A retirement investment portfolio should include a diverse mix of assets in order to reduce your risk. But should cryptocurrency be one of them? Before you buy any cryptocurrencies as a retirement investment, there are a few things to consider.
Not all retirement accounts allow cryptocurrency investing
The first main obstacle that you’re likely to encounter is that you might not be able to add cryptocurrency to your retirement investment portfolio. If you’re using a workplace 401(k), chances are that you’re limited to investing in pre-selected funds, and cryptocurrencies won’t be among the assets you can invest in.
If you’re using a self-directed 401(k), you can choose to invest in crypto if you want. You can also opt to open a traditional or Roth IRA with a brokerage firm that allows you to invest in cryptocurrencies. And some platforms that specialize in cryptocurrencies allow users to open an IRA as well.
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But neither Roth nor traditional IRAs provide an employer match, as most 401(k)s do. And there are income limits for who can take advantage of these accounts that don’t apply to 401(k)s.
So if you’re considering making crypto part of your retirement portfolio, you’ll first need to address these logistical issues to see if it’s possible to do so.
Cryptocurrencies are a volatile, risky investment
Even if you can invest in crypto for retirement, that doesn’t necessarily mean you should. Cryptocurrencies are known for their volatility, with even some of the more-established coins seeing wild swings in performance. Many also don’t have a lot of real-world utility as currencies, and their value is highly speculative.
When you’re investing for retirement, chances are good that this is money you can’t really afford to lose. You can’t live on Social Security alone because it’s insufficient to cover the necessities, so supplemental income from your nest egg will be needed.
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