Crypto for Retirement: Is It Reliable?
Bitcoin and Ether are making their way into the retirement plans of young investors. Read to know if crypto is a good retirement investment.
A recent survey by Capitalize, an IRA rollover service, found that 56% of Gen Z adults (18+) and 54% of millennials say they are using cryptocurrency or non-fiat tokens (NFTs) as part of their plan for retirement. Only 20% of Gen Xers and 14% of baby boomers in the survey said they invest in cryptocurrency to help them save for retirement.
How good are these survey results?
Capitalize said that respondents were found through the Amazon Mechanical Turk survey platform and that their answers were “self-reported and could have problems like exaggeration, recency bias, and telescoping.” For comparison, a Pipslay survey from May 2021 found that 49% of millennials and only 13% of Gen Z own cryptocurrencies.
Younger people are more likely to be comfortable betting on cryptocurrency in general, not just as a way to save for retirement. In a study done by the personal loan company Stilt in 2021, more than 94% of crypto owners were either millennials or members of Generation Z. A survey by the research company Engine Insights shows that 59% of Gen Z and 46% of millennials think they can become millionaires by investing in cryptocurrencies.
Also, younger people have a long way to go before they can retire. Because of this, it’s likely that their investment strategies can be more risky. This could be another reason why crypto is becoming more popular in the retirement savings plans of younger people.
Risks of putting your retirement money into crypto
There are lots of stories on social media about people who invested in crypto and made a lot of money from it. But it’s important to keep in mind that these success stories don’t apply to everyone. Many investors lose money trying to make quick money in the crypto world, which is a very volatile place.
Let’s look at Bitcoin, which is the most well-known digital currency right now. When it was first made available in 2008, Bitcoin was worth less than a penny. It went up to $1 in April 2011. Its price went over $68,000 in November 2021. But the price of Bitcoin is closer to $42,000 in January 2022. Some people think that Bitcoin will hit $100,000 in the near future, but no one really knows where prices are going.
On the other hand, the stock market hasn’t been nearly as volatile and has usually gone up over time for investors. Between 2000 and 2019, the average return on the S&P 500 was 8.87% per year. Between 2010 and 2020, the average return on the S&P 500 was 13.6% per year. Recently, the S&P went up 100% from March 2020, when stocks were at their lowest point, to August 2021.
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