Recently, news about the open 401(k) retirement plan investing in encryption currencies has garnered widespread attention. While this move may bring new opportunities for investors, it also comes with numerous potential risks. This article will detail the seven major risks that pension investors need to carefully consider when contemplating the inclusion of encryption currencies in their investment portfolios.

First of all, the extremely high volatility of the cryptocurrency market cannot be ignored. This volatility can lead to significant paper losses in retirement savings in the short term, and even the risk of major shrinkage. Investors need to be mentally prepared to cope with the possible severe market fluctuations.

Secondly, investors face the risk of permanent loss of principal. Cryptocurrency projects may fail for various reasons, including technical flaws, fraudulent activities, security threats, or regulatory crackdowns. There have been numerous such incidents in history that have led to significant losses for investors.

Third, over-investing in encryption may erode the core safety cushion of retirement savings. The primary purpose of retirement funds is to provide stable assurance for future living, and the high-risk nature of encryption clearly conflicts with this goal. Investors need to weigh risks and returns to ensure that they do not jeopardize the financial security of their retirement.

Fourth, a high allocation ratio may lead to serious consequences. Even if policies allow for investment in encryption currency, investors should strictly control their investment ratio, and it is recommended not to exceed 5% of total retirement assets, or even lower. Excessive pursuit of high returns may result in disproportionate risk exposure.

Fifth, the uncertainty of regulatory policies has increased investment risks. The regulatory environment of the encryption currency industry is still changing, and potential future policy adjustments (such as changes in tax policies, new regulatory requirements, etc.) may have a significant impact on investments.

Sixth, under certain circumstances, investors may face liquidity risks. Although mainstream encryption currencies usually have better liquidity, the 401(k) plan itself may have redemption restrictions. Furthermore, during periods of extreme market panic, the liquidity of encryption currencies may temporarily dry up.

Finally, investing in encryption currencies through 401(k) may involve additional fees and complexities. Compared to traditional investment tools, funds or ETFs related to encryption currencies may charge higher management and custody fees, and the product structure may also be more complex, increasing the difficulty for investors to understand and manage.

In summary, although the 401(k) plan opens up new options for investors to invest in encryption currencies, the potential risks cannot be ignored. Investors should comprehensively assess their own risk tolerance, deeply understand the related risks, and consider seeking advice from professional financial advisors to ensure the safety and effectiveness of their retirement investment strategies.