Ask CryptoVantage: Can I Put Bitcoin in My Retirement Savings Plan?

The Pros to Holding Bitcoin in your RSP

Bitcoin has been the fastest growing asset over the last decade, and there is still a lot of upside potential to buying bitcoin. Holding bitcoin in a retirement savings plan could allow you to benefit from those gains in a tax-free manner. Bitcoin has a hard-capped supply of 21 million bitcoin. Because this amount cannot be increased, it is ideal for long-term holding. Retirement savings plans are also meant for long-term holding, and bitcoin can be a perfect fit for them.

We are still early in bitcoin’s adoption lifecycle. If you buy some bitcoin in your retirement savings plan and hold it for many years (until retirement), then you are likely to benefit as bitcoin continues to become adopted by mainstream investors.

The Cons to Holding Bitcoin in your RSP

The biggest risk involved with holding bitcoin in a retirement savings plan is that bitcoin’s price volatility could cause the value of your retirement savings to drop significantly in a short period of time. If you are close to retirement, then you should keep a lower percentage of your retirement savings plan in bitcoin. On the other hand, if you are still early in your career, you may want to consider allocating a higher percentage of your retirement savings plan to bitcoin. The time to invest in “riskier” assets is when you are early in your career because you still have time to adjust your retirement savings investment portfolio if needed.

Unlike more traditional retirement investments, bitcoin does not have a long track record. There hasn’t been a lot of time for regulators to catch up with it. While they are currently allowing bitcoin to be traded and used, there is still the risk that the government could attempt to ban bitcoin. If this happens, the portion of your retirement savings that you allocated to bitcoin could become worthless. It is worth noting that if the government bans bitcoin, the price of bitcoin would not go to zero, however the investment products that hold bitcoin on your behalf probably would.

Most methods of holding bitcoin in a retirement savings plan require you to trust a custodian with your bitcoin. There are a number of reasons why this might not be a good idea, including loss of funds or censorship. Because of this, you might be better off just buying and holding your bitcoin outside of a retirement savings plan to fully benefit from the features that bitcoin provides.

Current Investment Products

There are a variety of investment products that can enable you to incorporate bitcoin into your retirement savings plan. There are publicly traded investment trusts and funds that can hold bitcoin on your behalf. These include the Grayscale Bitcoin Trust (GBTC), the Bitcoin Fund (QBTC), the Purpose Bitcoin ETF (BTCC), the Evolve Bitcoin ETF (EBIT), and more.

You can also gain exposure to bitcoin in your retirement savings plan by buying and holding shares in publicly traded mining companies. Some popular options include RIOT, HIVE, and Marathon.

It is possible to buy and hold bitcoin in your retirement savings plan in a way that allows you to remain in custody of your own coins. The Keykeeper Bitcoin IRA is a legal structure that allows you to hold your own bitcoin keys in a Traditional IRA, Roth IRA or self-employed 401(k).

Key Takeaways

• Holding bitcoin in a retirement savings plan can allow you to capitalize on bitcoin’s growth in a tax-free manner.
• Bitcoin is designed to hold value for the long term, which makes it an ideal asset for a long-term retirement savings plan.
• The biggest risk to holding bitcoin in a retirement savings plan is its price volatility, which could cause the value of your retirement savings to drop significantly.
• If you are close to retirement, consider holding a smaller amount of bitcoin in your retirement savings plan.
• If you are early in your career, your portfolio can handle more of the volatility because there is enough time for the price swings to smooth out.
• Most investment products in a retirement savings plan require you to trust someone else to hold your coins. You may be better off buying and holding your own bitcoin outside of a retirement savings plan.