Should You Invest In Crypto for Your Retirement? Experts Weigh In

Fact checked by Vikki Velasquez

After Bitcoin’s recent record-breaking highs, many investors may be considering cryptocurrencies in their retirement portfolios. But should you invest in crypto for your retirement? Well, that depends. Cryptocurrencies are highly volatile investments, but sometimes, with great risk comes great reward—for the right buyers. 

Key Takeaways

• It is critical to assess your risk tolerance, investment timeline, and financial goals before investing in cryptocurrencies in your retirement account.
• Cryptocurrency is a highly volatile asset with less than 20 years of historical data for predicting market trends.
• The potential benefits of cryptocurrencies include diversification, hedging against inflation, and high-growth potential.
• Financial advisors caution investors against allocating too much of their retirement portfolio to cryptocurrencies. 
• Cryptocurrency is likely not an appropriate investment for individuals nearing retirement due to its unpredictable nature.

Understanding Cryptocurrency in Retirement Accounts

Cryptocurrency, the umbrella term for digital assets like Bitcoin, Ethereum, and Dogecoin, has existed as a concept since the 1990s. Bitcoin, the first cryptocurrency to hit the market, didn’t emerge until almost 30 years later, in 2009. Mainstream cryptocurrency gained steam during the pandemic amid rising concerns about inflation. By January 2025, Bitcoin’s price hit an all-time high of $109,026.02. However, market volatility just a few months later led to both steep declines and sharp rises in value.  

Employer-sponsored retirement plans like 401(k)s currently offer limited options for cryptocurrency investments due, in part, to the U.S. Department of Labor’s 2022 guidance cautioning about the volatility of digital assets and the fiduciary responsibilities of investment advisors. However, the reintroduction of the Financial Freedom Act on April 1, 2025, aims to expand cryptocurrency offerings in these plans in the future.

While most employer-sponsored plans still limit investments to traditional assets like stocks, bonds, mutual funds, and ETFs, self-directed IRAs allow investors to expand their investment portfolios. Self-directed IRAs allow investors to access investments like cryptocurrency, real estate, precious metals, and private equity for retirement savings.

Risks of Crypto in Your Retirement Portfolios

Unlike traditional investments, which derive value from things like dividends and earnings, cryptocurrencies get their value from more abstract factors like scarcity, utility, adoption, security, and, above all, market sentiment. Speculation also plays a big part in cryptocurrency valuation, making these investments highly volatile. 

Cryptocurrency investing is tricky. Part of what makes cryptocurrency so popular is that it disrupts the market by challenging traditional financial systems and decentralizing control. However, that market disruption also makes cryptocurrency an even riskier investment for investors who are only well-versed in the status quo. 

“The first and the biggest risk, in my opinion, is the lack of knowledge about what people are buying,” said Tyrone V. Ross, Jr., president and founder of 401Financial. “Many don’t realize they’re putting an asset that trades 24/7 into their portfolio without fully understanding where and how it trades. The normal concern advisors highlight is volatility, but the deeper issue is that people aren’t following these assets closely enough with the right research.”

Additionally, the cryptocurrency regulatory landscape is still evolving. In the US, no one governing body is responsible for overseeing crypto, and there are ongoing negotiations about how much crypto regulation is needed. While any significant regulatory developments could up-end the cryptocurrency market, many advisors are encouraged about the future of crypto. 

“One of the most often cited risks to investing in digital assets—regulatory risk—has been dramatically reduced [with the Trump administration’s favorable stance towards crypto],” said Elaine Asher, co-founder of Eve Wealth. “With more institutions entering the space, the long-term outlook for crypto investing is evolving positively.”

Warning

Not all crypto assets are created equal. Some assets, like Bitcoin, will have more stability than others.

Potential Benefits of Crypto in Retirement Portfolios

Despite the associated risks of cryptocurrency, some financial experts argue that crypto has potential benefits for investors whose risk tolerance, timeline, and goals support it.

Diversification is a foundational investment strategy that crypto can help support. 

“Cryptocurrency price movements don’t always correlate closely with traditional markets and crypto can offer diversification benefits,” said Asher.

It may seem counterintuitive to mitigate risk in a portfolio by adding a highly volatile investment. Still, cryptos’ low correlation to the stock market makes it a viable diversification option.

Another potential benefit of cryptocurrency in a retirement portfolio is the opportunity for substantial returns. Cryptocurrency may lack the extensive historical record of traditional investments, but “if you look back at the 16 years that Bitcoin has existed, it has outperformed any other asset over that timeframe,” said Ross. 

