Is crypto too risky for a retirement pension?

Much material is written about the perceived risks of including crypto in retirement pensions. Could crypto be a viable investment?

According to many mainstream media accounts, crypto is a “trendy” but also “risky” asset class to include in one’s retirement pension. Reasons given are the fact that it is not sufficiently tried and tested, that volatility is a massive factor, and that most investors just don’t understand the ‘risky nature of crypto’.

So having noted the concerns, how is crypto doing in pension funds so far?

A “retirement planning” article on Investopedia suggests that it is too early to tell. The article pointed out that even though Bitcoin has seen a mean annual return of 93.8% since its inception in 2009, in 2018 the return was -72.6%, and there have been some ups and downs since then.

Not all cryptocurrencies are suitable

Although the article does centre mostly on the potential for Bitcoin as a savings investment, it does mention the “thousands of cryptocurrencies” that could potentially be chosen from.

As interesting a proposition as it is, that from many cryptos one or two just might provide a huge amount of upside, the risks here are almost certainly not over-dramatised. 

Putting Bitcoin, or a select smattering of the top performing and more established cryptocurrencies into a portfolio is one thing, but investing into any of the smaller caps just really isn’t a good move for a long-term retirement pension.

Mainstream media focuses on crypto pensions

Be that as it may, it does not look like traditional pension funds are getting anywhere near the returns that would guarantee a proper pay-out for the retirement pensions of the future. 

Even taking into account the recent near collapse of UK pensions due to that country’s bond market fiasco, there doesn’t seem to be much in print across the mainstream media that is warning investors of the ever-more risky environment that their existing pensions are facing.

For some reason, most information appears to generally give warnings as to what might happen to investors exclusively in the case of crypto pensions.

The subject is also causing much vexation among certain members of Congress. For example, when Fidelity announced that it was going to enable clients to include Bitcoin in their 401K pensions, dire warnings of a “risky and speculative gamble” were made by such as Senator Elizabeth Warren.

It could be argued that precisely because of the precarious and dangerous situation that pension investments find themselves in today, the inclusion of Bitcoin may well help to offset some of the risk.

Yes, there is undoubted volatility here, but pensions are for the long haul and not the short or even medium term. Bitcoin is an asset that has outperformed all other assets over the last dozen years. There is no guarantee that this will continue, but given the failure of pensions to get anywhere near the return that is needed, it might not be a bad idea. Not investment advice.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.