Crypto for Retirement: Worth the Hype?

It's pretty common now to see articles online talking about how crypto investing could be a valuable way to save for retirement. Some have gone so far as to say it's one of the best ways to secure enough funds to retire comfortably and ahead of schedule. These so-called experts suggest that all you have to do is buy the right amount of a certain coin at the right time and you'll be golden.

Surveys have brought some concrete figures to this trend. A very recent one from 2024 had almost 45% of the survey's retirement-focused participants reveal they've already invested in cryptocurrencies at some point, or are planning to in the near future. The idea is appealing, sure, but there's a bit more to it than simply setting up a wallet and buying some Bitcoins. Without a good idea of what you're doing, it could all go quite wrong, really quickly.

This article aims to be a bit of a reality check. While adding a dash of crypto to a diverse portfolio could indeed be a smart move, it's not for everyone, and shouldn't be considered at all if you don't know some key facts about how the industry works.

Understanding the appeal

It doesn't take an investment guru or financial expert to see why crypto has creeped into the retirement conversation. Some people have managed to get incredibly lucky buying and selling specific coins at good times. The crypto boom has been characterized numerous times by exponential periods of massive, eye-popping growth. People who've waited a bit too long to get their retirement plans in motion will no doubt be looking to copy the overnight success stories they've read about online.

Crypto isn't nearly as shrouded in mystery as it is now, too. There's more historical data to look at now that the coins have been around, and carefully tracked, for years. The ability for absolutely anyone with an internet connection and a bit of free time to pour over Ethereum price correction history information and many other niche details has made newcomers brave. Perhaps too brave in some ways, as markets change direction fast, and past performance is not proof that future results will be good.

Figuring out where and how to buy coins is also a breeze now, with many competing exchanges fighting amongst themselves to offer very easy-to-follow resources and video content on coin prices and comparisons.

Crypto is mainstream

Now that crypto enjoys a lot more legitimacy with the introduction of Bitcoin spot ETFs in the US, the idea of jumping on a large coin at the right time and riding the wave to an early, and incredibly comfortable retirement is on everyone’s mind. Instead of with weariness, people are now approaching crypto investments with excitement for a few reasons:

• Crypto millionaires have captured the public's imagination
• Huge coin value surges are widely publicized
• A single well-timed crypto purchase could secure a retirement fund overnight
• Coin investments keep up better with inflation
• The ability to invest without partnering with a bank is appealing
• Cryptocurrency investments offer more personal control
• Youthful generations are comfortable with innovation
• The barrier for entering the investment scene is very low

Altogether, it's not surprising crypto as an option for retirement has taken off the way it has.

It's not all sunshine and roses

What the news posts, websites promoting wallets and TikTok videos aren't doing is giving you the full picture. For every massive success, there's many failures and missteps too. There's a reason why some skeptics have likened investing in crypto to gambling; people who strike it rich overnight generally found their success thanks to a heap of good luck.

Before you go ahead and throw all your savings into a cryptocurrency investment, it's recommended that you have a solid understanding of all the potential pitfalls.

1. The value of coins is volatile

Back in the days before crypto, planning for retirement involved very securely and slowly building wealth. People did, and still do, use a spreadsheet or perhaps some clever accounting software to work out exactly how much fiat currency they need to put away every month to retire comfortably. Cryptocurrencies don't really allow a person to do this so reliably.

You could very diligently keep buying a small percentage of a Bitcoin, but there is no guarantee the coin will be worth anything at all when you reach retirement age. Your next egg could have doubled or tripled in value, but it just as easily could be mostly wiped out, just because of some changes in the market.

2. Regulations aren't set in stone yet

The governments of the world can't quite decide what to do with crypto. On one hand, some countries have banned their citizens from engaging with it at all. One the other, some see the potential and are willing to write up laws in an attempt to give their populations freedom without letting exchanges take them for all that they've got. This uncertainty born from a lack of uniform rules is tricky for investors, and especially long-term investors, to figure out safely.

3. Cryptocurrencies have no reliable or proven track record

The entire financial world tracks the value of all available coins by years, not decades. In other words, cryptocurrency is still a fledgling asset class. Stocks and bonds, otherwise known as traditional investments, have long track records to look back on. This makes them more predictable options for people looking to slowly but more surely set up a savings plan.

4. Scams and hacks make everything a little more stressful

Whenever there's money to be made, cyber criminals will crawl out of the woodwork to see if they can steal from the success of others. Regular, old-school investment platforms have been in the game longer, and know how to handle these threats better. For now, crypto wallets are more vulnerable, and it's easier to fall for a phishing scam than you might think. Nobody is immune, and if that wallet holds your entire retirement investment, there's no solid way to get it back.

Relying on crypto for those golden years isn't for everyone

Investing in crypto for any reason takes grit and determination. At the start you'll probably make a few mistakes, and this is okay if you start small and don't invest everything you own. There’s many moving parts, countless different coins to choose from, and a lot to think about. If you’re only now getting into the scene, and have just created an account to set up your first crypto wallet, you probably won’t know enough to set this retirement plan in motion smoothly. It's a complex landscape that's easy to get lost in or overwhelmed by.

Think of crypto as a way to diversify an existing, traditional portfolio

If a guide tells you to only invest in Bitcoin or Ethereum to get rich quick and enjoy an early retirement on a private island, run. Sure, putting a few pennies towards cryptocurrency to diversify can be a good idea, but it definitely should not be a cornerstone. Instead, put more focus on building a solid foundation with traditional investments like IRAs and 401(k)s. If you're still young and have many years of work ahead of you, look at side hustles to boost that bottom line. If your drop-shipping enterprise bears fruit, then you'll have more funds to put into a crypto portfolio.

If you're sure you want to go down this path, do your research

If your heart is truly set on leaping into the crypto investment sea to dive for treasure and quick gains, fair enough. The idea of buying just before a big surge and setting yourself up for life is a nice dream, that's not impossible to grab hold of. But if you're serious about enjoying your twilight years with enough money in the bank to do more than the bare minimum, it's recommended to learn as much as you can about every angle of the cryptocurrency game. Try to make stability a priority, and don't put all those nest eggs into one barrel.

Frequently Asked Questions:

Is cryptocurrency a safe investment for retirement?

While cryptocurrency can be a high-reward investment, it is also high-risk due to its volatility and lack of long-term track record. Diversifying your portfolio with more traditional investments like stocks, bonds, and retirement accounts is generally recommended to ensure stability.

How can I minimize the risks associated with crypto investing for retirement?

To minimize risks, invest only what you can afford to lose, diversify your investments, stay informed about market trends, and use secure and reputable exchanges. Also, consider consulting with a financial advisor who has experience with cryptocurrencies.

What are the biggest challenges of using cryptocurrency for retirement savings?

The main challenges include high volatility, regulatory uncertainty, lack of a proven track record, and the risk of scams and hacks. These factors make it difficult to rely solely on cryptocurrency for retirement savings.

How do I start investing in cryptocurrency for my retirement?

Start by educating yourself on the basics of cryptocurrency, choose a reputable exchange to buy and sell coins, secure your investments with a reliable wallet, and consider a diversified approach by combining crypto with traditional investments.

Can I include cryptocurrencies in my retirement accounts like IRAs or 401(k)s?

Yes, some financial institutions offer self-directed IRAs that allow investments in cryptocurrencies. However, these options come with higher fees and additional complexities, so it's crucial to understand the implications and seek professional advice before proceeding.