It was only a matter of time, but cryptocurrency investments are now available in 401(k) retirement plans.
ForUsAll, a retirement investment platform that focuses on small businesses, has launched Alt 401(k), a retirement investment platform that allows employers to provide alternative investment options within their retirement plans. As the plan’s first alternative investment, ForUsAll is providing employers the option to offer cryptocurrency by selecting cryptocurrency platform Coinbase Institutional.
The platform provides employers with the choice to include cryptocurrency via a self-directed alt window inside their 401(k) plans, where participants can invest in more than 50 cryptocurrencies along with the rest of their investment lineup. The firm acknowledges that cryptocurrency has the potential to be risky and volatile, so the investments are capped at 5% of a participant’s portfolio. ForUsAll says it also closely monitors allocations and alerts employees when their overall cryptocurrency allocation exceeds 5% of their portfolio so they can rebalance into more traditional mutual funds.
“Without access to these portfolio building blocks and expert help to prudently use these asset classes, the average American may be at a structural disadvantage,” David Ramirez, co-founder and chief investment officer of ForUsAll, said in a statement. “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.”
The company touts tax efficiency as an added benefit to including cryptocurrency in a 401(k) plan, saying the cryptocurrency purchases would be treated like other investments in the plan for tax purposes, and any gains would be tax-deferred until they are withdrawn from the 401(k). The firm adds that the gains could even be tax-free forever with a Roth account, and notes that investors would not incur taxes when they sell cryptocurrencies to rebalance their portfolio after significant gain.
Diversification is another advantage cryptocurrency can offer, according to ForUsAll, which says a relatively small allocation may increase expected return without increasing the level of overall expected risk. It also said the growing interest in cryptocurrencies, particularly among younger employees, may help more participants engage more in their retirement plans and save more as a result.
“For too long, too many Americans haven’t had the same access to alternative investments that wealthy and professional investors have had,” Jeff Schulte, CEO of ForUsAll, said in a statement. “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy.”