401(k) Crypto Move Sparks Debate: Democratizing Assets or Risk for Retirees?

Robert Kiyosaki, author of Rich Dad Poor Dad, has highlighted that President Donald Trump’s August 7 executive order to expand alternative investments in 401(k) plans could significantly benefit Bitcoin holders. The order, which directs federal agencies to revise regulations under the Employee Retirement Income Security Act (ERISA), aims to permit 401(k) participants to allocate funds into cryptocurrencies, private equity, and real estate. This shift aligns with Trump’s broader push to position the U.S. as the “crypto capital of the world,” a goal underscored by recent legislative actions and regulatory rollbacks.

The executive order reverses prior caution from the Biden-era Department of Labor (DOL), which had advised “extreme care” in including cryptocurrencies in retirement plans due to their volatility and risks. On May 28, 2025, the DOL rescinded its 2022 guidance, adopting a neutral stance that allows fiduciaries to evaluate crypto investments under standard ERISA principles. This regulatory shift follows similar moves by the Securities and Exchange Commission (SEC), which has dropped lawsuits against major crypto firms and engaged in dialogue with industry stakeholders. The Labor Department’s updated position removes barriers for plan sponsors, potentially accelerating the inclusion of Bitcoin and other digital assets in retirement portfolios.

Supporters of the policy argue that integrating cryptocurrencies into 401(k)s democratizes access to high-growth assets previously reserved for institutional investors. For instance, Michigan’s largest public pension plan holds $44 million in Bitcoin and $30 million in Ethereum ETFs, demonstrating that alternative assets can yield substantial returns—though they represent less than 1% of its $115 billion portfolio. Advocates like Elizabeth Hansson of Stand with Crypto emphasize that the executive order is “permissive, not prescriptive,” allowing employers to decide whether to adopt crypto options based on workforce demographics and risk tolerance. Tax advantages, including tax-deferred growth in traditional 401(k)s and tax-free withdrawals in Roth accounts, further enhance the appeal for investors.

However, critics warn of heightened risks, particularly for less sophisticated investors. Alicia Munnell, senior adviser at Boston College’s Center for Retirement Research, calls the inclusion of Bitcoin in 401(k)s a “terrible idea,” citing its speculative nature and lack of long-term returns compared to traditional investments. Historical data reinforces these concerns: Bitcoin’s price has experienced double-digit declines multiple times, including an 84% drop between late 2017 and 2018. The Bipartisan Policy Center notes that private equity and private credit—other alternative assets gaining traction in retirement plans—also carry liquidity constraints and high fees, which could erode returns for average savers.

The regulatory landscape remains fluid. The Labor Department, SEC, and Treasury have 180 days to finalize guidance on fiduciary responsibilities and safe harbors for plan sponsors. This process will determine how quickly employers can introduce crypto options, with early adopters likely to be tech-savvy firms. Meanwhile, the market has already responded: Bitcoin surged to $117,500 shortly after the executive order, up from $114,000 pre-announcement. Analysts estimate that even a 10% allocation of the $12.5 trillion 401(k) market to Bitcoin could inject $800 billion into the crypto sector, potentially driving the price above $155,000.

As the policy evolves, debates over risk versus reward will intensify. While proponents like “Bitcoin Butcher” Ronnie Bedway view the order as a catalyst for mainstream adoption, critics stress the need for caution. The final outcome will depend on regulatory clarity, investor education, and market dynamics—a balancing act that underscores the transformative potential and inherent volatility of this new chapter in retirement investing.

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