Experts Warn Investors on using Retirement Savings in Cryptocurrencies


Bitcoin is among the most popular cryptocurrency today. People across the globe seem to be enthralled by the benefits it appears to be offering at first glance. People are scrambling to make investments in Bitcoins. The cryptocurrency held a value of more than $1000 a coin in March of 2017. In December of the same year, it traded for $19,000 a coin. Currently, the Bitcoin is trading at $11,000 a coin.

Retirement savings in Bitcoin

People are foreseeing a big future for Bitcoin. Some even predict that in the year 2050, the Bitcoin is going to be well worth what it is now. A large fraction of the population is investing their retirement savings into Bitcoin for fear of losing out on benefits in the future. Since its opening in 2016, near to 4,500 people have signed up their retirement savings.

Although predictions are at an all-time high, investments in Bitcoin come with high fees and a huge amount of risk. Economist worries about how people are putting in a large fraction of their retirement savings into Bitcoin without properly calculating the risk in order to retire peacefully.

The lure of fast and big returns makes it appealing as each day passes. The benefits outweigh the risks at first glance, but the reality is something else.

What benefits does a traditional IRA have over cryptocurrency?

Investing retirement savings in cryptocurrencies proceeds with the use of a self-directed account. Investors can put almost anything into self-directed accounts including personal property. Custodians are assigned the responsibility of managing these self-directed accounts.

Since retirement savings in cryptocurrencies are only backed up by certain agencies, they charge heavy fees. The fees include the account fee, holding fee, transfer fee, and opening fee. Together, this amounts to a large sum every month.

On the other hand, the traditional retirement savings account do not come with additional fees and they offer better returns for the investor.

Moreover, the custodians managing the self-directed accounts do not have any responsibilities to the investor as such. In addition, you will also be required to hire another company to facilitate the purchase of Bitcoin. You are also liable to pay a liquidity fee each time you make a shift between cryptocurrencies and cash.

When you take a retirement account such as a Roth IRA, there is a benefit of tax-free withdrawal upon retirement. However, since virtual money is considered as property, your investments will be taxed each time you make a withdrawal.

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