As cryptocurrencies take over a larger portion of the investing market, more subset companies are emerging. Fintech companies have emerged to support increased investment activity and applications for the seemingly endless number of cryptocurrencies. Now, we can add 401(k)s to the list of viable investment vehicles to support crypto.
Traditional and institutional investors have been hesitant to adopt cryptocurrencies wholeheartedly into their portfolios. Citing extreme volatility, lack of regulations, and environmental concerns, Wall Street investors have kept their distance while keeping a close eye on the crypto market.
Perhaps, 401(k)s could become a gateway for investors who have previously shied away from cryptocurrencies to get on board.
Coinbase is partnering with a small 401(k) provider.
Coinbase is one of the leading cryptocurrency exchanges. Coinbase has established itself as one of the most beginner-friendly platforms for buying and selling cryptocurrencies. Releasing an IPO in April, traditional investors were able to piggyback off the cryptocurrency momentum without holding any crypto directly. However, that could all change.
Last week, small 401(k) plan provider ForUsAll introduced the “Alt 401(k), a Fully Integrated Retirement Plan With Cryptocurrency and Alternative Investments.” ForUsAll will enable employers to offer cryptocurrency as a viable investment option within their 401(k) plans. Historically, 401(k) participants were limited to the few mutual funds, index funds, and target-date funds the plan provided.
“For too long, too many Americans haven’t had the same access to alternative investments that wealthy and professional investors have had. Our mission is to provide every American with the tools necessary to build a brighter financial future, and making these alternatives more readily available is a key step towards that,” CEO of ForUsAll Jeff Schulte said. “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy - alternative investment options, combined with our original core offering of low-cost index funds and personalized help.”
The Alt401(k) will give participants limited exposure.
While allowing participants to invest in cryptocurrencies is groundbreaking, the plan does limit how much can be allocated towards crypto. David Ramirez, co-founder and CIO at ForUsAll, said, “Alternative investments, including small allocations to cryptocurrency, can help improve portfolio diversification and expected returns. However, the volatility and the complexity of these asset classes make prudent education and advice for employees essential.”
Key features of the Alt 401(k) include:
A fully automated 401(k) for employers that provides both traditional and alternative investment options
Opportunities for employees to transfer up to 5 percent of their balances into a secure account where they can buy and sell over 50 different cryptocurrencies
Employees will get ongoing portfolio monitoring and education
Integrating traditional retirement investing with cryptocurrencies is something crypto-enthusiasts have been waiting for. While 5 percent limits the amount participants can invest in cryptocurrencies, it limits the exposure to volatility for those who might not be as savvy in the crypto world.