How Does the Fidelity 401(k) That Allows Crypto Work?

Adding Bitcoin to your Fidelity 401(k) account

In early 2022, Fidelity became the first major financial services firm to offer investors the chance to add crypto assets to their 401(k) retirement accounts. The company is a giant in the retirement business, holding more than $2 trillion in 401(k) assets, and administers the pension plans of more than 23,000 companies across the country. The company announced in April that by late 2022, employees will be able to add Bitcoin to their 401(k) accounts—if their employer allows it.

Though this move was certainly a milestone for crypto, many analysts have been quick to point out that cryptocurrencies may be a poor choice for investors looking to build value over the long term.

  • In early 2022, Fidelity Investments became the first firm to announce that employees could add crypto—in the form of Bitcoin—to their 401(k) accounts. 
  • The company will make this available to all 23,000 employers for which it oversees 401(k), and this is expected to be ready in the summer of 2022. 
  • Ultimately, it will depend on employers as to whether employees can add Bitcoin to their retirement accounts. Employers have a responsibility to offer “prudent” investment options in their 401(k) accounts, and at the moment, the Department of Labor has implicitly said that crypto doesn’t meet this test. 
  • It remains to be seen, however, how many employers will allow their staff to buy Bitcoin in this way and at what volume.

Building a 401(k) Crypto Account

Fidelity is primarily known for its huge portfolio of retirement accounts. The company is the largest 401(k) provider in the U.S. and holds more than one-third of all of the funds invested in 401(k) accounts in the country. These funds are invested in a vast variety of assets, and now the company wants to add one more—Bitcoin.

More specifically, the company announced in April 2022 that they are introducing a digital assets account option alongside their more traditional accounts. This will allow employees with 401(k) accounts to add Bitcoin to them, for which they will be charged an account fee of between 0.75% and 0.9% of funds invested in the digital asset account. There will also be a trading fee, but the amount of this has not yet been announced.

It’s expected that Fidelity’s digital asset account will be ready for use in the summer of 2022. At that point, employees with a Fidelity 401(k) account may be able to allocate a percentage of their account to Bitcoin, but only if their employer allows them to make such a designation. Ultimately, it is employers who have the final say in whether their employees will be able to add Bitcoin to their retirement accounts, and this may impose a significant bar on the widespread adoption of crypto in these accounts.

Even if employers allow employees to add Bitcoin to their Fidelity 401(k) accounts, the level at which they will be able to do so will be limited. Fidelity says that the option to buy Bitcoin will be integrated right into its 401(k) investment menu, and so buying crypto will be as easy as buying shares in mutual funds, except that the percentage of a retirement portfolio that is held as crypto will be limited. The employer will determine the ceiling, but the platform won’t permit allocations of more than 20%, although that number could change.

Though it may be possible to add Bitcoin to your 401(k) retirement portfolio at some point during the summer of 2022, you should think carefully about doing so. Though Bitcoin has made some spectacular gains over the past decade, it’s widely regarded as too volatile to make for a responsible retirement investment.

Will You Be Able to Add Crypto to Your 401(k)?

Though Fidelity will make it possible to add Bitcoin to 401(k) accounts, this doesn’t mean that every employee whose plan is overseen by the company will be able to do so. 

That’s because 401(k) accounts are ultimately the responsibility of employers, who have a fiduciary responsibility to their employees. At the moment, most analysts predict that most companies won’t allow their employers to add Bitcoin; at least not right away. Though Bitcoin might be suitable for some employees, it’s unlikely to be a responsible investment for those close to retirement—and because of the way that most employers administer 401(k) plans, the same investment options must be open to all plan participants.

These concerns have recently been echoed by the Department of Labor. Though the federal agency hasn’t gone as far as banning crypto from retirement plans, it issued a compliance assistance document in March 2022 that reminded plan overseers—that is, employers who must act solely in the best interest of participating workers—that they were responsible for choosing “prudent” options. And it strongly suggested that cryptocurrencies didn’t yet appear to meet that bar.

The net effect of these concerns is that most employees won’t be able to add Bitcoin to their 401(k) accounts anytime soon.

Can I Add Crypto to My 401(k)?

Not at the moment. But in early 2022, Fidelity became the first firm to offer investors the chance to add crypto assets to their 401(k) retirement accounts—as long as their employers allow it.

Who Decides if I Can Add Crypto to My 401(k) Account?

Fidelity will offer Bitcoin as an option for 401(k) accounts across the 23,000 employers it provides 401(k) services for. However, employers will have the final say as to whether their employees will be able to buy Bitcoin for these accounts. At the moment, it looks like few employers will.

Should I Add Crypto to My 401(k) Account?

Though Bitcoin, the most well-established cryptocurrency, has made spectacular gains in the past decade, most analysts think that it is simply too volatile to make for a responsible retirement investment.

The Bottom Line

In April 2022, Fidelity became the first firm to announce that employees could add crypto—in the form of Bitcoin—to their 401(k) accounts. The company will make this emerging asset class investment option available to all of the 23,000 companies for which it oversees 401(k) plans, and this is expected to be ready in the summer of 2022. 

Ultimately, it will depend on employers as to whether employees can add Bitcoin to their retirement accounts. Employers have a responsibility to offer “prudent” investment options in their 401(k) accounts, and at the moment, the Department of Labor has implicitly said that crypto doesn’t meet this test. It remains to be seen, however, how many employers will allow their staff to buy Bitcoin in this way and at what volume.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Fidelity. "We are Fidelity."

  2. The New York Times. “Fidelity’s New 401(k) Offering Will Invest in Bitcoin.”

  3. Fidelity Investments. "Fidelity Investments Advances Leading Position as Digital Assets Provider With Launch of Industry’s First-of-Its-Kind Bitcoin Offering for 401(k) Core Investment Lineup."

  4. Forbes. “Bitcoin Is Coming to Your 401(K)."

  5. U.S. Department of Labor. "US Department of Labor Cautions 401(k) Plan Fiduciaries to Exercise Extreme Care as They Consider Cryptocurrencies."

  6. U.S. Department of Labor. "FAQs about Retirement Plans and ERISA," Pages 10-11.

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