After Bitcoin first made headlines in 2009, a wave of cryptocurrency offerings have since become available.
Now as the value of Bitcoin has increased over 4000% since its inception, some retirement savers may wonder if it’s smart to invest in cryptocurrency for their golden years.
“Planning to retire based on investing in cryptocurrency alone would be a risky bet,” said Greg King, CEO of Osprey Funds, a subsidiary of REX Shares, a Connecticut-based provider of exchange-traded products. “However, we believe an investment in bitcoin should absolutely be a component of most long-term investors' portfolios.”
Here’s the best reasons and advice from financial experts on how to approach crypto investments for retirement.
Good returns so far
Bitcoin’s consistent annual compound return makes it a candidate to consider in your investment portfolio.
“Bitcoin is here to stay,” King said. “It has averaged a 121% compound annual return over the last five years. As an emerging technology, we expect that it will continue to outpace the overall market in terms of growth rates.”
The best time to invest in cryptocurrency is now rather than later, especially for those approaching retirement.
“Obviously there is the idea that it could go down also, but if you stay safe with a crypto that is just gradually increasing, you are more than likely going to make a large profit, if you have it for a number of years,” said Ethan Taub, CEO of Loanry, a California based loan company. “It will be a smart move for those who are looking to retire in the next 3-5 years, as you could almost double your income by just moving it to crypto.”
Invest through 401k plans
If you’re seeking to incorporate crypto in your retirement plan, it’ll most likely be through your employer-based 401k plan, according to Andres Garcia-Amaya, founder of Zoe Financial, a financial firm.
“In a 401k plan, cryptocurrency would likely be treated like any other assets that can be held in a 401k, such as stocks, bonds, ETFs, etc,” Garcia-Amaya said.
For instance, Digital Asset Investment Management recently launched a company-sponsored 401k plan that will allocate up to 10% of Bitcoin into your portfolio.
Get an expert
While he doesn’t dissuade investors from cryptocurrency in their retirement plans, Garcia-Amaya said to make sure to seek professional help from advisors who understand the technology.
“Be sure to pick an advisor that is highly-vetted, commission-free, and a true fiduciary,” said Garcia-Amaya. “Since crypto retirement is a rather new development in the wealth management space, you'll want to hire an advisor who understands this technology, and the implications of selling and is an expert in retirement planning.”
Always remain diverse
Relying on crypto alone can lead to adverse results. A diverse portfolio is still key, King said.
“Planning to retire based on crypto alone is like planning to retire by buying one stock — for example, Tesla. Possible? Yes. Likely? No. Responsible? Not exactly,” King said. “While you may be tempted to load up on Bitcoin, if you want to sleep well on your journey to retirement, do yourself a favor and diversify.”
Read more information and tips in our Investing section