Cryptocurrency has become a hot topic and investment trend in recent years. It might have started as a niche product and area of interest for a small number of fans and evangelists but is now invested in and owned by millions of people at every level.
Given its place in the financial markets, many people wonder if they should invest in crypto as part of their retirement savings plan. We have put together this comprehensive guide to help you better understand the opportunity and the associated risks.
Invest in over 30 cryptocurrencies from your checking account with no trading fees with the Current mobile app crypto feature.
Titan is an investment platform with a team of experts actively managing your portfolio based on your chosen strategy, including cryptocurrencies.
Alto IRA allows you to invest in stocks, bonds, mutual funds, ETFs, real estate, cryptocurrencies, and even gold for your retirement.
Planning for Your Retirement
Before we explain crypto in more depth and the investment opportunities, let’s first discuss the importance of retirement planning.
To have a comfortable and fulfilling retirement, it’s essential that you make a plan and then implement it—the sooner in your working life, the better!
Plan your Timetable
The best place to start when planning your retirement is to decide on your specific retirement goals. Once you’ve set some goals, you’ll know where you’re heading, so you can then work out how you’ll get there and how long you have to reach your goals. For example, if you’re 30 years old, you might plan to retire at age 65. This means you have 35 years to save and invest to reach this goal.
On the other hand, if you’re 50 years old and want to retire at 60, you only have 10 years left to save and invest, so you need to have a different strategy. The longer you have between today and when you want to retire, the greater the risks you can take when determining your investment strategy.
Know Your Retirement Needs
When determining specific investment strategies for your retirement, you need to decide how much money you want to have available when you give up working. Of course, the exact amount is going to be different for everybody. It depends on lots of factors like, for example, if you own your own home, if you’re married or single, the maintenance costs of your house, how much money you want to have for entertainment and travel, and so on.
Most retirement experts recommend you aim to have between 70% and 80% of your income at the time of retirement. So, if you’re earning $100k per year, you should aim to have enough retirement savings and investments to generate $70k to $80k per year. Once you decide on a number, you need to work out a plan to ensure your savings and investments provide you with this amount.
Start Saving
Now that you have a plan, the next step is to start saving. Financial planners have lots of advice about the perfect percent of your income you should regularly save. These percentages range from as low as 10% to as high as 20%. The average rate is around 15%. If you started to save this percentage of your income in your early 20s, you’d end up with a sufficient level of funds for a comfortable retirement.
Invest Your Money
Once you start saving your money, you need to invest it to get the best returns and make your money work for you. A range of investment vehicles is available to put your money into. Here are some of the most common:
- High-yield savings account. These savings accounts pay a higher interest level than standard savings accounts. When you regularly contribute to a high-yield savings account, you enjoy the benefits of compound interest.
- Traditional Individual Retirement Account (Traditional IRA). When you contribute money into a Traditional IRA, it’s tax-deductible, and you only pay tax when you withdraw money from it.
- Roth IRA. Contributions to a Roth IRA are made with after-tax income, so you don’t pay any tax when you withdraw money from it.
- Simple IRA. These are designed for small businesses. They allow employers and employees to make contributions to the IRA without costly administrative fees.
- Traditional 401(k) plans. These allow employees to make contributions from their before-tax income. You only pay tax when you withdraw from a Traditional 401(k).
- Roth 401(k). These allow employees to make contributions from their after-tax income. You don’t pay any tax when you make withdrawals from your Roth 401(k).
- Crypto IRA. These allow you to invest in crypto assets and access many tax benefits. This helps you receive higher returns over the long term due to reducing your tax obligations.
Invest in over 30 cryptocurrencies from your checking account with no trading fees with the Current mobile app crypto feature.
Titan is an investment platform with a team of experts actively managing your portfolio based on your chosen strategy, including cryptocurrencies.
Alto IRA allows you to invest in stocks, bonds, mutual funds, ETFs, real estate, cryptocurrencies, and even gold for your retirement.
What is Cryptocurrency?
Cryptocurrency is a digital store of value that can be used to make a financial transaction or buy as an investment for a potential future return. The most famous cryptocurrencies are Bitcoin and Ethereum. Cryptocurrencies run on what is known as a blockchain, which is a public ledger that records all transactions made between individuals. Blockchains are very difficult to hack or alter as they’re distributed and duplicated across the network.
Investing in Cryptocurrency For Retirement
Cryptocurrency started as a project used and promoted by a few internet users but is now considered by most investors to be a legitimate and growing part of the finance industry. If you’re looking to add crypto as part of your retirement plan, many financial products and tools from credible financial institutions are available that you can use.
Before investing in crypto, you must be aware of the risks. The main risk is the volatile nature of crypto assets. It’s not uncommon for cryptocurrencies to go up and down in double-digit percentages in a short period of time. However, this risk is reduced if you’re investing for the long term. Most financial advisors recommend only putting a small amount of your savings and investments into crypto due to the risks.
What is a Crypto IRA?
Most 401(k)s and IRAs don’t give investors access to crypto assets to invest in. This is where specialist Crypto IRAs come in. They allow you to invest in high-growth crypto assets and gain access to the many tax benefits. In addition, reducing your tax liabilities gives you higher yields over the long term.
How Does a Crypto IRA Work?
A crypto IRA works similarly to other IRAs, but instead of investing in more traditional assets, they’re used to invest in cryptocurrencies. Crypto IRAs also store your crypto assets in a dedicated digital wallet and can be used to gain significant tax benefits.
Advantages of Crypto IRAs
- Diversification. Investing a portion of your investment savings through a Crypto IRA gives you exposure to high-growth crypto assets as part of a diversified investment plan.
- Potential for higher returns. Cryptocurrencies have the potential to increase in value over the long term significantly. If you have a Crypto IRA, you can take advantage of this.
- Tax advantages. Having a Crypto IRA means lowering your tax obligations. The IRS considers crypto as property, subject to capital gains taxes. By putting your crypto investments into a Crypto IRA, you can defer paying taxes until you make withdrawals.
