Retirement planning with cryptocurrency: What you need to know.
The crypto rush is upon us! Everyone is looking into cryptocurrencies, choosing to buy Bitcoin as both an investment and a technological advancement. In many ways, cryptocurrency seems to be having a promising future, and that reflects in all areas of life.
One of those aspects is that of retirement. Is it possible to buy and store a small amount of crypto and enjoy a full-fledged retirement fund in a couple of decades? Read further to find out!
The scam of retirement plans
Most people don’t really understand how the concept of money works. In their eyes, as long as you keep paying a set percentage of your taxes you will be able to enjoy a work-free life after approximately 50 years of hard work. But let’s delve a little deeper to understand how the dynamics are really structured in order to make this work.
Inflation kills the value of your money
Governments and central banks lowball inflation rates, making it seem as if our current financial system is sustainable in the long term. But as time goes on we slowly realize that inflation rates are decreasing the value of your retirement money, creating an unequal distribution. Let’s assume that you are retiring this year. If you have been making retirement contributions over the past 50 years, you’re in for a serious loss over time. $100 contributed to your retirement plan 50 years ago are worth $691 today, but you’re likely to not even receive 10% of that amount during retirement. The same goes for the money you place in a savings account for retirement. Every year, inflation decreases the value of your money, making it unwise to let your money sit in the bank.
Negative interest rates are upon us
A few years ago the world went on an uproar when they slowly started seeing the interest rates of their savings account decrease to near-zero levels. Today, this is even worse. You literally have to pay a small amount each year to store your money in a savings account, on top of the inflation issue discussed above. Combined, this makes retirement savings accounts look like one big scam that you can’t escape from.
Why cryptocurrencies offer a better and cheaper alternative
There are many reasons for which you should consider cryptocurrencies instead of FIAT when it comes to your long-term retirement plans. Especially for those that are still in their 20’s, even a small amount of the right cryptocurrency can set you up for financial freedom later in life. Here’s why:
- Decentralization – There is no central authority that controls the issuance and distribution of money. Cryptocurrencies are stored in wallets which only you have access to, which means that only you can decide when and how you wish to spend it. On the contrary, retirement plans are distributed by governments and the amounts change towards the lower end for reasons you are not personally responsible for.
- Not affected by inflation – Most cryptocurrencies have a hard cap that can never be exceeded, unlike FIAT currencies that can be printed uncontrollably.
- Growth over time – Additionally, there are certain mechanisms that can actually cause deflation and increased scarcity as time goes by. The most popular example of this is the Bitcoin halving, which decreases mining rewards. As a result, the demand increases and so does the Bitcoin price. Adding to that, we often witness community growth for trending projects which further increases demand and distribution among more wallets.
- Passive income opportunities – Cryptocurrencies are not only growing in value steadily – they also offer passive income opportunities. This is especially true when it comes to high-interest savings accounts that payout in cryptocurrency, as well as staking plans on exchange platforms.
How to retire with the help of crypto
Strong cryptocurrencies with proven utility and growing demand are your best bets when creating your retirement plan. The coins you want to be investing in should be around in the next few decades, which is why it is best to structure your portfolio with fundamentals in mind. In our opinion, when planning for more than two decades in mind it is best to allocate your funds as follows:
- 70% Bitcoin
- 20% Ethereum
- 10% Native tokens of exchanges (BNB, FTT, etc.)
Note that this portfolio breakdown should not be taken as financial advice – it is simply the way that we would do it. Once the cryptocurrencies have been acquired, it is important to store them in a non-custodial wallet with high security and, preferably, an option to invest in an interest-bearing account. At an average of 5% annualized interest and with daily payouts, you could almost triple your crypto holdings within a 20-year timeframe. And that on top of the value your crypto will gain over time.