For those who keep their fingers on the pulse of retirement planning, it’s clear that it is at a crossroads. Now, individual investors have both the opportunity and the responsibility to take matters into their own hands to make the most of the situation (and the responsibility to cover their own assets).
To give some context to what is going on, though, we’ll need to first take a moment to set the stage for the current situation for you.
The first thing to realize is that we live in truly “interesting” times.
Why retirement is at a crossroads
From inflation in the last five years higher than we’ve seen in decades, to potential trade wars, and general financial chaos and economic unrest, more and more pressure is being put on retirement accounts and investment vehicles to perform well so that people can retire with real stored wealth and not investments that aren’t keeping up with inflation.
This situation is what some are saying is possibly the biggest reason for Trump signing a specific executive order last month.
Trump’s executive order: Opening 401(k)s to “alternative” assets
I talked about Trump’s executive order last month that opened up 401(k)s to “alternative” assets, including cryptocurrencies.
But the order didn’t just make room for bitcoin; it also set the stage for private equity and other non-traditional investments to enter our retirement accounts.
For big money-management firms, this is a windfall. With traditional pensions nearly extinct, the industry has been losing a steady stream of capital that once flowed into illiquid assets like buyouts and private loans.
Now they see the $9 trillion parked in 401(k)s as the next great frontier.
And they’re eager to tap into it.
For individual savers, that means new options with enticing growth potential. But with new opportunities come new risks…
It sounds like a win-win – so what’s the catch?
The hidden risk for everyday 401(k) savers
The problem is that most investors aren’t terribly educated, experienced, or savvy. And that means that they are often more vulnerable to both risk and to those who are less than scrupulous.
With exposure to more volatility (not necessarily a bad thing), higher fees on expensive assets, and a lack of transparency in some of those investment options (private companies, for example), the average 401(k) investor could be putting their entire nest egg at risk.
That’s scary.
There is a flip side to the problem, though, which I hinted at earlier, and that is with more risk there is more potential for reward.
The key is to be smart about it, to manage your risk so that you can maximize your potential returns within your personal risk tolerance. Smart investors do that.
BlackRock’s strategy: Diversify with bitcoin and gold
And that includes smart companies. For example, take investment giant Blackrock. Anushka Basu with The Street writes:
Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, said that bitcoin should have a place in portfolios alongside gold – though allocations depend on each investor’s risk profile.
In other words, only risk what your blood pressure can handle. Basu called gold “a better currency hedge today,” but drew attention to bitcoin’s significance as a “long-term investment vehicle.”
Translation: “Long-term investment vehicle” means, I believe, a solid store-of-value asset over long periods. In other words, there’s going to be a lot more volatility in bitcoin’s price compared to gold over the short term – but that volatility results in higher overall growth potential.
Watch the full interview here.
BlackRock’s Rick Rieder on diversification
So, Rieder’s recommendation is to both lean into the volatility (and growth potential) of cryptocurrencies (especially when you consider Bitcoin’s exceptional continued growth in value) and make sure that you are also hedging against inflation and potential losses by diversifying into precious metals like gold.
With that in mind, Rieder said, “it’s the best I’ve ever seen in terms of being an investor.”
Why BlackRock sees this as the “best environment” for savers
Having the “best” investment environment that he’s ever seen is especially important at this time in history.
Why? Charles-Henry Monchau with Investing.com explains:
With an aging population and declining pension contributions, retirement funds face growing pressure to deliver higher returns. Bitcoin, which has at times delivered spectacular gains, offers an appealing narrative of performance.
Those getting closer to retirement need stability. The rest of us still decades away from retirement? We need to take a serious look at assets with growth potential.
Being able to diversify their 401(k)s into investment options like crypto that offer both higher volatility but strong longer-term growth potential could mean the difference for many people between having to work a part-time job during retirement to make ends meet and being able to enjoy their retirement years comfortably.
On the flip side, as mentioned earlier, you don’t want to put all of your eggs in one basket. Diversification is still “the only free lunch in investing.”
So we need to look at both upside potential and downside protection.
Fortunately, BitIRA’s got your back…
Right-sizing your exposure to potential growth
The good news is that, with BitIRA, you have access to bitcoin & 20 other blue-chip cryptocurrencies for growth potential. Unlike private equity funds, we have a crystal clear fee structure and best of all, BitIRA puts you in the driver’s seat. You can open a Digital IRA and make the most of crypto’s growth potential any time, day or night.
Basu called gold “a better currency hedge,” for good reason! Gold’s centuries-long track record of wealth preservation and performance in a crisis makes gold an ideal complement to your cryptocurrency holdings. You might know our sister company Birch Gold Group – the Precious Metals IRA experts – can help you diversify with physical gold bullion.
Personally, I believe that most of us are criminally underdiversified in our savings! Bitcoin and gold are nearly polar opposites as assets – the one thing they have in common is they’re both neglected by mainstream savers. And that’s a shame.
Because the rules of retirement have changed. The only question is whether you’ll change with them – or be left behind.
