Nearly half of younger people want crypto exposure in 401(k)s, Schwab study says

The young, at least in the U.S., are leaning less on traditional 401(k)s to save for retirement — and are increasingly favoring new options like crypto, according to a new Charles Schwab study.

The study found that 37% of Gen Z workers and 54% of millennials say their first investment experience was through a 401(k) – lower than 61% for both Gen X and baby boomers.

Instead, the two younger segments are also more likely to invest in crypto, real estate, annuities and small businesses than their older counterparts. About 22% of Gen Z workers first got involved in investing through mobile commerce, the study found, while 11% first invested in crypto.

The online survey, conducted in April by Logica Research for Schwab Retirement Plan Services, included 1,000 US 401(k) plan participants.

Younger people are questioning traditional approaches to work and retirement as they have changed jobs and reassessed priorities during the pandemic, Catherine Golladay, head of Schwab Workplace Financial Services, said in a statement.

“The 401(k), while still their primary retirement savings tool, is no longer viewed as their only path to retirement,” Golladay said. “They see an opportunity to reach their financial goals through various assets that make them excited to invest and engaged in their financial future.”

Thirty-two percent of respondents said they wished they could invest in crypto via their 401(k) – with 46% and 45% of Gen Z and millennials reporting that preference, respectively.

Fidelity Investments said in April that it was set to allow individuals to allocate a portion of their retirement savings to bitcoin through the company’s internal 401(k) plans. A spokesperson told Blockworks last week that the company’s Digital Assets Account was on track to launch its first plan sponsor clients this fall.

A spokesperson for Charles Scwhab declined to comment on whether it would attempt to launch a similar offering.

Crypto payroll solutions company Bitwage partnered with 401(k) provider ForUsAll earlier this month to allow crypto into pre-tax or after-tax 401(k)s. Bitwage CEO Jonathan Chester told Blockworks that he expects younger workers who generally underutilize their 401(k) may seek to gain crypto exposure via retirement accounts for tax savings.

“[That could] bringing more people in the millennial and Gen Z groups into the fold to maybe use those systems in unique ways, Chester said. “It would be much more difficult to do that through a 401(k), because the employer has a fiduciary responsibility, so I would imagine that independent retirement accounts [IRAs] would lead the way.”

Outside of 401(k)s, 61% of respondents said they use a savings account to save or invest for retirement, while 25% said they invest in crypto. Millennials were most likely to invest in crypto – at 35% – while only 4% of baby boomers do.

Thirty-nine percent reported saving in a health savings account (HSA), while 33% and 29%, respectively, said they invest in an IRA or brokerage account.

The study comes during a year in which Charles Schwab and other major financial services companies have become more involved in crypto.

Charles Schwab launched its first crypto-related ETF in August, following similar launches by rivals BlackRock and Fidelity.

Schwab was also among a group of companies, including Citadel Securities, Fidelity Digital Assets, Paradigm, Sequoia Capital and Virtu Financial, to back crypto exchange EDX Markets last month.

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