Should You Have Cryptocurrency in Your 401(k)?

Crypto may be coming to retirement accounts. Think carefully about the pros and cons before investing

Chris Taylor,

AARP

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Published August 07, 2025

three gold eggs on a blue background. bright green and a gold bitcoin burst from the center egg

Should you have cryptocurrency in your retirement plan?

AARP (Getty Images 4)

Like them or not, cryptocurrencies such as bitcoin, Litecoin and Ethereum continue to march into the financial mainstream, and the next frontier could be retirement savings.

In late May, the U.S. Department of Labor (DOL) rescinded prior federal guidance that discouraged 401(k) plan providers from offering crypto on their investment menus. While that isn’t necessarily an official stamp of approval — the DOL said it is maintaining a “neutral stance” on adding crypto to retirement plans — it does further open the door for a digital asset option.

“You probably will see some retirement plans start to offer crypto,” says Amy Arnott, a portfolio strategist with Chicago-based investment research firm Morningstar. “But there might be some reluctance, given fiduciary considerations, about whether it is prudent to offer something with such volatility within retirement plans.”

In a November 2024 report, the Government Accountability Office (GAO) identified 69 cryptocurrency asset investment options available to 401(k) participants via methods like self-directed brokerage windows. That followed the Securities and Exchange Commission’s approval of Bitcoin exchange-traded funds in January 2024, which allowed for easy trading on major investing platforms.

As with any portfolio decision, you should evaluate whether crypto is an appropriate retirement investment based on your age, financial goals and risk tolerance. Making that assessment, however, can be tricky given the nature of the asset. Cryptocurrency isn’t like a business that generates sales, makes profits and pays dividends — it’s a speculative play, and its value can shoot up or crater on a dime. As a result, some analysts say Bitcoin has no place in retirement portfolios. “I think it’s a terrible idea,” says Alicia Munnell, a senior adviser at Boston College’s Center for Retirement Research. “People should invest in things they understand, and most people don’t even understand what Bitcoin is.”

But some financial advisers like cryptocurrency, especially as a long-term investment, and say people shouldn’t rule it out from their 401(k).

Here are a few things to consider if cryptocurrency options pop up in your retirement plan.

Pro: It’s not hard to add to your portfolio

Many mom-and-pop investors have been skeptical about buying crypto assets, since the field is still relatively new and unfamiliar to a lot of people. But federal approval of Bitcoin exchange-traded funds (ETFs), backed by major industry players like BlackRock, has opened crypto ownership to a wider universe of investors.

“That has allowed people to access Bitcoin through brokerage platforms and made it much more accessible,” says Jay Jacobs, BlackRock’s U.S. head of equity ETFs. “It has been a major driver of growth.”

For instance, iShares Bitcoin Trust (IBIT), a BlackRock exchange-traded fund, had $86 billion in assets at the end of July, and “roughly half is from individual investors, buying through brokerage platforms directly,” Jacobs says.

Pro: Recent performance is strong

Bitcoin has its fair share of skeptics, but there’s no denying that its value has risen dramatically over time.

In mid-July, its price was nearing $120,000. That’s after gains of 120.1 percent in 2024 and 155.4 percent in 2023. Compare that to the S&P 500, which rose 26.3 percent in 2023 and 25 percent in 2024.

“Look back at the past 10 years, and it’s the best-performing major asset class,” says Arnott. “But there is still that question mark: Is it just a speculative asset, or will it have long-term staying power?”

With forecasts for stocks and bonds looking more muted due to persistent concerns around tariffs and inflation, it’s understandable that investors might be tempted to look elsewhere for juicier returns.

Pro: It can act as a portfolio diversifier

The principles of diversification hold that the more you spread your risk among different asset classes, the less vulnerable you are to shocks in any one sector. So if you are looking for a hedge — perhaps you’re bearish about the U.S. dollar’s strength, or you’re looking for other asset classes that will hold up in times of trouble — crypto is one place to diversify your risk.

Cryptocurrency “could be an alternative store of value if there are declines in stocks and bonds, much like how people have used gold in their portfolios in the past,” Jacobs says.

Con: It’s volatile

If you’re looking for an asset class that is very steady and will help you sleep more soundly at night, cryptocurrency might not be for you.

“Because there’s nothing underlying the value of crypto, it fluctuates wildly,” says Munnell. “There are big ups and big downs. Right now it looks great, but who knows what will happen tomorrow?” For example, bitcoin returns have whipsawed over the years — and that’s just one type of cryptocurrency. “Altcoins” that have been less widely adopted are even more volatile.

As a result, according to the GAO report, “analysis of investment returns indicates crypto assets have uniquely high volatility.” In other words, you have to be the kind of investor who is sanguine enough to weather sudden drops in value.

Con: Not everyone has a long time horizon

Whether crypto is an appropriate investment for your 401(k) depends in large part on how far away you are from retirement. Typically, as you near retirement, you shift your portfolio to safer asset classes like bonds and cash, which aren’t prone to dive at critical moments, protecting you in the event of a sudden market downturn. If you’re heavily invested in crypto and its value crashes in your early retirement years, you could be forced to liquidate other investments to make ends meet, potentially doing long-term damage to your retirement funds.

“Crypto is more for younger investors who might have several decades until retirement, and are willing to hold on through large drawdowns," Arnott says. “Look at periods like 2014, when Bitcoin was down 57 percent, or 2018, when it lost three-quarters of its value.”

Her advice: “Only consider it if you have a long time horizon ahead.”

Con: It’s less regulated

The whole cryptocurrency asset class is still relatively new, and regulators have been hard-pressed to keep up. That’s made it essentially the finance world’s Wild West. Hacks of cryptocurrency exchange, crypto scams and poorly managed platforms (such as the FTX bankruptcy) have become staples of the news.

Lawmakers are trying to enact more guardrails, such as with the recent passing of the GENIUS Act, which includes more federal oversight for stablecoins (cryptocurrencies that are tied to real-world assets like the U.S. dollar). That means checks and balances like reserve backing (proof that issuers have enough funds to pay customers), transparency and asset disclosures, and third-party audits.

But the thin regulatory framework for most cryptocurrencies should give 401(k) investors pause, Munnell says.

Getting your feet wet

The important thing to remember about crypto is that it’s just one option on a larger menu. You don’t have to go all in because you happen to like its prospects. If you want to add cryptocurrency to your 401(k), you can devote a small portion of your portfolio to it, limiting your exposure to risk.

In one BlackRock white paper, the authors suggest investors interested in the sector consider a modest allocation of 1 to 2 percent of investable assets. That way, even in a worst-case scenario in which your crypto’s value nosedives, it won’t sink your portfolio.

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Chris Taylor is a senior correspondent with Reuters, covering personal finance and workplace issues. He is a frequent contributor to Fortune, and has won journalism awards from the National Press Club, the Deadline Club and the National Association of Real Estate Editors.