These You Need to Know Before Investing in Fidelity’s Bitcoin Retirement Plan

Cryptocurrency folks have been stunned by news recently that asset management giant Fidelity will allow investors to deposit bitcoin in their 401(k) retirement savings accounts. On the surface, this is an easy way for individuals to gain exposure to such emerging assets, which is beneficial from a tax perspective. However, there are still some important factors to consider before you invest.

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Glossary

Fidelity will open cryptocurrency services to accounts in its employee retirement plans later this year, if employers choose to offer the service. Annual gains from 401(k) plans are tax-deferred, eliminating the hassle associated with crypto investments and annual tax filings. Funds a user withdraws from a 401(k) retirement account can be taxed as ordinary income (for traditional pre-tax accounts), or tax-free (for Roth accounts that deposit after-tax funds).

According to The Wall Street Journal, crypto investment fees will range from 0.75% to 0.90% plus transaction fees, which are in the middle of the spot market transaction fees of most major exchanges in the United States, such as Coinbase, Gemini, Kraken, FTX .US and Binance. Additionally, employees are currently limited to investing up to 20% of their account balance and newly deposited funds in Bitcoin.

may still have to wait

The service will be rolled out in 2022. Currently, the only publicly signed company is business analytics firm MicroStrategy. Led by billionaire and bitcoin titan Michael Saylor, the company is the world’s largest enterprise-level holder of bitcoin, with bitcoin holdings worth as much as $5 billion. Given that the service to invest in bitcoin must be provided by employers’ consent, and some may be discouraged by the volatility of the crypto asset, there may not be any large-scale capital transactions in the short term.

Bitcoin prices soar in sharp volatility

Back in 2013, you could buy a bitcoin for less than $300. Today, one bitcoin is worth about $40,000. It can be seen that the increase is huge, but the period fluctuates constantly. The price of Bitcoin and other major cryptoassets has halved several times (mostly before the industry was embraced by the mainstream). For example, many investors may recall that Bitcoin traded at nearly $20,000 at the end of 2017, followed by a 75% drop in a few months. Late last fall, Bitcoin went through another similar drop, with the price dropping from $69,000 to a low of $30,000. Bitcoin holders will tell you that the asset can bounce higher after each knockout. Many people think that going through these boom and bust cycles is a rite of passage. But it may not be for everyone.

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Government may not welcome

While the entire crypto community may be cheering Fidelity for allowing customers to dabble in bitcoin, the government may not be so happy. First, federal regulators have been extremely cautious about investors’ easy exposure to cryptocurrency markets such as Bitcoin. In particular, the SEC, while having approved a handful of products involving risks in bitcoin futures contracts, has yet to approve a bitcoin spot ETF, often evaluating the market as vulnerable to fraud and manipulation.

Bitcoin’s volatility is also an issue when it comes to retirement planning. Bitcoin is down nearly 40% from its all-time high of nearly $70,000 in November, and retirees and those nearing retirement may not have the funds or time to weather the ups and downs. In fact, the Labor Department issued a notice last month expressing some concerns about retirement funds investing in cryptocurrencies. Chief among these concerns is the volatility of the market. Investors are unable to make informed decisions due to the uncertain and vague regulatory status of Bitcoin; another concern is the safety of holdings of the crypto asset, which has become a fat sheep in the eyes of hackers. The Department of Labor has a say in the regulatory aspects of employer-sponsored programs, so its attitude is important.

Additionally, when Coinbase, the largest U.S. crypto exchange, announced last July that it was partnering with a retirement firm offering such services, David John, senior policy advisor at the AARP Policy Institute and associate director of the Retirement Security Program at the Brookings Institution, told Forbes: “Crypto The currency itself is fascinating, and its development is fascinating, but it is still in its early stages. And it is definitely not suitable for retirement investing. Actually for retirement investing, what users want is growth and limited volatility. The older you get The bigger you are, the less you want your portfolio to go up and down, because that makes it hard to plan for retirement income.”

Fidelity is not the only option

While Fidelity is a kingdom in its own right when it comes to asset management and retirement savings, there are other ways to invest your retirement savings in cryptocurrency. Companies such as Kingdom Trust, iTrust Capital, and BitcoinIRA allow investors to buy digital assets through exchanges and deposit them into individual retirement accounts. Additionally, Coinbase has partnered with ForUsAll to allow participants in its employer-sponsored program to purchase dozens of different cryptoassets and deposit them in a tax-deferred program.

Finally, if you want exposure to the industry but don’t want to hold digital assets directly, there are also plenty of stocks and ETFs that track companies in the crypto industry to choose from.

Talk to a financial advisor before investing

Saving for retirement is an individual decision, and the strategy from choosing what to hold to prorating must depend on the individual’s specific circumstances. Therefore, please consult a qualified investment advisor or seek other professional advice before making any major decision.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/these-you-need-to-know-before-investing-in-fidelitys-bitcoin-retirement-plan/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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