Should Crypto Be Part of Your Retirement Portfolio?

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.

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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.

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.

Many people struggle to build savings that replace enough of their income to maintain their standard of living in retirement. Putting some of the money you hope to use for your later years into a high-risk investment could make achieving your savings goals even more challenging.

On the flip side, some cryptocurrencies could have a lot of upside potential, and there's a chance you could earn much higher returns on these assets than with some of the more-traditional retirement investments. But the price of the potential for higher returns is that you're also risking big losses that could leave you with too little in the end.

To help you decide if you should include cryptocurrencies in your retirement portfolio, consider what would happen if the value of your digital coins went to $0, which is not out of the realm of possibility. If you wouldn't have enough money left as a retiree, then you can't afford to take that chance, and you need safer investments.

But if you are already investing in lots of lower-risk assets, you're on track to hit your retirement goals, and you have some extra money you can invest in cryptocurrencies without jeopardizing your retirement, then you might just decide it's worth it for the potential returns that crypto could provide.

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