Bitcoin 401k and Retirement Accounts

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– The 401k is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.
– The government lets companies offer these accounts with some tax advantages, which its hopes will encourage people to save for retirement.
– There are two types of 401ks, a traditional and a Roth variation. In a traditional 401k, an employees contributions are deducted from their taxable income, while a Roth 401k allows them to contribute after-tax dollars, so they can take their money out tax-free during retirement.
– A 401k also has limits on the contributable amount which is periodically updated and requires consultation with a qualified tax professional or the IRS themselves.
– Usually, companies handle 401k retirement savings plans but individuals also have the option of a self-directed 401k.
– A self-directed 401k plan enables individuals to make investment decisions on their own. These can include assets such as mutual funds, stocks, bonds, and even invest in more unconventional assets like real estate and commodities, but only the employer allows it.
– Recently, Fidelity Investments, the largest retirement investment provided in the US, announced they will be offering 401k investors the ability to access Bitcoin for use in their plans sometime in the summer of 2022.
– Fidelity is the first retirement plan provider to make such a move, which will lead to others following suit.
– However, as 401ks are employer-offered retirement savings accounts, they must be chosen by the employer.
– Meanwhile, officials within the U.S. Department of Labor have taken issue with Fidelity Investment including Bitcoin as part of its 401(k) offerings.
– Some of the Departments issues with cryptocurrencies include their volatility and inconsistent valuation methods investors could use to evaluate prices.
– Other Crypto options for retirement include an individual retirement arrangement, which also allows for tax-deferred investments to be claimed upon retirement.

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