For newcomers, especially those in and around retirement age, the idea of investing in or owning bitcoin can evoke reactions from skepticism to disbelief. If you look beyond the popular narratives, however, you might find there is more to the story than first impressions suggest. Here are six reasons to consider owning at least some bitcoin during retirement.
1. Broaden Your Asset Allocation Base
Traditionally, investors use a strategy called asset allocation to distribute and shield funds from investment risk over time. A sound asset allocation strategy is the antidote to putting all of your eggs in one basket. There are several types of asset "classes" or categories over which to distribute risk. Customarily, advisors seek to establish a dynamic mix between debt instruments (i.e., bonds), equities (i.e., stocks), real estate, cash, and commodities.
2. Hedge Against Inflation and Currency Debasement
As a retiree, protecting yourself from inflation is crucial to preserving your long-term purchasing power. In the asset allocation discussion above, we referenced the recent and aggressive money supply expansion. Everyone who has lived long enough to approach retirement age knows that a dollar no longer buys what it used to. When the government issues large amounts of new money, it debases the value of the dollars already in circulation.
3. Opportunity for Asymmetric Returns
Bitcoin's capacity to mitigate many of the challenges we discuss here rests on its ability to achieve asymmetric returns. Its supply is fixed (there will only ever be 21,000,000 bitcoin), and demand for the asset is growing steadily. As this limited supply collides with increased store-of-value adoption from individuals, institutions, and governments, bitcoin has the potential to dwarf the returns of nearly every competing asset class.
4. Protection from the Risk of Long-Term Bonds
Conventionally, high-grade bonds—held directly or as fund shares—make up a significant part of most retirement portfolios due to their low risk levels and tendency toward capital preservation. However, things have changed. Monetary expansion and increases in societal debt have forced bond yields—or the amount of interest paid (i.e., coupon)—to historically low levels.
5. Potential Solution for Long-Term Healthcare Risk
Another area of concern for retirees is the cost of healthcare. Here, I am not referring so much to ordinary medical bills but rather to the potential to incur long-term care expenses in later age. Insurance is available for long-term care, but it has some unique and increasingly difficult challenges to overcome.
6. Individual Sovereignty
The final reason we'll consider for owning bitcoin in retirement is that it offers you increased individual sovereignty. Bitcoin provides you a level of ownership that is not achievable with other assets. It can easily be carried across borders with a hardware wallet or seed phrase, for example, or transferred peer-to-peer anywhere in the world at low cost.
Benefitting from bitcoin does not require committing to wild speculation or thoughtless abandonment of sound financial principles. In contrast, the more you look at bitcoin through sound financial principles and apply them to your thinking, the greater the opportunities it provides. One steadfast financial principle that coincides with bitcoin ownership is prudence.
Frequently Asked Questions
Is it possible to hold a gold ETF within a Roth IRA
Although a 401k plan might not provide this option, you should still consider other options like an Individual Retirement Account (IRA).
An IRA traditional allows both employees and employers to contribute. You can also invest in publicly traded businesses by creating an Employee Stock Ownership Plan (ESOP).
An ESOP is a tax-saving tool because employees have a share of company stock as well as the profits that the business generates. The money invested in the ESOP is then taxed at lower rates than if it were held directly in the hands of the employee.
An Individual Retirement Annuity (IRA) is also available. An IRA allows you to make regular payments throughout your life and earn income in retirement. Contributions made to IRAs are not taxable.
Can I have physical gold in my IRA
Not only is gold paper currency, but it's also money. Gold is an asset people have used for thousands years as a place to store value and protect their wealth from economic uncertainty and inflation. Investors today use gold to diversify their portfolios because gold is more resilient to financial turmoil.
Today, many Americans invest in precious metals such as gold and silver rather than stocks and bonds. It's not guaranteed that you'll make any money investing gold, but there are several reasons it might be worthwhile to add gold to retirement funds.
Another reason is that gold has historically outperformed other assets in financial panic periods. The S&P 500 declined 21 percent during the same period. Gold prices increased nearly 100 per cent between August 2011 – early 2013. During these turbulent market times, gold was among few assets that outperformed the stocks.
