The U.S. based financial services firm, Fidelity Investments will allow customers to put Bitcoin in their 401(k) retirement accounts. However, their employers must agree to the same as well.
With this new move, employers can place a limitation on the amount of savings marked for bitcoin, with the maximum cap limit of 20%. However, now several first-time investors can gain exposure to bitcoin without creating a separate account on a crypto exchange.
The 401(k) retirement savings accounts are company-sponsored retirement accounts in which employees can contribute their income, while employers may match contributions.
As a result, employees get a tax exemption on the money they keep in the retirement account. Meanwhile, contributions are automatically debited from employee paychecks and invested in the funds of their choice.
Interestingly, Fidelity’s retirement accounts are a big-time hit! As per research firm Cerulli Associates, the accounts have an estimated $2.4 trillion in 401(k) assets in 2020.
It is informed that fees on the bitcoin investments in the firm’s 401(k) accounts would be anything between 0.75% and 0.90%. The fees would be determined by the amount and the employer, and they would be maintained on the company’s own custody platform.
An additional trading fee would be charged which is yet undisclosed. Fidelity Investment is also planning to compile educational content for investors.
MicroStrategy, a Business analytics firm has apparently volunteered for the plan. The firm holds billions of dollars in bitcoin.
Fidelity has been one of the first major firms to provide several bitcoin-based products and offerings.
In February Fidelity released its ‘Bitcoin First report’. The firm said that BTC “is the most (relative to other digital assets) secure, decentralized, sound digital money and any ‘improvement’ will necessarily face tradeoffs.”
However, firms offering bitcoin exposure in their 401(k) accounts is one thing that have been warned against by the U.S. Labor Department.
Recently, in March, the US department warned that cryptos were speculative and volatile trading investments and providers offering cryptocurrencies in retirement plans is a “serious concern”.