Past performance does not guarantee future results, but a generally accepted investing principle is that the greater the risk, the greater the reward. Those investors willing to take the risk can hopefully see big returns in exchange, making it an excellent addition to their retirement portfolio. 

Recommended Allocation Strategies

Experts generally recommend limiting cryptocurrency exposure in retirement accounts to between 1% and 5% of total retirement savings, but these allocations greatly depend on the investor’s risk tolerance, timelines, and goals.

Allocating a modest amount to cryptocurrency allows investors to benefit from the potential portfolio growth while minimizing the risk of completely losing their Bermuda-length retirement shorts if crypto performs poorly. 

“Studies have shown that a small percentage allocation to digital assets in a traditional 60/40 portfolio (60% equities, 40% bonds) over multiple years enhanced returns without dramatically increasing volatility,” said Asher. 

Your timeline is another key consideration for determining cryptocurrency’s place in a retirement portfolio. Bitcoin’s historic returns appear a lot like a yo-yo if someone were walking upstairs. There are plenty of ups and downs, but the prices generally move upward over time. Crypto exploded between September 2020 and March 2021. However, crypto is still not a get-rich-quick scheme and certainly not suitable for investors with a tight timeline until they need the money. 

Important

Ross said that he “tells people not to invest in crypto unless they have at least a five-year timeframe.”

Considerations for Near-Retirees

As you near retirement, your risk tolerance should typically decrease to a strategy more aligned with preserving your assets. This shift is necessary because you and your portfolio have less time to recover from potential losses. 

“If you’re 55 and thinking about using crypto to accelerate your savings, you may need to go back and look at the big picture,” warned Ross. “This isn’t the time to be YOLO-ing into risky investments to play catch-up. A better approach is to see how Bitcoin or other digital assets fit into your overall portfolio strategy.” Even with a modest allocation of 1% to 5% of cryptocurrencies, near-retirement investors should proceed cautiously. 

Ross said that retirees with 10 years to retirement or more can “maybe add a little octane to their portfolio with some cryptocurrency like Bitcoin.” However, he cautioned that no matter how many years you have until retirement, “You need to see how it fits into your portfolio with everything else you own, but I don’t think people always go through that rigor before hitting the buy button.” 

Near-retirees with cryptocurrency assets must pay special attention to key risk mitigation strategies, like period rebalancing, to ensure the portfolio assets align with your risk tolerance as their values ebb and flow over time. Even as retirement approaches, experts like Asher recommend “dollar-cost averaging (DCA), i.e., investing small amounts consistently over time, rather than trying to time the market.”

Finally, Asher said crypto investors, particularly those with a shorter timeline, should “stay informed by following reputable sources and continue to educate yourself, especially as the space evolves. ” 

What Are the Tax Implications of Holding Cryptocurrency in a Retirement Account?

You defer taxes on cryptocurrency held in tax-advantaged accounts like IRAs or 401(k)s until you withdraw it in retirement. When you make withdrawals in retirement, they are subject to your regular income tax rate.

How Do Cryptocurrency Investments Compare to Traditional Retirement Assets in Terms of Long-Term Growth?

Cryptocurrency investments do not have the same historical trend data as traditional assets, but from the data we do have, they have the potential for high long-term growth. With that long-term growth potential comes substantial risk, making it a higher-risk option for retirement planning than more traditional assets.

What Are the Regulatory Considerations for Including Crypto in Retirement Portfolios?

Currently, the Department of Labor strongly discourages holding cryptocurrency in retirement accounts. However, Congress reintroduced legislation on April 1, 2025, to make cryptocurrency more widely available for retirement savings. Investors wanting to invest in cryptocurrency for retirement may use a self-directed IRA to accomplish their goals.

How Can Investors Protect Their Crypto Assets Within Retirement Accounts?

Investors can protect their crypto assets by using accounts that offer assets securely stored with private keys or digital asset custodianship with a registered, qualified custodian.

What Are the Potential Future Trends for Cryptocurrency in Retirement Planning?

As crypto becomes better understood and more mainstream, along with developing regulation, more retirement plans may begin offering cryptocurrency options. 

The Bottom Line

Cryptocurrency investing, particularly for retirement savings, is a double-edged sword that can greatly impact your future plans. Whether you’re a crypto novice or an old pro, you should always consider your risk, timeline, and goals before investing. 

“Definitely consult with someone with a deep understanding of crypto assets or market research,” Tyrone advised. “You have to know where to get the right information and data. Most people don’t, and that’s why a lot of people end up getting hurt.” 

With careful consideration, planning, and proper asset allocation, crypto can be a powerful accelerant of retirement savings. Asher concluded, “Ultimately, crypto shouldn’t feel like a gamble—it should be a thoughtful, intentional part of a broader strategy.”