Fidelity Is Preparing To Let You Save for Retirement With Bitcoin

Fidelity Investments may be a legacy financial institution, but that doesn’t mean it can’t keep up with the times. Fidelity retirement investors with a 401(k) account will soon be able to invest in Bitcoin (BTC) for their future.

Here’s what Fidelity says about the transition to cryptocurrency retirement investing, plus what may be next for the investment company’s future in blockchain technology.

Fidelity is currently readying its procedures to allow 401(k) retirement account holders to invest in Bitcoin. The company announced the move on April 26. As blockchain technology and cryptocurrency investing options expand, Bitcoin remains the longest-running and most popular digital currency.

For tax purposes, the U.S. treats cryptocurrency like property, meaning you’ll pay capital gains tax if your investment increases in value at the time of sale. Because 401(k) accounts are tax-deferred retirement accounts, you’ll only pay those taxes when you withdraw money at retirement age. Crypto regulations continue to evolve, so it’s possible there will be changes to its tax treatment within retirement accounts in the future.

For now, Fidelity is capping the percentage of your overall 401(k) portfolio that you can invest in Bitcoin. Investors will be able to allocate up to 20 percent of their 401(k) accounts to BTC. This is likely a way for Fidelity to limit exposure and protect investors, especially as their fiduciary duty will be under regulators' microscope.

Fidelity will be the first major retirement investing company to offer Bitcoin investing within 401(k) accounts. Other investment companies and startups have prioritized crypto investing for retirement, but Fidelity is undoubtedly the largest and most prominent.

Fidelity is one of the largest investment companies in the U.S. As of 2020, it managed 27.2 million IRAs and 401(k) retirement investing accounts. Its 401(k) accounts have about $2.4 trillion under management.

Not everyone is thrilled about the move to Bitcoin retirement investing. The U.S. Labor Department is concerned about the risk that investing in BTC for retirement could have on workers’ future financial security. Crypto remains a speculative investment, and it’s more volatile than the traditional stock market or cash. The department says, “These investments present significant risks and challenges to participants' retirement accounts, including significant risks of fraud, theft, and loss.”

Still, Fidelity is moving forward with Bitcoin 401(k) retirement investing. Many companies use Fidelity to manage their employees' retirement savings plans, so this is big news for workplace benefits (especially at a time when employers are competing for talent).

This move into crypto retirement investing is likely a first step in a longer playbook for Fidelity, which could include other blockchain adoptions on the front and back end. From retail investing to data tracking, blockchain’s utilities run the gamut, even for traditional financial institutions.