Here’s a trend that should strike fear into the heart of anyone with retired parents or who is staring down the barrel of retirement themselves: cryptocurrencies are showing up in retirement accounts.
Why? Because the up and down market over the last 20+ years, coupled with flat earnings and rising prices, has left many Americans behind on their savings. Assets like Bitcoin — which is up more than 300% since May 2020 and 120% from the start of this year through April (more on that in a second) — look like a quick fix.
Need proof?
Bitcoin IRA says that more than half of its users are 55 and over and 75% are over 45.
A wild ride.
But those folks are taking a difficult path to retirement bliss. After hitting an all-time high near $65,000 per token in May, Bitcoin has dropped sharply and is currently hovering around the $30,000 range. But who knows where it will be tomorrow, given the ups and downs that crypto is known for.
Part of the reason for this is that trading volumes have dropped off in recent months after China announced plans to ban cryptocurrency trading while it works to roll out its own state-sponsored coin. Volumes at sites including Coinbase, Kraken, Binance and others fell 40% and more in June alone, a sign that interest is drying up.
When that happens, prices drop. And when prices drop, the already volatile crypto space becomes even more volatile.
Why are retirees getting into crypto?
Because they need the help.
According to PwC’s latest Retirement in America report, the median retirement savings for those between 45 to 55 is $82,600. That’s not great, nor is the $120,000 average balance for those in the 55 to 64 cohort that are about to retire.
Cryptocurrencies are hot and exciting right now, and the soaring returns that some coin investors have seen in recent years seem like a great way to make up for those boring old 401(k)s and IRAs that haven’t been doing so great. Who needs to scrape and save when you can turn $10,000 into $20 million just by buying the right token at the right time?
My take: Here’s the bad news: There is no magic bullet when it comes to retirement. Yes, we all wish we had bought into the crypto hype back in 2012 or so, but this asset class was just as risky and unproven then as it is now. Sure there is some upside, but any asset that’s only worth as much as someone else says it’s worth, as opposed to any underlying value, is by definition a very risky asset. Add to that the fact that major crypto traders (aka whales) own roughly 92% of all Bitcoin available on the market right now and you have a captive market that can do anything. Do you really want your retirement based on that?
