Retirement savers who can’t stomach the thought of owning volatile Bitcoin directly but still want a sliver of exposure may soon have their wish granted. The long-awaited decision on spot bitcoin ETFs – investments that track the real-time price of bitcoin – is nearing, with industry insiders buzzing with optimism.
While the retail popularity of such ETFs remains unknown, over 10 asset managers, including BlackRock, are lining up to launch theirs. Experts predict these offerings will open up crypto as an asset class not just for high-risk traders, but also for retirement savers. This access could come through company 401(k) plans, solo 401(k)s, and self-directed IRAs.
Bitcoin’s rollercoaster
Despite a stellar 2023 performance, bitcoin remains a wildly volatile asset, attracting fierce criticism alongside ardent belief. Yet, many major pension funds have allocated funds to crypto, and Fidelity even added a bitcoin fund option to its 401(k) plan last year.
Currently, options for crypto ownership within retirement accounts are scarce. Most employers remain hesitant due to 2022 guidance from the Department of Labor. This pushes many people to hold crypto outside retirement accounts, often opting for self-custody or exchanges.
With spot bitcoin ETFs, experts expect more providers to allow them within retirement accounts, expanding options for savers. Steven Larsen, a CFP, believes the SEC’s approval could encourage companies to offer them in their 401(k) plans.
However, Joshua Rubin, vice president of legal at Betterment, points out the Department of Labor’s concerns about crypto’s risks for 401(k) participants. Despite potential solutions offered by spot ETFs, some employers might remain hesitant initially.
While custodians like Schwab and Fidelity haven’t allowed direct crypto investments in IRAs, they’ve shown increasing involvement in the crypto market. With spot ETFs, market watchers predict their inclusion for retirement saving is practically inevitable.
The decision to include Bitcoin in your retirement portfolio is complex, requiring careful consideration of risk and investment strategy. Regardless of your choice, holding Bitcoin within a retirement account offers tax advantages compared to a brokerage account, as gains wouldn’t be taxed until withdrawal.
Don’t give up if your employer isn’t on board. You can still open an IRA with a provider offering them, ensuring your retirement options encompass this potentially lucrative asset class.
While applications for an Ether ETF exist, its approval is likely to come later. The spot bitcoin ETF will be the first test case, paving the way for further crypto integration into retirement savings.
This article has delved into the potential impact of spot bitcoin ETFs on retirement savings, highlighting the increased access, tax benefits, and remaining hurdles. Stay tuned as this exciting chapter unfolds, offering a new way for savers to navigate the dynamic and evolving world of cryptocurrency.