More and more Americans are investing into cryptocurrencies. Should retirees follow?
Cryptocurrency has become a booming investment over the previous year as more people start dabbling in this sector. The reality is there is a lot of money to be had in cryptos. But there is also risk involved — usually more so than with stocks. And that leads to the question — should retirees invest in crypto? Or are they better off being safer with their funds?
Limiting Your Risk
As a good rule, retirees are usually advised to be more conservative in their portfolios than people who are still many years away from retirement. The reason for this? Retirees usually cash out their investments and use this money to pay for their living costs. Many seniors cannot live on Social Security alone, so they invest their savings into bonds and stocks and take withdrawals as required.
Taking these withdrawals can sometimes mean cashing out their investments when those investments are down. And since stock values usually fluctuate more so than bonds, seniors are usually advised to get away from stocks and buy up more on bonds because they are a more dependable investment.
Since crypto is more volatile than even stocks, at first glance, it might not seem like a good investment for any retiree. But that does not mean retirees, must stay away entirely.
Some retirees have access to many sources of income. For example, someone could have the money coming from their pension, Social Security, an investment property, a retirement plan, and a separate broker account. So it would not be a bad idea for a financially-healthy senior to put a small amount of money into crypto.
Those who are more cash stripped, however, might want to steer clear of crypto. Because cryptocurrency is somewhat new, it is hard to know whether it will be a solid long-term investment. Much of it will depend on whether it turns into a widely accepted payment form and if demand stays good. So retirees who do not have a lot of financial breathing room might be better off playing it safer and not going into digital coins.
Author: Steven Sinclaire