Fidelity Investments Proposes Bitcoin As A 401（k）Investment Option

2022-07-21, 03:09

[TL; DR]

🔹 Fidelity investment is one of the mainstream financial service providers to adopt Bitcoin in its investment plan.

🔹 Fidelity Investments inc is one of the world's largest asset managers, founded in 1946.

🔹 As of December 2021, Fidelity's investment had about $11.8 trillion under management.

🔹 Fidelity investment operates a brokerage firm, manages mutual funds, provides fund distribution, retirement services, etc.

🔹 The 401(k) plan is a retirement savings plan provided by American employers for their employees’ retirement savings.

🔹 The 401(k) plan will ensure the deduction of a certain percentage from the employee's paycheck with contributions from the employer.

🔹 The traditional and Roth 401(k) retirement plan is in Fidelity's investment.

🔹 The 401(k) plan is a company-sponsored retirement account that offers tax savings.

🔹 On the 26th of April, Fidelity investment announced that employers and employees can now use cryptocurrency.

🔹 The investment plan will allow investors to allocate 20% of their accounts and earnings.

It is no longer news that the mainstream financial service providers have embraced the use of cryptocurrencies in their daily operations.

One financial service provider that proposed using Bitcoin as an investment option is Fidelity Investment, a top-rated retirement plan provider in the United States.

In this article, we shall identify the giant strides of Fidelity investment, how the 401(k) retirement savings plan works, and the adoption of Bitcoin for the investment plan.

Fidelity Investment

Image: Business Wire

Fidelity Investment is the largest retirement plan provider in the United States. It is an American multinational financial service provider established in 1946. Fidelity investment inc is one of the world's largest asset managers, with about $11.8 trillion in assets under management as of December 2021.

Fidelity Investments is a financial service provider that operates a brokerage firm, manages mutual funds, provides fund distribution, investment advice, retirement services, wealth management, index funds, securities execution, asset custody, and life insurance.

Fidelity Investment is not the fiat mainstream retirement plan provider to allow cryptocurrency-based investment plans. In June 2021, ForUsAll, another retirement plan provider, partnered with Coinbase to offer BTC exposure to its retirement savings account holders.

What Is A 401(K) Plan?

Image: David Waldrop

The 401(k) plan is named after the United States Internal Revenue Code section, and it is a retirement savings plan provided majorly by many American employers of labor. The 401(K) plan has tax advantages for the saver.

The 401(k) savings plan mandates the employee to agree that a certain percentage of each paycheck will be paid directly into an investment account. The employee has the privilege to specify the rate and which of the investment options they want to opt for. The employer can also decide to match part or all of the contributions.

The 401(k) plan is unique because it is a company-sponsored retirement account, and employees are expected to contribute their income at intervals while the employer may match contributions. The traditional and Roth are the two basic types of 401(k) savings plans.

The discrepancy between the two plans is how they are taxed. In the commonly used Traditional plan, employee contributions are pre-taxed, which reduces taxable income, but withdrawals tax is fixed.

The primary benefit of the 401(k) retirement plan is that it offers tax savings. It is also a contribution plan because the employer and employee can contribute to the investment account. The 401(k) retirement plan is now preferred to the traditional pension schemes.

Fidelity Investment To Adopt Bitcoin As Investment Option

On the 26th of April, Fidelity investment announced that employees and employers who want to adopt its 401(K) retirement package can now use cryptocurrency. This announcement makes Fidelity investment one of the first retirement plan providers to allow cryptocurrencies.

Specifically, the 401(k)retirement plan will allow the use of Bitcoin (BTC), and it is expected that the investment option will become available by MID-2022. With about $11.3 trillion in Assets Under Administration (AUA) AND 23,000 employers using Fidelity retirement accounts, accepting cryptocurrency is a milestone recognition.

According to Dave Gray, the head of the workplace retirement offerings and platforms at Fidelity, he said “There is growing interest from plan sponsors for vehicles that enable them to provide their employees access to digital assets in defined contribution plans, and in turn from individuals with an appetite to incorporate cryptocurrencies into their long-term investment strategies.

In the details of the new cryptocurrency plan by Fidelity investment, investors in the Bitcoin-eligible retirement plans will be able to allocate 20% of their accounts to this investment option. However, the percentage figure may change.

The fees for Bitcoin-eligible accounts will range between 0.75% and 0.90% of assets, while the employer and the employee will determine the amount to be invested. The Bitcoin-eligible 401(k) plan will attract additional fees, particularly the per-trade fees.

Conclusion

Experts opined that the endorsement and acceptance of cryptocurrency by one of the foremost US retirement plan providers indicates that crypto investment is getting the recognition it deserves in the mainstream.

Furthermore, one of the areas of concern is whether employers and employees will adopt the Bitcoin-based retirement plan, coming at a time when the crypto market is witnessing a drastic surge.

It is expected that the giant step by Fidelity investment would prompt wider acceptance of Bitcoin investments among 401(k) retirement plan providers and sponsors.

Author: Valentine A., Gate.io Researcher
This article represents only the researcher's views and does not constitute investment suggestions.
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