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Published: Jan 21, 2022 5 min read

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Collage of three millennials using their smart phones with cryptocurrency coins in the background
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Cryptocurrencies like Bitcoin and Ether are making their way into young investors’ retirement plans.

According to a recent survey by Capitalize, an IRA rollover service, 56% of Gen Z adults (18+) and 54% of millennials say they are including cryptocurrency or NFTs as part of their retirement strategy. That’s compared to only 20% of Gen X and 14% of baby boomer survey respondents who said they are investing in crypto to help them save for retirement.

(How reliable is this survey data? Capitalize noted that respondents were gathered through the Amazon Mechanical Turk survey platform, and that their answers were "self-reported and are subject to issues, such as exaggeration, recency bias, and telescoping." For the sake of 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 the personal loan company Stilt, more than 94% of people who own crypto were millennials or members of Gen Z. Moreover, 59% of Gen Z and 46% of millennials believe they can become millionaires by investing in cryptocurrencies, according to a survey by the research company Engine Insights.

Younger people also have a lot more time to wait before they're going to retire. As a result, they presumably can take on more risk with their investment strategies. This may be another reason why crypto is more popular among younger investors' retirement saving plans.

But considering its volatility, is it safe to devote any portion of your retirement portfolio to crypto?

Risks of investing in crypto for retirement

Tales about people cashing in big after investing in crypto are all over social media. But it’s important to note these success stories cover but a sliver of the population. Many investors lose money chasing easy profits in the immensely 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 climbed to $1. In November 2021, its price breached the $68,000 mark. But in January 2022, the price of Bitcoin is closer to $42,000. Some are predicting that Bitcoin will hit $100,000 in the near future, but no one really knows where prices are heading.

By contrast, the stock market hasn’t been nearly as volatile — and traditionally has climbed upward for investors over the long haul. Between 2000 and 2019, the S&P 500’s annual return was an average of about 8.87%. Between 2010 and 2020, the S&P 500 delivered an average annual return of 13.6%. More recently, the S&P rose 100% from the time stocks bottomed out in March 2020 to August 2021.

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

If you’re ready to invest in crypto for retirement, bear in mind that most companies limit 401(k) account options to a menu of investments that typically doesn’t include cryptocurrency. However, you may be able to open a self-directed IRA that provides access to crypto. 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 provide the same tax benefits as IRAs, but some let you 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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