7 Reasons Why Cryptocurrency Belongs In Your Retirement Portfolio
27 November, 2018 | 5 MIN
Why Cryptocurrency Has Become Such a Big Deal
Across the world, governments are faced with the reality that most households aren’t saving enough for retirement.
Sadly, the era of company-sponsored pension plans is long gone and both Millennials and Boomers are bombarded with the high costs of basic priorities such as housing, education and healthcare that compete directly with investment plans and retirement savings.
According to a recent study carried out by Ramsey Solutions, about half of Americans are not saving for retirement, and the few who do save aren’t saving enough. Folks, that’s a crisis.
In another survey, only 3 in 5 households headed by someone between the ages of 45 and 54 had a retirement account with an average value of $83,000, and 13% of people in their 40s had absolutely no retirement savings.
Apparently, 56% of Gen X folks have no clue how much they will need for retirement. This is according to a new study conducted by Bankrate. In addition, nearly half of working households will experience lower living standards during retirement, as revealed by the Center for Retirement Research at Boston College.
Save for Your Retirement By Investing in Crypto
It’s never too late to start planning or saving for your retirement. Its a fact that most people dread putting their money in risky (read: liquid and volatile) areas such as cryptocurrencies.
We will tell you for free that any viable future financial plan should include Bitcoin and other cryptocurrencies which will provide a secure hedge against existing shaky financial systems.
Today, many people are searching for opportunities that deliver high ROI within a short time frame, possibly through options like private equity funds, venture capital, real-estate investment trusts and lately cryptocurrency.
And there are many people that continue with the struggle to max out their 401(k) contributions, stashing money in traditional IRA or mutual funds.
Of course that’s crucial, but since the majority of retirement plans adhere to the “contribute and coast” rhetoric, ensuring smooth operations and optimal earnings, they eventually demand rebalancing of your finances as the global financial landscape evolves.
Keep in mind that cryptocurrency is one of the biggest and most disruptive technologies in the financial arena in recent times.
Cryptocurrency is coming into the broader market as a new asset class. The puzzling price swings in Bitcoin are luring millennials into pouring their money into risky investments. Interestingly, even the IRS has approved cryptocurrency IRAs.
At this juncture, people are wondering which crypto asset class belongs to the retirement accounts, which crypto and retirement portfolios can feature in their investment strategy and if buying crypto is a great idea for long-term investing?
Why Cryptocurrency Has Become Such a Big Deal
Well, it’s the next big thing. Ask Wall Street fund managers — they say it is the future!
Don’t be surprised when your friends and family start channeling their retirement dollars into cryptocurrency sooner rather than later. And don’t be startled when you see the cryptocurrency index or exchange-traded funds start to appear on the New York Stock Exchange.
While the crypto space is susceptible to volatility, there are numerous indications that point to Bitcoin and blockchain as being a strong bull ideal for building exchange-traded funds as well as other instruments that are great for retirement savings. You too should be bullish on blockchain, Bitcoin and other cryptos.
Rafael Carmona Toscano, a private investor and scholar of cryptocurrency who has been accumulating Bitcoin since 2013, notes that Bitcoin has a bright future. Rafael boasts hands-on experience with cryptos as he started out mining Bitcoin, and later purchased it.
“Bitcoin is a bank for the unbankable,” he says, while stating that many people in the world have no bank accounts and hence cryptocurrency would solve a huge problem for those folks.
Digital assets represent a new, fundamental asset class — one that is being considered carefully by investors. The main reason for this can be illustrated by Real Estate Investment Trusts, abbreviated as REITs.
The underlying concept of REIT was first introduced as an asset class designed for legal investment in 1960. The investment grew gradually in subsequent decades, but did not gain momentum until the 1990s. In short, the early investors profited incredibly.
Similarly, Bitcoin and other cryptocurrencies are probably the fastest growing asset class in the financial space. But do they qualify to be in your retirement account? Many experts believe so.
Here are 7 reasons why you should include a cryptocurrency IRA (individual retirement account) in your retirement portfolio.
The rule of thumb is never put all your eggs in one basket! Did you know that diversification is one of the strategies used to minimize exposure to a single asset class while still ensuring its growth? When it comes to retirement planning, one of the most effective ways to diversify is to put your savings in multiple mutual funds for different reasons such as income, growth, investing etc. Thereafter, you may need to re-balance your portfolio to ensure any rapidly growing segments of your portfolio do not skew your intended allocation.
In traditional financial markets, most of the available tax-deferred retirement accounts restrict diversification to only two classes — bonds and stocks. But, as much as diversification involves spreading the risk across different asset classes, this should extend beyond bonds and stocks to include real estate, cryptocurrency and precious metals, among others. Since cryptocurrency is a promising new asset class with exciting upside potential, it is worth considering as a retirement plan alternative for your diversified portfolios.
