Trump Opens Door for Crypto Investments in 401(k) Plans, but Is It Worth the Risk?

In May, President Donald Trump’s administration relaxed barriers in 401(k) plans that discouraged investors from buying cryptocurrency and other digital assets. Biden-era guidance that was put in place in 2022 urged employers to exercise “extreme care” before making crypto and related investments available to their workers; Trump’s Labor Department has rescinded that guidance, opening the door for more Americans to add these investments to their retirement savings plans.

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While having more flexibility in the assets you can include in your 401(k) portfolio can be seen as a good thing, cryptocurrencies are known to be incredible risky investments. Here’s what you need to know before adding these assets to your retirement savings account.

Whether you’re close to retirement or years away, there are two big risks to consider before adding cryptocurrencies to your 401(k) plan.

“Extreme volatility is a concern, especially for those close to retirement,” said Stephan Shipe, Ph.D., CFA, CFP, founder and CEO of Scholar Financial Advising. “However, the bigger risks come from the uncertainty around value and risk of crypto as a whole.

“Since there isn’t a long track record of asset prices, we can’t measure volatility and risk in the same way that we would a stock or bond,” he continued. “This makes it difficult to balance the whole portfolio in a way that is consistent with overall risk tolerance.”

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Investing in cryptocurrencies can have high rewards, but Shipe does not believe the risk that comes along with this investment is worth it in the context of a 401(k) plan.

“For most retirement investors, the answer is no, [it’s not worth the risk],” he said. “While crypto has produced spectacular returns in certain periods, retirement accounts should prioritize consistent growth and preservation of capital.”

Retirement accounts should be focused on safer assets, Shipe said.

“The extreme volatility and speculative nature of cryptocurrencies contradict fundamental retirement planning principles,” he said. “Retirement accounts are typically long-term vehicles designed to provide stable income, not speculative trading platforms.”

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