portfolios. Investors might find that cryptocurrency is an increasingly viable alternative for retirement savings.
On May 28, 2025, the DOL adopted a more neutral stance toward crypto in 401(k) plans, which are employer-sponsored retirement savings accounts.
This shift means that individuals could add cryptocurrencies like Bitcoin (BTC), Ether (ETH), or others to their pension plans with a more relaxed approach.
This article explains what that means for long-term investors and individuals planning for retirement in the United States, including risks and benefits.
Why Is Crypto Entering 401(K) Plans
As crypto evolves and gets more widely used, options like including it in retirement plans are becoming increasingly popular. In a recent move, the DOL changed its traditional stance.
While it had previously discouraged crypto in retirement plans due to volatility and regulatory uncertainty, the announcement offered a more accepting view of crypto (including its different forms, such as tokens, coins, or just crypto assets) as an alternative asset class.
While the guidance states that crypto investment for retirement should be approached with “care, skill, prudence and diligence,” considering digital assets as one of the many investment options for retirement and no longer referring to them as investments that require “extreme care,” as stated in the 2022 release, signifies a clear step forward.
Limits and Rules for Crypto in 401(K) Plan
The Employee Retirement Income Security Act (ERISA) , a federal law governing retirement and health plans, details the specific rules and limits for crypto in 401(k) plans.
- Key responsibilities: The DOL states the specific responsibilities for fiduciaries and tells them to act prudently and in the best interest of individuals while evaluating the risks associated with crypto.
- ERISA standards: Some options allow individuals to invest in crypto through self-directed brokerage accounts, which gives them more responsibility; however, ERISA standards still apply.
- Regulation: Users should always consider the evolving regulatory landscape of crypto.
- Risk evaluation: Associated risks, such as fraud, technological failure, scams, or hacking, should always be taken into account.
- No FDIC or SIPC Insurance: Crypto is not insured by the FDIC (Federal Deposit Insurance Corporation) or the SIPC (Securities Investor Protection Corporation).
For these reasons, the strongest tools for making the right decisions are education and information. Seeking professional advice is always a good idea.
How Much of a 401(K) Should Go Into Cryptocurrency?
While some investors, such as financial advisor Ivory Johnson, recommend allocating CNCB between 2% and 8% of a 401(k) to cryptocurrency, others take a more cautious stance.
A survey by the Digital Assets Council of Financial Professionals (DACFP) shows that many advisors suggest limiting crypto exposure to just 2%, with most recommending no more than 5%.
This conservative approach protects long-term savings from crypto’s price swings and speculative risks.
Risks and Benefits of Adding Crypto to a Retirement Portfolio
As with any investment, there are both risks and benefits to consider. In the case of crypto, some of the most relevant points are outlined in the following table.
| Category | Risks | Category |
|---|---|---|
| Market | Extreme price volatility | High growth potential and diversification |
| Regulatory | Evolving, limited oversight, no insurance | Tax-advantaged growth (401k) |
| Operational | Security concerns, hacking, loss;
Complexity for many investors |
Direct control, often liquid;
Potential inflation hedge |
| Performance | No dividends or interest;
Short history, unproven stability |
Asymmetrical returns possible;
Access to a new asset class |
| Suitability | Not for low risk tolerance;
Possible capital loss |
Small allocation, high reward;
May suit long-term horizons |
Is Crypto in a 401(K) a Smart Move?
Crypto in a 401(k) is not automatically a good or bad idea. It depends on the investor’s age, goals, knowledge and risk tolerance.
For younger investors with time to recover from market drops, crypto can add diversification and long-term growth.
A small allocation, 1 to 5%, could be a conservative approach to balance potential reward with risk.
For example, a $100,000 401(k) with 2 percent in Bitcoin ($2,000) could grow sharply if Bitcoin reaches $200,000. That small slice would not ruin the entire portfolio if the price crashes.
Adding crypto might be risky for older investors, but it could still be worth it in limited amounts. A small exposure could offer growth without jeopardizing the whole retirement plan.
Investors should review their 401(k) plan options, understand the costs and custody protections, and approach crypto with clear, specific goals.
It is important to remember that his content is for informational purposes only and does not constitute financial advice. Individuals should consult a licensed financial advisor before making investment decisions.
Conclusion
The DOL’s shift to a neutral stance on crypto in U.S. 401(k) opens new possibilities for retirement savers. While digital assets offer potential for high growth and diversification, they come with significant risks like volatility and a lack of insurance.
Fiduciaries must act prudently, and investors should prioritize education, understand associated fees, and consider their individual risk tolerance for any allocation, often keeping it small for long-term planning.
FAQs
Not all 401(k) plans include cryptocurrency. Although regulatory pressure has eased, each plan sponsor decides whether to offer digital assets. Only a few providers, such as Fidelity and some crypto-focused platforms, currently allow crypto in retirement accounts. The main risks include extreme price swings, the speculative nature of cryptocurrencies, exposure to scams or theft, and limited regulation. These factors can lead to sharp losses, especially in long-term retirement planning. Potentially, crypto investments may involve higher fees due to custody, security, and management requirements, among other things. It is important to review the fee structure of any investment option.Are all 401(k) plans now offering crypto?
What are the most significant risks of investing in crypto within a 401(k)?
Are there additional fees associated with crypto investments in 401(k)s?
