Cryptocurrencies and digital assets like NFTs have been dominating headlines lately. In March 2021, Christie’s sold a $69.34 million NFT-based art piece. According to analysts, the total market value of crypto assets was almost equal to gold in May of that same year.
In light of these relatively new assets’ meteoric rise, should you consider incorporating them into your retirement plan? In an interview with GOBankingRates, Rob Stevens, TIAA retirement income specialist, discussed if you should or should not include these digital assets into your retirement plan.
Cryptocurrency Is Too Speculative to Bank Your Retirement On
You should give it a second thought before adding Bitcoin or Ethereum as part of your retirement plan. Investing is usually driven by one goal: which is to replace a portion of one’s paycheck when one retires. Thus, it’s your ‘serious’ cash rather than your speculation money,” Stevens said.
Investing in cryptocurrency is more of a speculative endeavor than a means of covering liabilities and expenses in retirement. Cryptocurrencies are extremely volatile, as Stevens points out. “For instance, bitcoin prices went from $1,000 to $17,000 between 2017 and 2019, and then to $3,000,” he said.
As a result of negative social media comments made by celebrities and a potential crypto ban by China, Bitcoin’s price declined by over 50% in April. The value of one specific cryptocurrency decreased overnight, after one skit on late-night television. Since cryptocurrencies are speculative, financial analysts may not be capable of modeling their risk and performance.
Nevertheless, retirement investment possesses some volatility but they should be able to be tracked and modeled. Compared to the overall market, the volatility of a large-cap stock fund, for example, maybe lower. According to Stevens, a large-cap stock fund’s long-term performance depends on factors that can be tracked, like cash flow from earnings per share and operations. Cryptocurrencies should not be part of your retirement plan if that’s what you’re looking at because of their volatility, so only invest what you can afford to lose.
Participants who choose to purchase cryptocurrencies should know that they are speculative and should use funds not meant for their retirements, such as bonus money, or funds designated for hobbies or trips,” Stevens said.
Make you of this opportunity from Bitcoin Revolution and know more about Cryptocurrency. Get all the relevant information you need when you visit us.
NFTs Are Also Too Speculative for Your Retirement Plan
Stevens said, “Non-fungible tokens (NFTs) can be profitable depending on the eye of the beholder, just like artwork.” “You can never tell if a video or picture of a famous athlete or actor will rise more in value than what you paid for it in the future.” Taking into account the unpredictable future value of NFTs, you should not buy one thinking that you can retire from its earnings someday.
“NFTs are speculative, like cryptocurrencies, and so they shouldn’t be considered part of a retirement portfolio for most plan participants,” Stevens said. “It might be better to treat buying NFTs like buying baseball cards or stamps as a hobby. Instead of investing retirement funds into an NFT, use the money for a hobby.
Planning To Retire on Income from Crypto or NFTs Is Extremely Risky
These digital assets should not be used to plan retirement, not even for the most risk-tolerant investor. Cryptocurrencies especially carry several risks. Stevens says there are very few businesses accepting cryptocurrencies as payment in addition to the volatility and lack of a long-term track record.
If the only way to exchange these cryptocurrencies for goods and services is to exchange them for another currency, such as the dollar, it may make them illiquid.
It’s likely that some cryptocurrencies now available will be outdated when you retire. If you have NFTs during your pre-retirement years, their value may fluctuate greatly, putting your retirement at risk.
None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.