Why You Should Avoid Investing In Cryptocurrency In Retirement
Is Crypto a good investment for retirement? (Photo by Chesnot/Getty Images)
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Many people feel that investing in cryptocurrency is a way to increase their retirement savings, but it is not without risks. Cryptocurrency is a highly volatile asset class with prices that can fluctuate wildly in a short amount of time. This makes it a risky choice for those who are retired or nearing retirement and need to protect their savings. There are a few reasons why you should avoid investing in cryptocurrency in retirement, including the volatile nature of the asset, its lack of regulation, and the potential tax implications.
What is Cryptocurrency?
Cryptocurrency is a digital asset designed to function as a medium of exchange. It is used as a way of transferring value between two parties, digitally, without the use of a central authority, such as a bank or government. Cryptocurrency operates outside of the traditional banking system and can be used to purchase goods and services, or be held as an investment.
There are a large number of cryptocurrencies, with Bitcoin BTC and Ethereum ETH being the most well-known. Some people refer to cryptocurrency as “digital gold” because they see it as an alternative to holding physical gold. Like gold, cryptocurrency isn’t dependent on the health of any one economy and is seen as a store of value, with a finite and predictable supply. There are some important differences between cryptocurrency and gold, however. Unlike gold, crypto is not a physical asset, but rather exists as computer code. This makes it easy to store and transfer electronically.
Reasons to Avoid Investing in Cryptocurrency in Retirement
Cryptocurrency is a highly speculative investment, so it’s best to avoid it if you’re retired or nearing retirement. The risk of a sudden price drop can be detrimental to the financial security of your retirement savings. The volatility of cryptocurrency makes it an unsuitable investment for those who are approaching retirement.
The price of cryptocurrencies can fall rapidly, and this can have a disastrous impact on your retirement savings if you’re not prepared. The sudden fall in price could significantly reduce the value of your savings, which could have a devastating effect on your retirement plans. The risk of a sudden price drop can be detrimental to the financial security of your retirement savings. This volatility makes it an unsuitable investment for those who are approaching retirement.
Currently there is still a lack of regulation surrounding cryptocurrencies, which also makes this more speculative and something you should likely be cautious about when investing particularly if you are close to retirement. We saw entire industries bubble in the early and mid 2000s due to lack of regulations, and that same combination of speculation, lack of regulation and fear of mission out could spell disaster for your investments.
