Cryptocurrency Options in Employee 401(k) Plans

While major cryptocurrencies such as Bitcoin are now household names, most Americans haven’t bought into this fast-growing asset class. One reason for this discrepancy is because the average American’s exposure to the broader investment market takes place through their employer-sponsored 401(k) plans. 

And with so much volatility and so little regulation in cryptocurrency markets, traditionally risk-averse retirement managers have generally shied away from cryptocurrency investments.  But fresh data suggest the handful of companies already offering cryptocurrency retirement options are ahead of the curve.

New research on full-time employees preferences suggests that workers are interested in this new retirement savings option. These data suggest there is an untapped well of enthusiasm for cryptocurrency investments through a 401(k) plan; however,there remain variations in attitudes towards cryptocurrency investments depending on one’s age and current investments.

Key Findings


  • 87 percent of American workers expressed interest in participating in cryptocurrency investments through their company’s 401(k) program. Just 13 percent said they were not at all interested.
  • Younger workers and those who already own cryptocurrencies were most interested in new cryptocurrency retirement options.
  • The most popular potential coin for retirement investments was Bitcoin, followed by Ethereum.
  • Over 40 percent said they’d want to invest up to a quarter of their retirement contributions into cryptocurrency.

Benefits of Including Cryptocurrencies in 401(k)s


Because cryptocurrency is ultimately a high-risk, high-reward investment, it began as a niche asset class that only a small group of investors were willing to stake their money on. As more and more retail investors have entered the market in recent years, many hunting voraciously and sometimes recklessly for short-term gains, the ranks of investors interested in cryptocurrencies have swelled. The hype has been heightened by the regular media stories highlighting amateur investors who have netted eye-watering returns.

Part of the appeal of a cryptocurrency 401(k) could be its potential to grant an investor exposure to the asset, while hopefully dampening some of the downsides. For example, an individual investor may feel more confident navigating the uncertain cryptocurrency regulatory environment with access to an employer-approved retirement planner. 

But ultimately the appeal of investing in cryptocurrencies through a 401(k) plan lies in the unique tax advantages that the 401(k) investment vehicle offers. 

And finally, we’ve all heard about the importance of having a diversified portfolio, particularly for something as crucial as the savings meant to tide us over in our old age. When utilized responsibly, cryptocurrencies could become part of a balanced retirement plan.

Who’s Ready to Make the Investment?


The overwhelming majority (87 percent) of respondents were at least slightly interested in a theoretical 401(k) program from their employer that would offer the ability to invest in cryptocurrencies.

If your company were to give you the option to invest in cryptocurrency as part of a 401(k) program, how interested would you be in participating?

Extremely or very interested

33%

Slightly or somewhat interested

54%

Not at all interested

13%

Three-quarters of workers in the survey currently participate in their employer’s 401(k) plan (without cryptocurrency options). Interest in a theoretical cryptocurrency retirement option was strongest among this group: 38 percent of these respondents said they were extremely interested in a cryptocurrency 401(k) program through their employer. In contrast, just 17 percent of those who do not presently have a 401(k) plan through their employer expressed the same intense level of interest.

Interest in cryptocurrency 401(k) options

By current 401(k) participation with employer and current cryptocurrency ownership


StatusExtremely or very interestedSlightly or somewhat interestedNot at all interested

Currently has 401(k)

38%51%11%

Does not have 401(k)

17%62%21%

Cryptocurrency owner

40%55%5%

Not a cryptocurrency owner

20%52%28%

Workers who already have cryptocurrency investments were naturally more interested in the possibility of 401(k) options featuring cryptocurrencies. But perhaps more tellingly, even among those with no exposure to cryptocurrency at all, one in five was highly interested in a cryptocurrency 401(k) offering. This suggests that the cryptocurrency is shaking off the shackles of its previously niche status, and that people who aren’t yet “in” on cryptocurrency are willing to put skin in the game. 

While cryptocurrency is moving towards the mainstream, some demographic attributes stand out in the data. Perhaps unsurprisingly, younger workers (those under 30) are the most interested in cryptocurrency 401(k) plans. Interest declined slightly as ages increased, likely because older participants are closer to retirement and more comfortable with traditional, lower-risk investments.

