For most workers, retirement is more about achievement than age. For those not adequately prepared, it is simply a reminder of their old age and an uncertain future. Retirement planning used to be easy. When workers get a job, both employers and employees contribute to a retirement program like the 401k monthly, and when they reach retirement age (typically around 65-67), they simply retire and enjoy the rest of their lives. Simple.

Today, it is more complex than that. There are so many factors to consider including inflation, unforeseen life events like the recent wide fires sweeping through neighborhoods in Los Angeles, and other economic uncertainties. That is why many people are exploring alternative retirement strategies as nobody wants to spend their entire adult lives working to achieve the American dream only to become homeless and broke at a time when they should be enjoying the fruits of their labor. One of the emerging strategies people are considering now is cryptocurrency. This digital asset is sweeping across a variety of industries and now has caught the attention of the retirement sector.

So how can people plan for retirement with crypto in this modern age?

Understanding Crypto and Its Growth

Crypto is a digital currency much like the US dollar that you know. Unlike the dollar though, crypto isn’t issued by the US government or any government for that matter. Instead, it is digitalled mined, and distributed on a highly secure network that is powered by blockchain technology. This network operates in a decentralized manner, meaning it does not reside in one location. It is everywhere so that no one person (or government) can have total control over it. And with blockchain technology, every transaction is accurately captured, recorded, and published in a distributed ledger for everyone to see. You might be thinking, “Isn't it a breach of privacy if everyone can see your transactions?” No, it is not.

You see, blockchain uses a highly advanced security feature called cryptographic hash, which prevents users from making edits or stealing personal information. In fact, for modifications to be made on a ledger, everyone on the network has to consent. We’re talking millions of users, which is practically impossible. Besides, all personal information like names are disguised with alpha-numeric codes so nobody can tell who the parties involved are in any transaction.

As you can see, the creator(s) of crypto did a good job of ensuring that it is a secure and timeless form of a digital asset. Today, the crypto market is worth over $3.3 trillion and growing daily. The reason for this growth is simply because individuals and businesses trust it, which is what makes it ideal for retirement planning.

The Potential Role of Crypto in Retirement Planning

The closer you are to retirement, the less risk you want to take with your investments. And that is understandable since you have less time to recover your losses should that happen. Adding crypto to your plan allows you to diversify your portfolio and spread your risk. Say for instance all your nest egg is in a pension fund and someone embezzles that away, what would you do? This is what happened in the Madoff investment scandal of 2008 where a former Nasdaq chairman and founder of an investment company pulled a multi-billion-dollar Ponzi scheme. His victims included retirees, even those in his company.

On a positive note, by diversifying into crypto, individuals can enjoy capital appreciation. Bitcoin (BTC) for example, has grown from less than a dollar to reaching $100,000 in just 16 years. So imagine if you invest a small portion of your monthly income into buying crypto to hold until retirement. Since it's a long-term plan, you won't have to worry about short-term market volatility. Other than Bitcoin, some of the cryptos with the most potential include Etherium, Solana, and Toncoin. These coins have strong fundamentals and have proven to be safe investments for long-term strategies like retirement planning.

Another opportunity worth mentioning is non-fungible tokens (NFTs). Although they are not a crypto, they operate using the same blockchain technology. NFTs allow you to own unique digital assets like art without worrying about where to keep them or if they will get stolen in an elaborate heist. When you retire, you may choose to sell the ownership rights for a fortune.

Risks to Consider

Like every investment, risks are sometimes inevitable. However, managing those risks could make the difference between losing everything and retiring comfortably.

The first risk to consider is market volatility. This should not bother you if you start investing early or have at least a decade to go until your retirement age. Markets do go up and down. It is normal. However, depending on your risk appetite, consider taking profit from time to time to protect your capital.

Another challenge could be regulatory risks. In the US, laws and regulations surrounding crypto differ per state and region. Consult with a professional regularly to ensure that your investments are protected in your region.

Lastly, security concerns. Although blockchain technology is highly secure, you still need to take steps to protect your assets. This can include implementing two-factor authentication and possibly holding your crypto in a hardware wallet, instead of online.

Practical Steps to Take Today

The first step is to determine how many years you have left before retiring. In the US, the normal retirement age is between 65-67, depending on the year you were born. If you have a lot of time on your hands, consider investing 10-20% of your income in crypto. If you don’t, then 5-10% should do. The US also has Individual Retirement Accounts (IRAs) that now accept crypto. So take advantage of those as well.

And if you don't already have other assets, consider getting some stocks, bonds, and real estate investments. What you want is a balanced and well-diversified portfolio to help you minimize risks and unforeseen circumstances.

While these opportunities all sound exciting, be sure to consult a professional financial advisor before committing to any long-term strategy. They can help you tailor your retirement strategy to suit your financial situation.

Wrapping Up

Crypto as a retirement strategy can be both exciting and risky. The key is to start early, start small, diversify your portfolio, and ride the wave. Over the years, adjust your strategy to align with current realities. By the time you retire, you will be glad you tried a modern approach to retirement planning than sticking with traditional strategies alone.