Fidelity's offer to put 401 (k) funds in bitcoin is loaded with unknowns
Fidelity announced that it would begin allowing 401(k) participants to invest up to 20% of retirement savings in bitcoin Credit: Getty Images/iStockphoto/Douglas Rissing
When Fidelity announced recently that it would begin allowing 401(k) participants to invest up to 20% of retirement savings in bitcoin, I immediately wondered whether Fidelity lets participants buy Swiss francs and Japanese yen and pounds sterling and euros in retirement accounts.
It’s not identical, since those are established currencies with stable long-term value, backed by strong governments, and cryptocurrency is … not. But traditional currencies are somewhat analogous with bitcoin, dogecoin, TrumpCoin, unobtanium, useless ethereum token (actual names!), and more than 10,000 digital currencies.
I didn’t know whether investing retirement funds in foreign currencies is allowed because, while we actively manage the stocks, bonds and funds in my family’s 401(k) accounts, we’ve never considered buying foreign currency. Because we have practically no idea whether each foreign currency will gain or lose value against the dollar. And absolutely no idea whether a cryptocurrency will.
Bitcoin surged to $64,400 on Nov. 12 because a lot of people wanted to buy it. It sank to $18,948 on June 17 because a lot of people wanted to sell it.
But who knows whether they’ll be buying or selling in the future.
Do you? Can you explain?
I’ve had scores of people encourage me to invest in crypto. I always ask: “On what basis do you evaluate whether any specific cryptocurrency is likely to rise or fall in the short and long term?”
Not only have I never gotten a good answer, I’ve never gotten a coherent bad one. It’s always just “mumble mumble wave of the future mumble.” And my question is not meant negatively, it's sincere. If a good answer ever surfaces, I’ll listen, and maybe even leap.
But Fidelity does not allow investing in foreign currencies via retirement accounts, nor does any other major investment house. You know what else is banned from purchase in my 401(k) plans, and yours, by law?
Fine art, rugs and antiques. Precious metals. Fine wine. Rare stamps. And almost all collectible coins.
But now Fidelity will let you buy bitcoin in your 401(k), while federal law says most tangible collectible coins, popular and respectable investment hedges, are too iffy for retirement investing.
Practically everyone who has common sense and lacks a profit motive to boost cryptocurrency opposes crypto purchases in 401(k)s, from the Department of Labor to top retirement experts. Practically everyone who has come out in favor has something to gain, including crypto professionals and politicians who crave their largesse.
The battle cry is, “People ought to be free to invest their money, “ and as a huge freedom fan, that resonates with me.
But 401(k)s curtail freedom purposely, convincing employees to lock up money they'd often rather spend, for decades, in return for employer contribution matches and tax advantages. Investment options are limited. Early withdrawals garner huge financial penalties.
As a nation, we want the elderly to be financially stable. That’s partly because we have such big hearts, and partly because it won’t be good if the headlines start reading, “Study shows 63% of seniors cannot afford the good commercial-free Hulu … or food.”
As a man who once bet $100 that Leon Redbone and Father Guido Sarducci were the same person (You NEVER saw them together!), it's not my place to say whether crypto is a good investment.
But I can say that if actual $20 Golden Eagle coins minted in 1907 are too risky for my 401(k) funds, so is the virtual bitcoin invented in 2008.
Columnist Lane Filler's opinions are his own.
Lane Filler is a member of the Newsday editorial board.