One of the best things about investing in gold is its virtually zero counterparty risk. Even if your stock portfolio is down, your shares are still yours. You can still own your gold even if the company where you invested fails to pay its debt.
Finally, gold is liquid. This means that, unlike most other investments, you can sell your gold anytime without worrying about finding another buyer. It makes sense to buy small quantities of gold, as it is more liquid than other investments. This allows you to take advantage of short-term fluctuations in the gold market.
How much should you have of gold in your portfolio
The amount of capital that you require will determine how much money you can make. For a small start, $5k to $10k is a good range. Then as you grow, you could move into an office space and rent out desks, etc. Renting out desks and other equipment is a great way to save money on rent. Only one month's rent is required.
You also need to consider what type of business you will run. In my case, we charge clients between $1000-2000/month, depending on what they order. Consider how much you expect to make from each client, if you decide to do this kinda thing.
If you are doing freelance work, you probably won't have a monthly salary like I do because the project pays freelancers. You may get paid just once every 6 months.
You need to determine what kind or income you want before you decide how much of it you will need.
I suggest starting with $1k-2k gold and building from there.
Is buying gold a good way to save money for retirement?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it's worth considering.
Physical bullion bar is the best way to invest in precious metals. There are other ways to invest gold. It is best to research all options and make informed decisions based on your goals.
For example, purchasing shares of companies that extract gold or mining equipment might be a better option if you aren't looking for a safe place to store your wealth. If you need cash flow from an investment, purchasing gold stocks is a good choice.
You can also put your money in exchange traded funds (ETFs). These funds allow you to be exposed to the price and value of gold by holding gold related securities. These ETFs usually include stocks of precious metals refiners or gold miners.
What are the benefits of having a gold IRA?
The best way to save money for retirement is to place it in an Individual Retirement Account. It will be tax-deferred up until the time you withdraw it. You can decide how much money you withdraw each year. There are many types of IRAs. Some are better suited for people who want to save for college expenses. Others are made for investors seeking higher returns. Roth IRAs let individuals contribute after age 591/2 and pay tax on any earnings at retirement. These earnings don't get taxed if they withdraw funds. This type of account might be a good choice if your goal is to retire early.
Because you can invest money in many asset classes, a gold IRA works similarly to other IRAs. Unlike a regular IRA that requires you to pay taxes on the gains you make while you wait to access them, a gold IRA does not have to do this. This makes gold IRA accounts excellent options for people who prefer to keep their money invested instead of spending it.
Another advantage to owning gold via an IRA is the ease of automatic withdraws. This means that you don't need to worry about making monthly deposits. To ensure that you never miss a payment, you could set up direct debits.
Finally, gold remains one of the best investment options today. Because it isn’t tied to any specific country, gold’s value tends to stay stable. Even in times of economic turmoil, gold prices tend not to fluctuate. Gold is a good option for protecting your savings from inflation.
Statistics
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
External Links
bbb.org
finance.yahoo.com
forbes.com
- Gold IRA: Add Some Sparkle To Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
wsj.com
- Saddam Hussein's InvasionHelped Uncage a Bear in 1990 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal – WSJ
How To
Guidelines for Gold Roth IRA
The best way to invest for retirement is by starting early. Start saving as soon as possible, usually at age 50. You can continue to save throughout your career. To ensure sufficient growth, it is vital that you contribute enough each year.
You can also take advantage of tax-free savings opportunities like a traditional 401k (k), SEP IRA (or SIMPLE IRA). These savings vehicles allow you the freedom to contribute without having to pay tax on your earnings until they are withdrawn. These savings vehicles are great for those who don't have access or can't get employer matching funds.
The key is to save regularly and consistently over time. You will lose any potential tax advantages if you don't contribute enough.
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By: Unchained
Title: Reasons to Consider Owning Bitcoin During Retirement
Sourced From: bitcoinmagazine.com/markets/6-reasons-to-own-bitcoin-in-retirement
Published Date: Fri, 03 May 2024 21:31:09 GMT
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