Are You Considering Cryptocurrencies as a Part of your Retirement Strategy?

The viability of cryptocurrency as an investment towards retirement planning

cryptocurrencies in retirement strategies

The jury is divided on the choice of cryptocurrencies as a form of investment. The wildly volatile pattern of cryptocurrency prices makes it a speculative investment, which is not the hallmark of a prudent retirement strategy. At the same time, one cannot ignore its increasing acceptance in the financial market. Retirement is something that is a long way in the future, and cryptocurrency may have an increased significance by then. Or at least that’s what many investors think these days.

Retirement Strategy

Typical retirement planning is to save and invest a portion of your income so that you build a retirement corpus. The money you will be using to sustain yourself and your family is what you are earning today. So, wealth protection is a precondition for the best investment options in retirement strategy.

Retirement strategy is built based on investments made in debt and equity instruments. For a conservative investor, the weightage of investment will be higher in debt instruments. These are safe investments, often backed by a sovereign guarantee and provide a steady return. Equity investments are market-linked and therefore, prone to market ups and downs. However, in the long run, equity investments demonstrate high returns, mostly better than risk-free debt investments.

The Nature of Cryptocurrencies

Cryptocurrencies are digital currencies that run on blockchain technology. There’s a limit to which cryptocurrencies can be mined, thus making it a scarce commodity. Their demand in the crypto market is the primary factor that moves its value, as it is not backed by any underlying assets. Unlike, for instance, the stock of a company is backed by factories, products, customers and revenue that contribute to its profit.

While governments and central banks have been skeptical about cryptocurrency initially, the chances of banning them are receding gradually. Increased acceptance of cryptocurrency on a global scale has helped it to establish itself as an asset class. In last year’s union budget, the Indian government indicated that it plans to launch its official digital currency. It also pronounced the tax regulations on virtual digital assets including cryptocurrencies and non-fungible tokens (NFTs), thus giving them legitimacy as well.

Also Read: Should you adopt a systemic way to invest cryptocurrency

Cryptocurrency in Retirement Strategy

A small portion of your investment can be made in cryptocurrencies. It is still early days to draw a pattern, but cryptocurrency news and price graph indicate that it manages to bounce back after every price fall. Cryptocurrencies are likely to remain stable when the investment is held for the long term. Besides, global investment firms are including cryptocurrencies in retirement portfolios. Such institutional acceptance can decrease the risk factor often associated with cryptocurrencies. 

  • For retirement planning, investment in cryptocurrencies should be made in leading currencies like Bitcoin and Ethereum which have a significant market capitalisation. 
  • While investing in cryptocurrency for retirement purposes, you must have the funds to hold the asset for the long run. 
  • Do note that cryptocurrencies attract an income tax of 30% without the benefits of deductions and exemptions.

Also Read: Are cryptocurrencies right investment choice the retirement things you need know

Over 50% of Gen Z and millennial individuals in the US are including cryptocurrencies and NFTs as a part of their individual retirement account (IRA), as per a Capitalize survey. Incidentally, these are the two generations who hold the bulk of crypto investments. The demand for crypto among future generations is a positive sign for the future of an asset that is largely driven by market demand. 

However, in deciding your retirement strategy, consider your risk appetite, fund availability and investment tenure before an investment in cryptocurrencies.

Also Read: How to choose the best cryptocurrency investment

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

The jury is divided on the choice of cryptocurrencies as a form of investment. The wildly volatile pattern of cryptocurrency prices makes it a speculative investment, which is not the hallmark of a prudent retirement strategy. At the same time, one cannot ignore its increasing acceptance in the financial market. Retirement is something that is a long way in the future, and cryptocurrency may have an increased significance by then. Or at least that’s what many investors think these days.

Retirement Strategy

Typical retirement planning is to save and invest a portion of your income so that you build a retirement corpus. The money you will be using to sustain yourself and your family is what you are earning today. So, wealth protection is a precondition for the best investment options in retirement strategy.

Retirement strategy is built based on investments made in debt and equity instruments. For a conservative investor, the weightage of investment will be higher in debt instruments. These are safe investments, often backed by a sovereign guarantee and provide a steady return. Equity investments are market-linked and therefore, prone to market ups and downs. However, in the long run, equity investments demonstrate high returns, mostly better than risk-free debt investments.

The Nature of Cryptocurrencies

Cryptocurrencies are digital currencies that run on blockchain technology. There’s a limit to which cryptocurrencies can be mined, thus making it a scarce commodity. Their demand in the crypto market is the primary factor that moves its value, as it is not backed by any underlying assets. Unlike, for instance, the stock of a company is backed by factories, products, customers and revenue that contribute to its profit.

While governments and central banks have been skeptical about cryptocurrency initially, the chances of banning them are receding gradually. Increased acceptance of cryptocurrency on a global scale has helped it to establish itself as an asset class. In last year’s union budget, the Indian government indicated that it plans to launch its official digital currency. It also pronounced the tax regulations on virtual digital assets including cryptocurrencies and non-fungible tokens (NFTs), thus giving them legitimacy as well.

Also Read: Should you adopt a systemic way to invest cryptocurrency

Cryptocurrency in Retirement Strategy

A small portion of your investment can be made in cryptocurrencies. It is still early days to draw a pattern, but cryptocurrency news and price graph indicate that it manages to bounce back after every price fall. Cryptocurrencies are likely to remain stable when the investment is held for the long term. Besides, global investment firms are including cryptocurrencies in retirement portfolios. Such institutional acceptance can decrease the risk factor often associated with cryptocurrencies. 

  • For retirement planning, investment in cryptocurrencies should be made in leading currencies like Bitcoin and Ethereum which have a significant market capitalisation. 
  • While investing in cryptocurrency for retirement purposes, you must have the funds to hold the asset for the long run. 
  • Do note that cryptocurrencies attract an income tax of 30% without the benefits of deductions and exemptions.

Also Read: Are cryptocurrencies right investment choice the retirement things you need know

Over 50% of Gen Z and millennial individuals in the US are including cryptocurrencies and NFTs as a part of their individual retirement account (IRA), as per a Capitalize survey. Incidentally, these are the two generations who hold the bulk of crypto investments. The demand for crypto among future generations is a positive sign for the future of an asset that is largely driven by market demand. 

However, in deciding your retirement strategy, consider your risk appetite, fund availability and investment tenure before an investment in cryptocurrencies.

Also Read: How to choose the best cryptocurrency investment

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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