The recent executive order signed by the president may clear the path for cryptocurrency to be included in 401(k) plans, but this move could put average Americans at risk. While cryptocurrency may seem like a promising investment opportunity, especially for Gen X investors who are tech-savvy and familiar with digital tools, it poses significant hazards.
The executive order gives the Secretary of Labor 180 days to clarify its position on alternative assets in 401(k)s. However, this move is not as straightforward as it seems. The Department of Labor has already rescinded guidance that discouraged fiduciaries from including cryptocurrency in defined-contribution retirement plans, making it easier for plan sponsors to offer crypto investments.
The problem lies in the lack of oversight and regulation in the cryptocurrency industry. According to Chainalysis, over $1.7 billion was stolen in cryptocurrency in 2023 alone. This lack of security leaves investors vulnerable to cybersecurity hacks with no clear recourse if they’re targeted.
Furthermore, including cryptocurrency in 401(k) plans raises concerns about fiduciary responsibility. ERISA rules require employers to act as fiduciaries when choosing investment options for defined-contribution plans, but cryptocurrency does not fit this definition. This could lead to plan sponsors failing their fiduciary responsibilities and facing lawsuits over excessive fees.
In conclusion, while the current administration may be supportive of cryptocurrency, it’s unclear how 401(k) plan sponsors will meet the legal requirements for fiduciary responsibility while offering crypto to plan participants. Before this happens, investors should exercise caution and urge their employers to keep cryptocurrency out of their retirement plans.
Source: https://www.fastcompany.com/91390635/why-gen-x-investors-should-keep-crypto-out-of-their-401k-plans