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should crypto be part of your retirement

Should Crypto Be Part of Your Retirement?

Cryptocurrencies have grown in popularity.  Their popularity has included waves of speculation and uncertainty, warranting careful consideration before viewing it as a viable retirement investment option. That is why we are answering the question: should crypto be part of your retirement?

Retirement Investment Planning: Whether to Play in Crypto or Stay Away. 

Cryptocurrency investing has exploded in popularity over the last 10 years.  Many of us have been sitting out this fad so far. It can feel tempting to jump into the risk-taking and reap what has been a large return for some .  But should it be part of your investment strategy for retirement?  The answer depends; however, most of us are likely not in a position to take on the kind of volatility and risk that comes with this type of speculation. 

Considerations for crypto part of your retirement 

Planning for retirement should consider a range of factors like your current savings, expected spending and target retirement age.   What then should be considered regarding crypto as a potential retirement investment?  Answer: a lot…….and carefully. 

Investment or Speculation? 

As investment advisors, we adhere to making investments in assets with strong intrinsic value. That includes a determinable book value, great fundamentals, and strong, quantifiable prospects for earnings growth.   We preferable purchase these assets at a discount or fair price, relative to its intrinsic value. Speculation then, is the purchase of assets which offer no clear value proposition along with very uncertain or unproven opportunities for growth. 

The value of a currency is tied, in part, to its ability to reliably store value over time while operating as a unit of exchange; meaning, the ability to trade it for a wide variety of goods and services.  What contributes to a currency’s reliability: accessibility, regulation, security and backing by the full faith and credit worthiness of their issuing government. 

Crypto currencies?  Today, their value is more dependent upon their restricted supply and a large pool of speculators wagering that there will be someone else willing to pay more in the future.  Their true worth or intrinsic value?  It is very difficult to say.  These digital currencies are currently highly unregulated making them much riskier.  If interested in exchanging your digital money for a good or service, you might find it difficult finding a merchant willing to accept it.  Want to sell your cryptocurrency?  You’ll have a limited number of exchanges to use. 

All of this makes cryptos much more speculative relative to other investment options. With speculation, comes extreme volatility and risk.  Introducing high levels of volatility and risk into an account designed to help fund something as important as your retirement, warrants careful consideration and thought. 


While it is possible to hold certain cryptocurrencies like Bitcoin in a 401(k), it is highly unlikely that you will be offered the option.  Why?  Employer-adopted 401(k) plans with employees are governed by fiduciary rules and responsibilities (called ERISA fiduciary rules).  These rules require that employer retirement plans like a 401(k) must provide a range of investment options while reasonably protecting their participants from large losses.  Given the volatility of cryptocurrencies, most employers shy away from the risk that they take on by offering a plan that has crypto as an investment option. 

All of that said though, 401(k) provider ForUsAll has collaborated with Coinbase (a digital currency exchange) to allow participants access to crypto assets.  However, plan participants can only hold up to a 5% allocation in cryptocurrencies. 

Currently, firms like Fidelity and Charles Schwab are not allowing customers to buy or sell cryptocurrencies in either taxable or IRA accounts.  However, clients can invest indirectly by purchasing shares in crypto trusts. Trusts such as the one offered by Grayscale Investments, LLC or a growing number of exchange traded funds (ETFs).  Be mindful though of not only the risks, but the often higher fees (expense ratios) associated with these investment vehicles. 


Digital currencies inherently carry much higher risks relative to other financial instruments such as stocks, bonds, and mutual funds.  Some of the bigger risks to consider before investing include: 

  • Regulation & Governance Risk – The United States has yet to develop a clear regulatory framework for cryptocurrencies.  Though likely to change, significant consumer risk comes with any asset that lacks proper regulation. 
  • Volatility – Bitcoin sold for $67,145 on November 10th.  Just over two months later one Bitcoin would cost you $37,114.  That is a decline of 44%. 
  • Security – Assets sit in your brokerage account protected by Securities Investor Protection Corporation (SIPC) insurance.  If your brokerage fails or commits fraud, you have some recourse to recoup your investment value up to a certain limit (SIPC protection does not insure against loss in market value).  This insurance coverage is nonexistent with crypto exchanges or trading accounts.  If the platform or exchange fails, you have no recourse. 

Need Alternative Investments to Manage Risk: Consider All Options 

Cryptos are often advertised as having low correlation to stocks and bonds.  Thee introduction of assets with low correlation to traditional investments can help reduce the overall risk of your portfolio.  This is a very good thing. However, this correlation is relatively unproven as cryptocurrencies have not been around for long. 

If you are looking for alternatives to add to your retirement account, you have many less risky, more “investment-like” options.  Consider adding asset classes like precious metals (gold, silver), and real-estate. Other commodities include energy (oil), agricultural products or industrial metals.  Many of these alternative investments have been around for a very long time. They offer more security, lower volatility, and more reliable performance. 

What If I Have a Retirement Shortfall? 

According to the Federal Reserve’s 2020 Report on the Economic Well-Being of U.S. Households, 75% of working U. S. adults have some level of retirement savings.  Meanwhile, only 36% say that they are “on track” for funding their retirement.   

It is understandable that those saving for retirement would be drawn to the potential outsized returns that cryptocurrencies can offer.  This is only compounded by our current environment of lower interest rates and growing inflation.  Just remember though, that an investment in crypto could wipe out years of savings just as easily as it could make up for shortages.  There are more viable options to funding retirement shortages: 

  • Delay retirement by a few years.  Not only are you adding additional years of earnings deferral into a retirement savings plan, but you’re also eliminating some years of having to drawn down your investment accounts.  That’s a double whammy. 
  • Work part-time.  Working part-time in your early years of retirement not only adds income to help cover expenses, but it also affords you the opportunity to delay your Social Security benefits for a higher monthly payout. 
  • Cut or delay discretionary expenses.  Reduce your required income draw in retirement by reducing your annual spending.   
  • A combination of the above options.   

Guidelines for Using Cryptocurrencies Investments for Retirement 

If you absolutely insist on have cryptos part of your retirement portfolio, we recommend the following be true for you: 

  • You have a long “runway” to retirement and expect to earn a high level of income allowing you to save more. 
  • If you are closer to retiring, you have a “fully funded” retirement where your expected income from invested assets, along with other sources (ie – social security, pensions, etc), will cover all living expenses. 
  • You limit your crypto allocation to the lesser of 3% of your total retirement assets or the most you can afford to lose.  This should help to limit the damage that any significant loss in value might cause. 
  • You are prepared to recoup, if necessary, any portfolios losses due to cryptocurrency volatility by making other sacrifices: work longer, cut retirement living expenses, etc. 

In the end, when it comes to incorporating cryptocurrencies into a retirement investment plan, the considerations depend on your unique situation.  There is much to consider.  As fiduciaries, we would be very hard pressed to make allocation recommendations to crypto, particularly for a soon-to-be retiree that obtains a marginally funded retirement.  If bent on investing in digital currency though, make sure you are aware of all risks and considerations. 

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