Crypto and Your Retirement Savings: Should You Risk It?
Written by
John Csiszar
Edited by
Amber Barkley
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Cryptocurrency is one of the most hotly debated asset classes in the world. On one side, passionate advocates view it as the currency of the future, supplementing or even substituting money as we know it. On the other side, certain experts say that investing in cryptocurrency is a fool’s game — and that most, if not all, investors will eventually lose their money by investing in it.
But the first step in successful investing is to remove emotion from the equation. With that in mind, here’s an unbiased examination of the facts surrounding crypto and a look at whether or not it might be a suitable investment for your retirement savings.
What’s the Potential Upside to Investing In Cryptocurrency?
When cryptocurrencies like bitcoin are running, they can provide astounding returns.
In 2013, for example, bitcoin posted an eye-popping 5,189.37% return, followed up by an enormous 1,162.50% gain in 2017. Over the past 12 years, the crypto has had an average annual return of 105.1%, meaning on average, it has more than doubled every single year of the last 12.
Those types of returns dwarf those of the S&P 500, which has “only” gained 14.40% per year, or 431.68% in total.
What Are the Risks?
As with any asset class that has such a potentially extraordinary upside, the risk of loss when investing in crypto is also high.
According to a study by Coin Kickoff, more than 2,500 cryptos “died” from 2013 through 2022. This clearly shows that you risk losing all your money if you pick the wrong crypto.
Even industry leader bitcoin, which is by far the largest of all cryptos, has lost more than half its value during three calendar years: 2012, 2018 and 2022. In those years, bitcoin posted returns of -50.19%, -72.13% and -62.02%, respectively.
Do Any Reputable Financial Experts Support Investing In Crypto?
Suze Orman is probably the most well-known financial expert who supports investing in crypto. As Orman told CNBC, “Everybody should absolutely have exposure to bitcoin.”
But it’s worth noting that Orman doesn’t believe that crypto will change the world and become a new currency. Rather, she recommends investing in it solely for demographic reasons.
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According to Orman, “As younger people make more money and mature, [bitcoin] will be one of their investments of choice, and that will cause it to go up … because the younger generation has a fascination with it — and you see the energy — a whole lot of people having interest in it, eventually it could very well catch fire.”
Importantly, however, even Orman hedges her recommendation, saying, “But in case I’m wrong — and I’ve been wrong — you gotta be OK with losing that money. So put as much money in there as you’re OK losing.”
But Orman is not alone in being bullish. Investment firm Bernstein, for example, sees bitcoin reaching $200,000 by the end of 2025, as reported by Forbes, while bullish investor Cathie Wood of Ark Invest envisions a price of $3.8 million by 2030, according to Investor’s Business Daily.
Are Any Opposed?
The list of financial experts who say you should stay away from cryptocurrency is long and distinguished. Here’s what some of the most prominent have to say:
- Warren Buffett, CEO of Berkshire Hathaway, known as the “Oracle of Omaha” for his investing prowess: “If you told me you own all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it.” He has also referred to it as “rat poison squared” and called it “a gambling token [that] doesn’t have any intrinsic value.”
- Financial guru Dave Ramsey: “I wouldn’t wish bitcoin investments on somebody I really dislike.”
- Investment firm Charles Schwab: “There are some potential benefits that can make it attractive to some investors … However, there is still potential for financial loss as cryptocurrency prices have been highly volatile, and fluctuations could result in significant financial losses.”
- Investment manager Jim Rodgers: “Bitcoin will disappear and go to zero someday.”
So, Should You Invest Your Retirement Assets in Crypto?
You should never put all of your retirement money into a single investment, particularly a super-volatile one like cryptocurrency. But if you have a high risk tolerance and can handle the swings of crypto, some experts suggest you may consider an allocation of no more than 5%.
But as Suze Orman said, you should only invest money that you are willing to completely lose. Carefully analyze your investment objectives and risk tolerance and consider speaking with a financial advisor before you put any crypto into your retirement account.
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