Every time Bitcoin spikes, you can almost set your watch to what happens next in the 401(k) world.<\/p>\n
People start talking about cryptocurrency in retirement plans. Again.<\/p>\n
Participants see Bitcoin going through the roof and wonder why they can\u2019t invest their 401(k) money in it. Providers see participant interest and start thinking about products they can sell. Plan sponsors start wondering whether adding cryptocurrency will make their plan look cutting-edge.<\/p>\n
My advice hasn\u2019t changed: I don\u2019t think it\u2019s a great idea.<\/p>\n
I\u2019m not anti-Bitcoin. What somebody wants to buy in their personal brokerage account is their business. A 401(k) plan is different because the plan sponsor has fiduciary responsibilities in selecting and monitoring the investment options offered to participants.<\/p>\n
Bitcoin going up doesn\u2019t eliminate those responsibilities.<\/p>\n
The problem with chasing an investment after a huge run-up is that everyone suddenly develops amnesia about risk. Volatility becomes an afterthought because people are staring at the returns. Then Bitcoin drops 30%, 40%, or more, and everyone suddenly remembers that retirement accounts are supposed to be about retirement.<\/p>\n
A plan sponsor also needs to ask what adding cryptocurrency actually accomplishes. Is it improving the retirement plan, or is it being added because participants are excited about Bitcoin today?<\/p>\n
Those are two very different things.<\/p>\n
I\u2019ve always believed that a good 401(k) investment menu should be boring. Give participants diversified, prudent choices that allow them to build retirement savings over decades. A retirement plan doesn\u2019t need to chase every investment trend that gets people talking.<\/p>\n
Bitcoin may continue going higher. It may eventually become a much more accepted part of investing.<\/p>\n
That\u2019s not the point.<\/p>\n
The question for a plan fiduciary isn\u2019t whether Bitcoin is hot.<\/p>\n
It\u2019s whether putting it in the 401(k) plan is prudent.<\/p>\n
Those aren\u2019t the same question.<\/p>\n
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