Nearly half of Gen Z and millennials want crypto in their 401(k)s

If you dream of combining your cryptocurrency investments with your retirement savings, you are not alone.

Nearly 50% of Gen Z and millennial workers wish they could invest in cryptocurrency via their 401(k) retirement plan, according to Charles Schwab’s “2022 401(k) Plan Participant Study,” which surveyed 1,000 401(k) plan participants between the ages 21 and 70 years old who work for companies with at least 25 employees and are currently contributing to the company’s 401(k) plan.

“They are questioning traditional approaches to both work and retirement,” Catherine Golladay, head of Schwab workplace financial services, said in a news release. “The 401(k), while still their primary retirement savings tool, is no longer viewed as their only path to retirement.”

For some investors, it is already possible to invest in cryptocurrency via a 401(k).

Fidelity Investments, which manages employee pension plans for nearly 23,000 businesses, has given companies the ability to offer employees the opportunity to invest in bitcoin through dedicated “digital asset accounts.” If an employer offers this option, employees can invest up to 20% of their 401(k)si bitcoin.

But just because the option is available doesn’t mean it’s a good fit for your retirement strategy.

“There is no underlying fundamental value to cryptocurrency,” says Greg McBride, financial analyst at Bankrate. “It is neither time-tested nor proven as a sustainable wealth creator.”

Adding cryptocurrency to your retirement portfolio can drag down overall performance, McBride adds.

That’s because you typically want to diversify your portfolio by spreading investment dollars across multiple financial assets, such as stocks and bonds. This helps reduce the volatility of your portfolio since you are not overly invested in one particular type of asset.

But cryptocurrency is a highly volatile asset, subject to unpredictable fluctuations and declines in value, meaning it can increase your portfolio’s volatility rather than decrease it.

Given the unpredictable nature of the crypto market, the US Department of Labor has warned companies that administer 401(k) plans to “exercise extreme caution before including direct cryptocurrency investment options.”

In addition to crypto, younger generations are interested in investing in a wide range of options via their 401(k)s, including annuities, which offer guaranteed income in retirement, according to Schwab’s survey. However, it is important to note that annuities can have a number of disadvantages for investors, such as expensive fees and limited access to your money.

“They recognize the value in speculative assets, but also recognize the value of guaranteed income as they approach retirement,” says Nathan Voris, director of investments, insights and consulting at Schwab Retirement Plan Services.

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