Crypto in your 401(k) or IRA: what the rules now allow, and the risks to weigh first

Retirement accounts are where many Americans keep most of their savings, so it’s no surprise that crypto has been knocking on the door. In the space of a few years, official guidance has swung from a stern warning to a neutral stance and then to a push for wider access. This guide explains where things stand for 401(k) plans and IRAs, and what to think about before putting retirement money into crypto.

401(k) plans: from warning to neutrality

2022: “extreme care”

On 10 March 2022, the Labor Department’s Employee Benefits Security Administration issued Compliance Assistance Release No. 2022-01. It told plan fiduciaries to exercise “extreme care” before adding a cryptocurrency option to a 401(k) plan’s investment menu.

2025: back to neutral

On 28 May 2025, the Department issued Compliance Assistance Release No. 2025-01, rescinding the 2022 guidance in full. It said the “extreme care” standard isn’t found in ERISA, the law that governs private retirement plans, and that the release restores its historical approach: neither endorsing nor disapproving of plan fiduciaries who conclude that including cryptocurrency in a plan’s menu is appropriate.

The 2025 executive order

On 7 August 2025, the President signed Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors”. Its list of alternative assets includes holdings in actively managed investment vehicles that are investing in digital assets, alongside private markets, real estate and commodities. The order told the Labor Department to reexamine its guidance within 180 days, and asked the SEC to consider ways to make alternative assets easier to access in participant-directed plans.

2026: a proposed safe harbor

On 31 March 2026, the Labor Department published a proposed rule that would clarify, and provide a safe harbor for, a fiduciary’s duty of prudence when selecting investment options for participant-directed plans, including asset allocation funds that hold alternative assets. It implements part of the executive order. The comment period closed on 1 June 2026. When we checked the Federal Register on 14 October 2026, it was still a proposal: no final rule had been published.

What this means for you

None of this puts crypto in your 401(k) automatically. Your employer and the plan’s fiduciaries decide what the plan offers, and they must follow a prudent process. If crypto does appear, it’s more likely to come through a fund that includes digital assets than as coins held directly.

How much you can put in: 2026 limits

Whatever you invest in, the IRS caps how much you can contribute each year. For 2026:

The IRS adjusts these figures each year: it announced the 2026 limits in November 2025. Remember that IRA contributions must be made in money, not crypto. See the FAQ below.

IRAs: your choice, your risk

With an IRA, you choose the investments, within what your provider offers. Some providers offer exchange-traded products that hold bitcoin or ether; others offer more. Check what your provider allows and what it charges.

Self-directed IRAs

Some crypto offers are sold through self-directed IRAs, which can hold a wider range of assets. The SEC and the North American Securities Administrators Association (NASAA) have issued an investor alert about them. Key points:

• Custodians and trustees of self-directed IRAs may have limited duties to investors.
• They generally don’t evaluate the quality or legitimacy of an investment or its promoters, and don’t verify the financial information provided.
• State regulators have seen cases where a self-directed IRA was used to lend credibility to a fraudulent scheme, and the SEC has brought cases where promoters steered investors into self-directed IRAs.

The SEC and NASAA’s alert explains how fraudsters exploit these accounts:

• Misrepresenting the custodian’s role. Promoters often say or suggest that the custodian has checked and validated the investment. In reality, custodians are responsible only for holding and administering the assets, and most custodial agreements state that they have no responsibility for investment performance.
• Unreliable values. Hard-to-sell investments are often shown on statements at the original purchase price, or at a value provided by the promoter. None of these necessarily reflects what you could actually sell for, if anything.
• Exploiting the early withdrawal penalty. The cost of taking money out early can keep investors in a fraudulent scheme for longer, and make them less watchful.

The alert’s advice: be especially wary of unsolicited offers that promote a self-directed IRA, even from friends or family; ask whether the seller is licensed and the investment registered, then check with the SEC or your state securities regulator; don’t believe “guaranteed” returns; and get a second opinion from an independent professional.

A pitch that insists you move retirement savings into a self-directed IRA to buy a specific crypto product deserves extra scrutiny. See pig butchering scams and crypto lending and earn accounts.

IRA rules that can catch crypto investors out

Prohibited transactions

The IRS describes a prohibited transaction as any improper use of an IRA by its owner, a beneficiary or a “disqualified person”, such as a fiduciary or close family member. Its examples:

• borrowing money from the IRA;
• selling property to it;
• using it as security for a loan;
• buying property for personal use with IRA funds.

The consequence is severe: if the owner engages in one during the year, the account generally stops being an IRA from the first day of that year, and is treated as having distributed all its assets at fair market value. That can mean a large tax bill. Before using any crypto service that offers loans, staking or other features on IRA assets, check with the IRA provider and a tax professional.

Collectibles and NFTs

If an IRA acquires a collectible, the tax code treats the purchase as a distribution equal to its cost. Collectibles include works of art, rugs and antiques, metals and gems, stamps and coins, with exceptions for certain coins and bullion. The IRS has said it will decide whether an NFT is a collectible by looking at what the NFT represents: an NFT that certifies ownership of a gem, for example, would be a collectible. See what are NFTs?

How tax works inside the account

The tax advantage is the same whatever the IRA holds:

• Inside the account, buying and selling isn’t taxed as it happens.
• Traditional IRA: the IRS says deductible contributions and earnings you withdraw are taxable, and withdrawals before age 59½ may face an additional 10% tax unless an exception applies.
• Roth IRA: qualified distributions aren’t taxable.

Outside a retirement account, every crypto sale or swap can be taxable. See US crypto tax.

Questions to ask before you invest retirement money in crypto

1. How much of my retirement savings could I lose without changing my plans? Crypto prices can fall sharply.
2. Through what? A diversified fund, a crypto ETP or coins held directly carry different costs and risks.
3. What are all the fees? Fund expenses, platform fees and spreads add up over decades.
4. Who holds the assets, and what happens if a provider fails? See is your crypto insured?
5. Who is recommending it, and how are they paid? Be wary of unsolicited offers.

This guide is general information, not financial advice. A fee-only financial planner can help you decide whether crypto belongs in your retirement mix.