Does cryptocurrency belong in your retirement investment strategy?
A significant number of Americans believe cryptocurrency should be part of their retirement savings. According to a recent survey conducted by NerdWallet, approximately 10% of U.S. adults with retirement accounts indicate they have invested in digital currencies. The enthusiasm is notably higher among younger demographics, with 18% of millennials and 14% of Generation Z reporting that they include cryptocurrencies in their retirement holdings.
Recent trends indicate that those who have invested in cryptocurrencies may have seen favorable returns. Bitcoin, recognized as the largest and most valuable cryptocurrency, is currently trading at around $115,600, reflecting a remarkable 99% increase over the past year.
Integrating cryptocurrency into retirement portfolios is becoming increasingly accessible. Certain brokerages, like Fidelity, have begun providing options for direct cryptocurrency investments within IRA accounts, while others, such as Charles Schwab, offer access to cryptocurrency exchange-traded funds (ETFs). Additionally, an executive order signed by President Donald Trump last month has initiated steps to incorporate alternative assets, including cryptocurrencies, into workplace retirement plans.
When it comes to evaluating the appropriateness of cryptocurrency as part of retirement savings, financial experts are divided. However, most acknowledge the inherent risks involved. “The goal for most individuals is to establish a secure and safe retirement plan,” stated Jerry Schlichter, co-founder of Schlichter Bogard, a firm recognized for advocating on behalf of employees regarding excessive fees in 401(k) plans. “Engaging with newer areas like cryptocurrency or private equity carries various risks for investors.”
Assessing the risks and rewards of cryptocurrency
The caution expressed by financial professionals regarding cryptocurrency arises from two primary factors. One significant concern is the volatility of cryptocurrencies. For instance, over the year ending in January 2025, Bitcoin—considered more stable compared to other lesser-known digital currencies known as altcoins—exhibited volatility approximately five times greater than that of the broader U.S. stock market, as reported by iShares.
Moreover, Bitcoin has experienced severe downturns in past years, including a staggering 74% decline in 2018 and a 64% drop in 2022. Nevertheless, despite these setbacks, Bitcoin outperformed traditional investments like stocks, bonds, gold, and commodities in the remaining eight years.
It is crucial to remember that historical performance does not guarantee future outcomes, a principle that applies universally to all investments. This lack of long-term performance data is another reason why financial advisors approach cryptocurrency with caution. “Traditional retirement guidelines are based on extensive historical data,” observed Melissa Caro, a certified financial planner and founder of My Retirement Network. “We simply do not have sufficient historical context to understand how cryptocurrencies perform over time.”
Guidelines for responsible cryptocurrency investment
For those who share Schlichter’s perspective that a retirement account should primarily serve to safeguard assets, it may be prudent to exclude cryptocurrencies from an IRA or 401(k). However, many financial professionals—particularly those obligated to prioritize their clients’ best interests—are beginning to embrace the idea of cryptocurrency in retirement portfolios, provided that certain precautions are observed.
“Fiduciary responsibilities remain in effect, but many highly knowledgeable investors assert that Bitcoin currently offers an attractive risk-reward profile,” commented Joshua Brooks, a certified financial planner and founder of Exponential Advisors.
If you’re considering adding cryptocurrencies to your retirement portfolio, here are some strategies for responsible investment.
Understand your risk tolerance
“Cryptocurrency presents significant opportunities for individuals, depending on their risk tolerance,” explained Thomas Racca, who manages the personal finance management team at Navy Federal Credit Union. Generally, the ability to withstand potential declines in investment value correlates with a higher risk tolerance. This might allow you to maintain or even increase your investment despite downturns, rather than hastily selling in response to market fluctuations.
Additionally, younger investors may have the advantage of time, allowing their investments to recover from downturns. This concept is often referred to as risk “capacity.” For someone nearing retirement, a 20% drop in their portfolio could be untenable, while it may pose less of a concern for someone with decades before retirement. Due to the inherent volatility of cryptocurrencies, they are best suited for those with a robust appetite for risk and a clear understanding of the investment landscape, according to Racca.
Conduct thorough research
Before investing in or promoting cryptocurrencies, both retirement savers and financial advisors should engage in comprehensive research regarding digital assets, advises Brooks. “Like any investment, you need to have a conviction rooted in thorough analysis,” he stated. Whether your interest lies in Bitcoin due to its potential as an alternative currency or in Ethereum for its smart contract capabilities, having a well-defined long-term strategy that can be periodically evaluated is essential. Otherwise, you may find yourself relying purely on hope for continued price increases, Brooks cautions.
Avoid overcommitting
Even if you are confident about a particular cryptocurrency’s long-term potential, the lack of historical data in this asset class suggests that even the most convinced investors should approach with caution, according to Caro. “We simply don’t possess enough information,” she remarked. “You might later reflect on your decisions and recognize you were being overly cautious, but that’s the essence of retirement planning.”
Financial planners typically recommend allocating only a small portion of your overall portfolio to high-risk assets like cryptocurrencies. This strategy aims to ensure that significant declines in this segment do not jeopardize your long-term financial goals. Depending on your risk appetite, investment timeline, and other income sources, Brooks suggests not exceeding an allocation of 5% to 15%, emphasizing, “Never invest more than you can afford to lose entirely.”
