Retirement savings can be challenging. As you reach retirement age, you want your nest egg to grow, so your life can be comfortable and stress-free.
Temptation To Invest For A High Return
Trendy investments, such as in Bitcoin and other forms of cryptocurrency, may seem like the way to go to crank up your Individual Retirement Account (IRA) balance in a jiffy. But, while younger savers can and should include some amount of risk in their retirement savings, Bitcoin may be too turbulent for any nest egg.
Bitcoin is extremely volatile. Its price famously exploded in December 2017, doubling overnight to near $20,000 per coin, only to spin down to around $6,000 in February 2018. It has bounced between that low point and $10,000 for most of 2018.
Bitcoin is Still in its Infancy as an Investment Vehicle
While IRAs can include Bitcoin, right now this can only be done through self-administered accounts. This means that in addition to its roller-coaster price exposure, an investor has to take on custodial duties to add Bitcoin to an IRA.
While working a little bit for the good of your retirement is not always a bad thing, self-administering your IRA can make your savings less efficient.
Self-Directed IRAs can be More Expensive
Time-honored sage investment advice is to diversify, stick to market index funds and minimize fees and costs. Bitcoin IRAs can throw a couple of wrenches into this plan. Its price does not follow market trends, and in a self-directed account, fees will likely be higher.
There are, however, some potential benefits of investing in Bitcoin. Volatility means a possibility of a massive price spike, that might coincide with cashing out your IRA or conversion of the coins into another investment.
But, again, some advisors believe a Bitcoin crash is imminent, due to the currency’s highly-speculative nature.