Cryptocurrency might seem an unconventional choice for growing your 401K, but don’t count it out just yet. Hoards of investors have been adding crypto to their portfolios for years now, and have thus been able to successfully invest in a new
While cryptocurrencies are a fairly new and modern innovation in the world of finance, a variety of options have already become available for all those looking to invest.
There are so many projects now, and crypto adoption is increasing now more than ever with an estimated 300 million crypto users worldwide by the end of 2021.
There are also new coins with different use cases, and investors have a lot of projects to choose from than just Bitcoin.
There are the more stable coins like ether (by Ethereum), which at the same time follow Bitcoin trends and establish patterns of their own. Or, there are coins with higher volatility like Dogecoin that rise and fall of their own accord.
Blockchain technologies are emerging as great retirement-plan assets to hold no matter your economical status, a great equalizer among all of us. Adding crypto to your 401K retirement plan, then, can be a great way to maximize your options, investing
in your future and hedging against keeping all of your eggs in the same financial basket.
A Decentralized Future
Cryptocurrencies exist currently as decentralized platforms built on blockchain technology. Being decentralized means they are not owned or controlled by any central entity. Instead, they work as a person-to-person payment option transcending
borders and many political policies.
You can send and receive crypto to and from anyone in the world, at any time, and at any location. All you need is a connection to the internet and the proper wallet and platform. A special perk is that many crypto platforms offer these exchanges
at little to no fee, facilitating a transaction cost at a much lower price than that which would have been asked for by a bank or any other regulatory exchange for the same purchase.
As many of these coins operate simultaneously in many countries across the world, their values fluctuate irrespective of the stock market. Sure, global events that affect the market may affect the price of crypto as well, but, unlike stocks,
this does not necessarily have to be the case with these digital assets.
So, if you are worried about relying solely on the market and investing all of your money strictly into stocks, crypto may be a great option for you.
Crypto and Your 401K
In 1974, the Department of Labor first implemented the Employee Retirement Income Security Act, also known as ERISA. ERISA was first designed to set in place minimum standards for retirement and health plans, providing plan participants with individual protections necessary to protect said plans.
When ERISA was designed, though, it made no note of dictating specifically which investment options must be included in a retirement portfolio, or which could not. The Act specifies instructions for fiduciaries in how they must conduct services
advising long-term investment options with minimal risk of loss.
Nothing is described, specifically, for what may be considered, how, and why. ERISA strictly governs the process.
This means that the Department of Labor does not constrict the options of which asset classes you use to invest in your 401K, thus allowing cryptocurrency to be a legitimate option you can use.
Many typical 401Ks offered by employers don’t inherently offer crypto as a part of their plan but focus instead on investing in assets like ETFs, mutual funds, or company stock. From the company’s perspective, they may find crypto too risky of
an asset and would rather limit their risk by avoiding it all around.
Still, if you, as the employee, would prefer to try crypto as an option, you can take it upon yourself to find cryptocurrency investments that would fit your 401K portfolio.
Crypto 401K Plans
A simple way to control the cryptocurrency investments in your 401K plan would be to find out if your employer offers a self-directed 401K. If so, you may be able to use this account to directly control your assets and how they are invested.
This way, you can invest as much or as little cryptocurrency as you would like, having complete control and autonomy over all of your funds.
If you feel like you understand the crypto landscape well, this will allow you to increase your crypto exposure as much as you would like.
Alternatively, you can try and see if your employer allows you to use 401K options specifically designed to allow crypto. There are some 401K plans that allow investors to invest up to five percent of their 401K into crypto coins like Bitcoin,
Ethereum, and Litecoin.
Other providers have designed entire 401K portfolios around coins like Bitcoin. These portfolios allow investors to go all-in on their investments in Bitcoin, giving themselves the full exposure they desire.
Similarly, there are options for investors who want to direct their crypto investments into an IRA account. IRAs also allow crypto investments, in a similar structure to 401Ks.
The majority of IRAs are designed for traditional investment strategies like 401Ks, meaning most providers generally privilege their accounts towards the same assets of ETFs, mutual funds, and company stock. However, there are some IRA providers
that will allow crypto, in similar fashions to that of the 401K.
Self-directed IRAs, like self-directed 401Ks, allow the participant to take their investing into their own hands. They have the ability to invest in crypto from their own IRA on their own terms, like with a self-directed IRA. However, the process
for the self-directed IRA holding crypto does involve a few more steps.
Opening an LLC owned by the IRA is one tactic used to invest in
crypto through an IRA. Once the LLC is formed, then you will be able to use a business checking account to fund transactions on a cryptocurrency exchange, after which you will then be able to begin trading.
If this process is one too many steps, IRAs designed specifically for crypto are also an option. If you choose to go this route instead, you do not need to set up an LLC, and can simply set up your IRA with a provider capable of trading crypto.
Multiple IRAs designed specifically for crypto have popped up over the past years, but traditional IRA providers have begun offering crypto options as well.
There are a lot of problems with our current financial systems. Inflation has taken over, making our dollars less valuable than they were before. Social security has run amuck, and it doesn’t take care of retirees the way it is supposed to, which
can make us wonder if the SS deposit that gets pulled from taxable income will actually do us any good later.
The old mindset of “set it and forget it” won’t work for the vast majority of us. In fact, doing it that way will likely have most of us losing money.
If we want to take charge of our futures and become financially free, we have to reconfigure the current retirement infrastructure. New asset classes have to be introduced, and the people have to be able to take back their control.
The blockchain offers the new advantages that our retirement infrastructure needs.
For example, take stablecoins, which are a type of digital currency whose market value is pegged to an external asset or reference, such as currency or exchange-traded commodities. TerraUSD (UST) is pegged to the US dollar at a 1:1 ratio.
Investing into a stablecoin can almost guarantee an APY of roughly 20%, beating inflation and offering the savings you need to protect your future.
Opening up an IRA with Dorado gives you a type of self-directed retirement account with the control you want and need to make these kinds of returns. An IRA with Dorado grants you the freedom and control you need to both invest in cryptocurrency
and gain the tax benefits of a retirement account.
Dorado IRAs offer flexibility in maximizing the number of options you have. There are hundreds of different cryptocurrencies available for you to invest with on our platform.
We have access to a number of trading features available as well, including limit orders and stop losses. With a Dorado IRA you will never be hit with any hidden fees and you can earn yield using both DeFi and CeFi.*
To open an IRA with Dorado, visit our website and sign up. Our IRA plan is only $20 per month, after a one-time setup fee of $499. With this plan, you receive all of the perks of a Dorado account, including
a self-directed crypto IRA, access to hundreds of cryptocurrencies, zero trade fees, zero withdrawal fees, and 24/7 customer service. Try it today.
*Individuals are responsible for doing their due dligience to ensure their specific investments are compliant with all regulations.