Cryptocurrency is no longer a fad investment for young investors. A recent survey conducted by digital asset IRA technology platform Bitcoin IRA found that more than three-quarters (76%) of its clients are over the age of 45, and 31% of near-retirees between ages 55 and 64 are invested in cryptocurrencies.
But is this a wise investment for near-retirees? GOBankingRates spoke with Chris Kline, COO and co-founder of Bitcoin IRA, about the possible risks and rewards for this age group.
Why Crypto Appeals To Older Investors
There are several reasons why investors and their 50s and 60s are actively investing in cryptocurrencies.
“Some of them see it as the future of finance, and that’s more so today than a few years ago when we started this,” Kline said. “Others have thought about long-term planning, and for them, there is concern about inflation and currency health. And then also there’s a group that just is [aiming for] speculative gains. Bitcoin has outperformed every asset class for the last five years, and as investors, they’re looking at their portfolios and saying, ‘Well, I could use a little bit of that.'”
How Investing in Crypto Can Pay Off in Retirement
One reason that investing in crypto in today’s economy can pay off is that it’s not affected by inflation in the same way that cash is.
“We’ve been adding money into the system to keep our economy healthy, and now we’re beginning to see the impacts of that, which is inflation,” Kline said. “Prices are going up across the board, and if we don’t manage that well, it can get out of control very quickly. So folks have been looking at alternatives. Bitcoin is an alternative to U.S. dollar assets that people want to have as a piece of their portfolio.”
It’s also a good way to add diversification to your retirement savings portfolio, Kline said. He recommends that every investor have some percentage of their portfolio in crypto — even if it’s just a tiny percentage.
“Having zero exposure to cryptocurrencies and digital currencies as this robust evolution is happening is probably not good for anybody,” he said. “I think having the exposure in one way or another, even if it’s just the tiniest little bit — going to Coinbase and buying a little bit of Bitcoin — and experiencing it and understanding it is important.”
Why Investing in Crypto May Be Too Risky for Near-Retirees
On the flip side of the coin, investing in crypto may not always be the best investment for those who are nearing retirement.
“Volatility is paramount — that’s the number one [risk],” Kline said. “Prices [for Bitcoin] have been $45,000, $65,000, $35,000 in just the last year. So it moves a lot. So if you’re in a stage in your retirement where you’re taking out your monthly cost of living, etc., having all of [your retirement savings] in Bitcoin is probably a dangerous thing. But most people in this age demographic aren’t doing everything in Bitcoin. They’re doing something between 5% and 25% of their retirement.”
Security is also a risk factor when it comes to crypto, so it’s important to use a secure platform.
“Finding a good platform that keeps it safe, insured and under security standards is important,” Kline said. “Having it sitting on a ledger wallet, for example, in your safety deposit box, and not telling your kids or your wife or husband about it, and then you die, and nobody knows what’s on there, they could think that maybe it’s just a flash drive and toss it into a box forever, or throw it away — even worse. Now what you’ve saved up to give to them in your passing has been lost. So DIY is a little bit more difficult.”
Kline also notes that crypto may not be a good investment for those who are already in their later years of retirement.
“Five years ago, someone would have said that crypto is a fad — they called it Beanie Babies,” he said. “This is a different time, and what is driving this is that it is a different way of looking at finance — but if you’re in the later stages of your retirement, you may not be around to see it all come to fruition.”
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