Millennials and Gen Z are investing in crypto for their retirement

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Cryptocurrencies like Bitcoin and Ether are making their way into the retirement plans of young investors.

According to a recent survey by Capitalize, an IRA rolling service, 56% of Gen Z adults (18+) and 54% of millennials say they include cryptocurrency or NFTs in their retirement strategy. This compares to just 20% of Gen Xers and 14% of Baby Boomer survey respondents who said they invest in crypto to help them save for retirement.

(How reliable is this survey data? Capitalize noted that respondents were collected through the Amazon Mechanical Turk survey platform, and that their responses were “self-reported and subject to issues, such as exaggeration, recency bias and telescoping”. For comparison, a Pipslay survey from May 2021 reported that 49% of millennials and only 13% of Gen Z own cryptocurrencies.)

Beyond retirement strategies, younger people are more likely to be comfortable betting on cryptocurrency in general. In a 2021 study by personal loan company Stilt, over 94% of people who own crypto were millennials or members of Gen Z. Additionally, 59% of Gen Z and 46% of millennials believe that they can become millionaires by investing in cryptocurrencies according to a survey by research firm Engine Insights.

Young people also have much longer to wait before retiring. As a result, they are likely to take on more risk with their investment strategies. This may be another reason why crypto is more popular among younger investor retirement savings plans.

But given its volatility, is it safe to dedicate part of your retirement portfolio to crypto?

Risks of Investing in Crypto for Retirement

Stories of people cashing in big after investing in crypto are all over social media. But it is important to note that these successes only cover part of the population. Many investors lose money in search of easy profits in the extremely volatile environment that is the crypto world.

Let’s look at Bitcoin, the most popular cryptocurrency today. Bitcoin was launched in 2008 when it was worth less than a penny. In April 2011, it jumped to $1. In November 2021, its price crossed the $68,000 mark. But in January 2022, the Bitcoin price is closer to $42,000. Some predict that Bitcoin will hit $100,000 in the near future, but no one is quite sure where the prices are going.

In contrast, the stock market hasn’t been as volatile – and has traditionally spiked higher for long-term investors. Between 2000 and 2019, the annual return of the S&P 500 averaged around 8.87%. Between 2010 and 2020, the S&P 500 has had an average annual return of 13.6%. More recently, the S&P rose 100% between when stocks bottomed in March 2020 and August 2021.

That’s not to say cryptocurrency doesn’t deserve its place in a well-executed and diverse retirement strategy, especially because Social Security probably won’t fund your retirement on its own. But most experts suggest that you shouldn’t spend more than 5% of your net worth on high-risk investments like crypto.

If you’re ready to invest in crypto for your retirement, keep in mind that most companies limit 401(k) account options to a menu of investments that typically don’t include cryptocurrency. However, you may be able to open a self-directed IRA that provides access to crypto. More and more of these so-called crypto IRA providers have been popping up. Some examples include Bitcoin IRA, Rocket Dollar, and iTrust Capital.

These self-directed IRA accounts offer the same tax benefits as IRAs, but some allow you to incorporate cryptocurrencies like Bitcoin, Ethereum, and Dogecoin into your retirement strategy. You can also diversify your portfolio with stocks, bonds, ETFs, mutual funds and more.

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