Updated: Apr 1
As cryptocurrency prices once again continue to soar and with Tesla investing billions into Bitcoin, many are considering whether cryptocurrencies may be suitable assets to use as part of a personal pension fund. Cryptocurrency investments are sometimes seen as controversial due to their price volatility and so including them as part of a pension may be a challenging prospect for some – however, the potential benefits are not to be ignored.
With more and more people choosing to take control of their own retirement funds through the use of a self directed IRA (Individual Retirement Account), inevitably people are curious as to how to include cryptocurrencies as part of their strategy. The motives for choosing to have a direct say in retirement investment funds include a lack of trust in traditional fund management strategies and a growing awareness of the underfunding of various pensions schemes, particularly those for public service workers – plus, of course, the dramatic gains being made in many cryptocurrency projects.
While the price volatility of cryptocurrencies has been held up by some as a reason to avoid them over the years, the reality remains that the price of Bitcoin continues to hit new all time highs. The long term rate of return from cryptocurrency investments can be staggering – often outstripping stock exchange performance – but picking the right tokens to invest in is critical to long term success.
Cryptocurrencies are going mainstream
Though it may be surprising to some, various pension funds already invest in diversified assets such as cryptocurrencies. There are therefore many people who think that cryptocurrencies are risky investments but whose own pension fund includes investments in those same cryptocurrencies! Many fund managers understand the potential gains and how to manage the risk effectively, so choose to manage cryptocurrency investments in ways that bring great results over the long term.
Numerous public companies now hold cryptocurrencies worth hundreds of billions of US Dollars and ultimately this has forced a wide variety of investment groups to rethink their involvement with cryptocurrencies as a whole. We are very likely to see a gradual increase in the use of crypto tokens within retirement strategies as time goes on, especially among the recent generations of people for whom blockchains are a normal part of daily life.
Bitcoin and various other crypto tokens have so far proven to be a reliable store of wealth and the plethora of next generation cryptocurrencies promise to revolutionise finance on a scale perhaps only matched by the way that the internet itself revolutionised the entire world. We may be on the cusp of an unprecedented and major transformation of wealth itself on Earth, meaning that neither individuals or any major organisation can afford to avoid the subject for long.
Boosting retirement funds with cryptocurrencies
Several strategies currently exist for utilising crypto as part of a retirement fund, including:
Fully self managed: The most straightforward and potentially risky approach is to simply take a percentage of your income (or other sources of funds to be used for retirement) and to purchase the cryptocurrency tokens directly – holding them in a secure digital wallet. While this ensures minimal costs and high privacy, this approach requires substantial technical and financial knowledge to do fully safely and carries the full risk that comes with the price volatility that cryptocurrencies are known for while they lack the full support of global economies.
Diversified IRAs: Some IRA pension options include cryptocurrencies among their investments, enabling access to the potential gains without the need for the pension holder to be involved in the fine details. Various approaches to these accounts exist, ranging from purely online services through to the more traditional accounts operated by institutions.
Next Generation Cryptocurrencies: A small number of exciting new projects promise to transform the pension landscape through the use of blockchain based cryptocurrencies. Ambitious moves are being made to upgrade and replace the entire traditional pension system with digital systems that bring greater transparency and potentially greater rewards. Two interesting examples of this are the public service oriented token, SVCS, at GivingToServices and the more general pension platform available at Akropolis. These projects aim to bring the full power of cryptocurrencies and specialist tools to savvy savers while also connecting them to the beneficial input from expert fund managers too.
Specialist help for public services retirement funds
Public service workers are being particularly hardly hit by underfunding of their retirement for a variety of reasons. A huge number of people globally face uncertainty when it comes to their own retirements, despite them working diligently for their country their whole lives. In the past, a government run pension fund was often considered to be a solid and reliable prospect, but a combination of poor management decisions, changing demographics and unexpected events has changed this drastically.
At present, public service pension schemes several major global regions are underfunded by as much as 33%, meaning that workers face the very real prospect of not receiving their full pension and having to work to ever higher ages before retirement is possible. The SVCS cryptocurrency token is specifically being developed to meet society’s needs in the face of this potentially huge threat. While centralised government pensions face an unstable future, SVCS offers the possibility of using decentralised technology to help fix the pension crisis.
While SVCS is still in it’s early stages, it aims to both provide a reliable way for public service workers to invest in cryptocurrencies for their retirement and to also empower the services themselves through channelling some of the gains from adoption of the tokens directly into those services. This means that SVCS token holders will both be able to directly benefit financially as the token grows but will also be able to directly support public services too – so everyone wins!
Bitcoin is often called ‘Digital Gold’ because it’s finite supply ensures it’s value is retained, rather than being diluted via inflation. SVCS tokens are also limited to a finite supply, conferring similar benefits for SVCS holders as Bitcoin holders receive in this regard. The team at GivingToServices.com plan on releasing their first pension services in 2022, but in the meantime you can pick up SVCS tokens on several exchanges and store them in standard Ethereum wallets, the huge potential gains for early adopters makes this a token to keep your eye on.
Disclaimer: This blog is provided for informational purposes only and is not providing or intending to provide financial advice. All readers are advised to do their own research when deciding where to invest and to take independent financial advice from a professional concerning investment decisions.