In August, President Donald Trump signed an executive order that will allow Americans to add such alternatives as cryptocurrency, real estate and private equity into their 401(k) retirement savings, per CNBC. Specifically, the order instructs the U.S. Secretary of Labor, the Treasury Department and the Securities and Exchange Commission (SEC) to revise their rules and guidelines so as to grant American 401(k) investors eventual access to such alternative currency assets as crypto.
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As CNBC noted, Trump’s historic executive order is a significant win for the digital currency realm, as the crypto industry has made considerable efforts for private assets to be incorporated into contribution plans in a more significant way than ever before. In response to the news in August, the price of bitcoin jumped 1% on the stock market.
GOBankingRates breaks down the implications for your retirement accounts and planning.
What Does This Mean for Your Retirement
First, as ABC News has reported, by signing this executive order President Trump has given access to “a huge new pool” of retirement funds for alterative asset managers. This also allows you to diversify your retirement fund portfolio (never a bad thing).
That said, private companies are not yet required to add crypto to their 401(k) plans; companies will need to examine the risks and liabilities of doing so before adding digital currency to their retirement plan policies.
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Such risks regarding crypto, though, should give everyone pause — while private digital assets can provide high returns and additional diversification for retirement investors, cryptocurrency is also extraordinarily volatile, and come with a far higher risk of loss.
Ted Rossman, senior industry analyst at Bankrate, warned ABC News that the incorporation of alternative assets to retirement accounts is “going to be slow going,” adding that “if you want to have a small part of your portfolio in crypto, that could make sense. Generally speaking, index funds are the best way to go for the average person. Just kind of keep it simple, match the market over time, get low fees.”
The Bottom Line
Ultimately, to keep your retirement funding secure and mostly risk-free, maintain a focus on things such as index funds, with only a small allocation given over to digital assets once they become available for your 401(k) plan.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Trump Expands 401(k) Plans With Crypto — What This Means For Your Retirement
