Bitcoin in a retirement plan? Until recently, a similar concept would have sounded unlikely. Meanwhile, US exchange Coinbase has partnered with startup ForUsAll, a provider of such solutions. What is the plan known as 401k and what impact can it have on the entire cryptocurrency market? This is what we will talk about in this article.
What exactly is a 401k?
A 401k is a type of retirement plan found in the United States. It allows people to put aside a portion of their salary into personal retirement accounts, without being taxed first. It is an employer support for the employee that is voluntary in nature. Reducing your base salary by the contribution that goes into your 401k plan is a way to increase your basic retirement. The need to tax the money held does not arise until it is withdrawn, which is when the employee reaches retirement age. Currently, this is 59 years and 6 months.
How does the 401k plan relate to Bitcoin?
So far, the 401k plan is mainly associated with the U.S. dollar, which can be invested in various products such as stocks, bonds, or even funds. However, this is set to expand. The partnership between Coinbase and ForUsAll will allow employees to add cryptocurrencies to their retirement portfolios as well. In addition to Bitcoin, more than 50 other tokens are expected to be included. DeFi projects are also among them. According to the information shared by the service provider, any crypto assets held by employees will be managed by Coinbase Institutional. However, the cryptocurrency holdings of employees’ portfolios will not be allowed to exceed 5%.
ForUsAll CEO Jeff Schulte assures that his company operates 401k plans for about 70,000 employees. These are mostly medium-sized businesses but also those with up to 10 employees.
Despite being voluntary, the 401k retirement plan is quite popular in the United States. According to 2018 estimates, there was over $5.3 trillion invested in it. This is a huge amount of capital that will soon be expanded to include cryptocurrencies.
Possible outcomes of Coinbase and ForUsAll collaboration
Undoubtedly, ForUsAll is the first service provider to undertake the expansion of a 401k plan to include Bitcoin and a number of other cryptocurrencies. Nor is it the largest company in the U.S. market to offer equity allocation in a retirement plan. Nevertheless, this venture is quite innovative and in case it passes the test, gaining popularity, ForUsAll’s competitors will also consider this kind of option. It is worth noting that the popularity of cryptocurrencies in the United States continues to grow, which may result in social pressure to implement this type of solution with much larger providers. Another important point is that many times the eyes of the whole world have been turned towards America and the financial solutions there. They were taken as an example and implemented also in Europe. Perhaps the idea from over the ocean will soon come to the shores of the Old Continent.