Interest in cryptocurrency 401(k) options

By age group


AgeExtremely or very interestedSlightly or somewhat interestedNot at all interested

Younger than 30

31%62%8%

30-39

35%52%12%

40-49

41%50%8%

50 or older

22%51%27%

But it is worth noting that even among workers aged 50 and up, three-quarters of respondents are at least slightly interested in cryptocurrency as a retirement option. This report suggests that some Gen-X and Baby Boomer workers are concerned about under-saving for their retirements, and are looking for higher returns on some of their retirement investments. 

Interest also waxes and wanes based on how long a respondent has until they retire.

Interest in cryptocurrency 401(k) options

By estimated retirement date


TimelineExtremely or very interestedSlightly or somewhat interestedNot at all interested

In the next 5 years

30%50%21%

In 6-10 years

40%54%6%

In 11-15 years

41%46%13%

More than 15 years from now

28%57%16%

Workers retiring in the next five years are less willing to risk their savings on cryptocurrency investments. But even among this group, which can see their retirement just over the horizon, 30 percent were very interested in a 401(k) with cryptocurrency options.

Confidence in Cryptocurrency as a Retirement Option


Financial advisers often point to a strong 401(k) as a pillar of one’s plan for retirement. For many, it is the primary source of income once they leave the workforce. Retirement plans generally are made up of assets that will provide a steady return over decades. Because cryptocurrency remains a volatile asset, money managers generally advise their clients to keep their cryptocurrency holdings at under five percent of their portfolio.

When asked how much of their retirement they are willing to stake on cryptocurrencies, sentiment varies by current cryptocurrency holdings and by years until retirement. Again, a commanding majority of Americans want to allocate at least some of their 401(k) to cryptocurrency investments. Around a quarter would be willing to put up to 10 percent of their retirement contributions into cryptocurrencies.

If given the option, what percentage of your 401(k) would you allocate into cryptocurrency?

Allotment amount

Responses

None

13%

1 – 10%

27%

11 – 24%

13%

25 – 49%

21%

50 – 74%

18%

75 – 100%

3%

I’m not sure

2%

Current cryptocurrency owners were more open to larger allocations. In fact, more than half of cryptocurrency owners (57 percent) said they’d be willing to invest 25 percent or more of their 401(k) into crypto.

Americans who did not own any cryptocurrency weren’t as enthusiastic. But even among these respondents, 37 percent would be willing to put a modest amount of their 401(k) into cryptocurrency (up to 10 percent).

Most popular currencies for retirement investments


Now that we know there is broad interest in cryptocurrency retirement options, let’s look at the currencies people have the most confidence in. 

The cryptocurrency market welcomes new players every day in the form of tokens that range from the heavy favorite (Bitcoin) to the serious alternative (Ethereum) to the farcical (Dogecoin and its ilk). We asked workers if they had to concentrate their hypothetical retirement allocations into just one cryptocurrency.

Almost half of all respondents would prefer to place some of their retirement investments in Bitcoin, which is the most mainstream of the cryptocurrencies. That means that over half are willing to invest in one of the other alternative currencies, or “altcoins”. While these currencies have advantages and disadvantages over Bitcoin,one fairly certain point is that they haven’t been around as long as Bitcoin, which makes them untested and potentially more risky.

One could argue that the lack of consolidation in the cryptocurrency space has led to confusion among investors as to which, if any, of the tokens will be around when they retire.

Which currency would you most like to see as part of your 401(k) investment options?

Bitcoin

47%

Ethereum

11%

Bitcoin Cash

8%

Cardano

4%

Stellar

3%

Dogecoin

3%

Litecoin

3%

Polkadot

2%

XRP

1%

I’m not sure

4%

None

13%

Conclusion


There is clearly a significant desire for more mainstream ways to invest in cryptocurrencies. Our research confirms that workers see employer 401(k) plans as potent – but still largely potential  – vehicles for granting more Americans access to this asset class. 

Much of this enthusiasm needs to be tempered considering various regulatory and structural obstacles to broader adoption of employer 401(k) programs with cryptocurrency offerings. 

But considering that the past decade has seen cryptocurrency grow from a largely theoretical concept to a mainstream investment, it is likely a matter of time before we see more and more ways for investors to put their dollars – or Bitcoins – into the asset class.

Our data


Business.com surveyed 958 full-time employees about their interest in cryptocurrency 401(k) options in August 2021. 75 percent currently participate in their employer-sponsored 401(k) program and 63 percent currently own cryptocurrencies. Results may be impacted by respondents’ exaggeration, or telescoping.


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