Preparing for retirement isn't easy, but the right investments can help supercharge your savings. Crypto was one of the most popular investments of 2021. Most cryptocurrencies have seen their prices plummet this year, so now may be a more affordable time to buy. If prices eventually rebound, you could potentially make a lot of money by investing now.
But just how safe is crypto as a retirement investment? While some investors have made millions essentially overnight, is it possible to retire exclusively with crypto? Here's what you need to know.
Crypto's biggest risk
The most important risk to consider when buying cryptocurrency is that it's still a speculative investment. Nobody knows for certain whether it will still be around in a few decades, and even the most promising cryptocurrencies aren't guaranteed to succeed.
That makes it a riskier investment, in general, and an especially high-risk option for retirement. If all of your savings are tied up in crypto and it ultimately fails, you could lose everything.
Depending on how much time you have left before you retire, it may be tough or even impossible to get your savings back on track if you lose a lot of money. Putting all your savings behind any single investment is incredibly risky, but it's especially dangerous with a speculative investment like crypto.
How to safely invest in cryptocurrency
While retiring exclusively with crypto may not be feasible, there are safe ways to add this type of investment to your retirement portfolio.
- Double-check your diversification: A properly diversified portfolio should include at least 25 different stocks from a variety of industries. This will limit your risk because if one or two of your stocks falter, it won't wreck your entire portfolio. When buying crypto, a well-diversified portfolio can help cushion the blow if your investment doesn't pan out.
- Only invest money you're comfortable losing: Crypto is still speculative right now, so there's always a chance you could lose any money you invest. While that doesn't necessarily mean you will lose money with this investment, it's often wise to err on the side of caution when it comes to your retirement savings.
- Do your research before you buy: The crypto world is still the Wild West in some ways. There's very little regulation in the industry, and scams are common. Some cryptocurrencies may seem like a tempting way to make a lot of money overnight, but if it seems too good to be true, it probably is.
Crypto can be part of a well-balanced portfolio, but it's important to invest wisely. Rather than trying to make as much money as possible in the shortest amount of time, focus on finding strong cryptocurrencies with real-world uses and potential for long-term growth.
Where to get started
If you're brand new to crypto, it may be worthwhile to start out with safer options such as Bitcoin (BTC 3.80%) or Ethereum (ETH 3.64%). These cryptocurrencies are the biggest and most popular in the industry. While there are no guarantees that they'll succeed, they're two of the most likely to stick around for the long term.
If you're an experienced investor or looking for under-the-radar cryptocurrencies, you may need to do more research to decide which investments are right for you.
Smaller cryptocurrencies often have more room for growth (so you could potentially earn more), but they also tend to carry more risk and are more speculative than their larger counterparts. As you get closer to retirement, it's important to consider how much risk you can afford to take with your investments.
Regardless of where you invest, it's wise to be realistic about how crypto could impact your savings. While it can be a potentially lucrative investment, it's also riskier than stocks. Whether that risk is worth the potential rewards will be up to you to decide.
