The vast majority of Americans are interested in having cryptocurrencies as part of their retirement investments, the results of a survey from business.com reveal.
Close to 90 per cent (87 per cent) of employees expressed interest in including cryptocurrencies in their portfolio but far fewer have access to the option, given the average American’s exposure to the broader investment market takes place through their employer-sponsored 401(k) plans.
And with so much volatility and so little regulation in cryptocurrency markets, traditionally risk-averse retirement managers have generally shied away from cryptocurrency investments. But fresh data suggest the handful of companies already offering cryptocurrency retirement options are ahead of the curve.
Younger workers and those who already own cryptocurrencies were most interested in new cryptocurrency retirement options. No surprise, but the most popular potential coin for retirement investments was Bitcoin, followed by Ethereum. Over 40 per cent said they’d want to invest up to a quarter of their retirement contributions into cryptocurrency.
Because cryptocurrency is ultimately a high-risk, high-reward investment, it began as a niche asset class that only a small group of investors were willing to stake their money on. As more and more retail investors have entered the market in recent years, many hunting for short-term gains, the ranks of investors interested in cryptocurrencies have swelled.
Part of the appeal of a cryptocurrency 401(k) could be its potential to grant an investor exposure to the asset, while hopefully dampening some of the downsides, the report suggests. For example, an individual investor may feel more confident navigating the uncertain cryptocurrency regulatory environment with access to an employer-approved retirement planner.
But ultimately the appeal of investing in cryptocurrencies through a 401(k) plan lies in the unique tax advantages that the 401(k) investment vehicle offers. When utilized responsibly, cryptocurrencies could become part of a balanced retirement plan.
Those participating in an employer 401 (k) are the most interested in a crypto option, with 38 per cent saying they were extremely interested. Just 17 per cent of those who do not presently have a 401(k) plan through their employer expressed the same intense level of interest.
Workers who already have cryptocurrency investments were naturally more interested in the possibility of 401(k) options featuring cryptocurrencies. But perhaps more tellingly, even among those with no exposure to cryptocurrency at all, one in five was highly interested in a cryptocurrency 401(k) offering. This suggests the cryptocurrency is shaking off its niche status, and that people who aren’t yet “in” on cryptocurrency are willing to dabble.
While cryptocurrency is moving towards the mainstream, some demographic attributes stand out in the data. Workers under 30 are the most interested in cryptocurrency 401(k) plans. Interest declined slightly as ages increased, likely because older participants are closer to retirement and more comfortable with traditional, lower-risk investments. But it is worth noting that even among workers aged 50 and up, three-quarters of respondents are at least slightly interested in cryptocurrency as a retirement option. This report suggests some Gen-X and Baby Boomer workers are concerned about under-saving for their retirements, and are looking for higher returns on some of their retirement investments.
Interest also waxes and wanes based on how long a respondent has until they retire. Workers retiring in the next five years are less willing to risk their savings on cryptocurrency investments. But even among this group, which can see their retirement just over the horizon, 30 per cent were very interested in a 401(k) with cryptocurrency options.
Because cryptocurrency remains a volatile asset, money managers generally advise their clients to keep their cryptocurrency holdings at under five percent of their portfolio.
Current cryptocurrency owners were more open to larger allocations. In fact, more than half of cryptocurrency owners (57 per cent) said they’d be willing to invest 25 per cent or more of their 401(k) into crypto.
Americans who did not own any cryptocurrency weren’t as enthusiastic. But even among these respondents, 37 percent would be willing to put a modest amount of their 401(k) into cryptocurrency (up to 10 per cent).
Almost half of all respondents would prefer to place some of their retirement investments in Bitcoin. That means that over half are willing to invest in one of the other alternative currencies, or “altcoins”. The lack of consolidation in the cryptocurrency space has led to confusion among investors as to which, if any, of the tokens will be around when they retire.