#2: Government Hedge
No government can directly control cryptocurrency. This is one of the reasons that has fueled its growth as an alternative currency. However, government regulations and policies do impact the bond market or Wall Street. In addition, central banks debase traditional currencies such as the U.S Dollar with evolving approaches to exchange and monetary policies. In contrast, digital assets like Bitcoin are immune to the effects of changing governmental directives. As such, we can consider cryptocurrency as an asset class capable of shifting in the opposite direction to dominant markets. This gives more credence to its diversification potential.
#3. Long-Term Growth Opportunities
Keep in mind that while cryptocurrency is proving to be an ideal long-term investment, it is also volatile. And just like any other volatile investment, what skyrockets today can plummet tomorrow and that can be bad for your health!
But do you know what other investments can be volatile? Stocks! That’s right. We all remember the Great Recession that happened from 2007–2009 where the U.S equities lost about 50% of their value in less than 18 months.
But we’re not talking about day-to-day transactions. Retirement planning is a long term horizon where individuals count on accruing tax deferred benefits for several decades in order to achieve a given milestone. It’s this long term view that got those who saved for retirement out of the muddy waters of the Great Recession.
Remember the lowest level for the Dow Jones Industrial Average during the crunch? It was at 6,547. Most notably, its highest level before the crash was at 14,164. A decade later, and the market has drastically risen over those points of the Great Recession.
Similarly, while the price of cryptocurrency and particularly Bitcoin is significantly low at the moment, it is obviously higher when compared to early 2017. I bet that anyone would be quite happy with the returns, with the coin price having increased beyond double from its value of about $2,000 in May 2017 to the current November 2018 prices of around $4,000.
#4. Cryptocurrency is Still Cheap
Is the current price tag of Bitcoin turning you away? Well, think again and remember even if Bitcoin’s not cheap, other cryptocurrencies are.
The most important question is not whether or not cryptocurrency is cheap, but will it have appreciated in value a decade later?
If you believe Bitcoin’s price will be in the range of $10,000, $100,000 or $1 million, then the coin is damn cheap today!
While you may not be that guy who spent $100 in 2010 and now has a net worth of $7.4 million, you can still take the advice provided by Wences Casare, PayPal board member that you “put 1 percent of your income into Bitcoin and forget about it for ten years.”
#5. Bitcoin Is Highly Resilient
Bitcoin is huge and the news of its death as highlighted in the 2013 smug LA Times article was premature, given that the coin is aging well.
While the Bitcoin market has faced some tumultuous times, like earlier in the decade when it lost about 70 per cent of its value overnight, the coin has recovered — along with other cryptocurrencies. Realistically, the thought of Bitcoin fading away is impossible as long as the concept of cryptocurrency still exists.
#6. Crypto Is Going Mainstream
You can use cryptocurrency on the online ecommerce marketplace, Overstock. Restaurants in Kenya and Silicon Valley will accept and give you a discount for using it. You can also buy your Sacramento Kings tickets with it.
Some of the biggest companies on the planet like Microsoft, Dell, Tesla and Virgin Galactic are accepting Bitcoin. And why not? Its price is likely to be more tomorrow than it is today.
BitPay, a global payment company is already working with over 125,000 merchants across the globe that accept Bitcoin as a medium of exchange. The company goes a notch higher to allow Bitcoin users to hold a Bitcoin Visa credit card which enables users to transact anywhere this Visa is accepted.
In essence, the fiction that “you can’t use Bitcoin to buy anything” is a fallacy, not a fact. Of course, We don’t expect you to hit your grocery store with it now, but you might be interested in knowing that a guy purchased a house with Bitcoin and made a $1.3 million return on the deal.
#7. Supporting Technology
The world of technology is evolving so rapidly and its successful integration into crypto and retirement portfolios will depend on how fast its functionality will allow holders to quickly and smoothly trade coins and exchange cryptocurrency for fiat currency or non-tokenized assets in their portfolios, while ensuring complete automation, transparency and record-keeping. This will reduce the need for having “middlemen” that drive up charges and cost layers.
The maturation of technologies that support trading in crypto is poised to increase its value, while pushing it into becoming mainstream.
Ideally, the emergence of more retirement platforms that support the technological characteristics of cryptocurrency exchange and portfolio integration have the power to increase crypto gains for the early adopters.
One example of a supporting retirement platform is Dacxi, an innovative platform that empowers new customers looking to hold on to their assets for the long-term. The company’s Dacxi Bundle is a first-of-its kind, combining the major coins by market capitalisation with an emerging coin with rapid growth potential. Ultimately, this helps new customers to spread their risk across four crypto assets automatically and at zero transaction fees!
Tokens or bundles purchased by users are kept safely in 2FA, secure wallets. Users are able to rebalance amounts and adjust their portfolio as they choose.
Take The Plunge
So, why be a statistic among people whose biggest regret is not saving enough for retirement?
How much do you plan to spend when you finally take the plunge? The answer to this question is — as much you can afford. Only you know your own risk tolerance and capability to save or spend.