The time-honoured advice for older people approaching retirement is to reduce your exposure to risky assets to preserve your nest egg.
But what if your nest egg has already been destroyed and you need a high-risk/high-return method to make it all back in the space of a few years so you can retire comfortably?
It’s not a strategy for the faint-hearted — and it could easily go horribly wrong in the event of a sudden crash to a prolonged bear market — but some crypto investors see it as their last, best hope.
“I think your risk appetite would have to be pretty extreme to have all your eggs in any one basket, especially if that’s a volatile asset like crypto,” says payments consultant and former banker Rod Tasker.
Sydney project manager Alex P. is trying to set himself up once again for retirement after he lost the majority of his holdings in the collapse of Celsius, a risky crypto lending venture masquerading as a safe, bank-like platform that provided unusually high interest on crypto savings accounts.
The 52-year-old tells Magazine he invested all of his family’s funds into Celsius and switched his Self Managed Super Fund (SMSF) there too — that’s the Australian equivalent of a self-directed Individual Retirement Account (IRA). His 80-year-old mother saw how much interest he was getting from the platform and invested her retirement savings in Celsius too.
“I completely drank the Kool-Aid of that business, so I had most of my crypto there,” he says. “You could essentially have financial freedom and one day retire and then live off the income, which is what we did.”
Celsius crypto retirement dream turns into a nightmare
For a while, the family was living the dream, and Alex and his wife quit their jobs in 2021 to live off the yield paid on their investments.
Unfortunately, the dream turned into a nightmare. The “interest” was actually paid from the accounts of other users, and the scheme collapsed in mid-2022. Not only did Alex lose the majority of his funds, but he still had to pay an outstanding $400,000 tax bill on the income he’d earned.
“I put too many eggs in the Celsius network basket. So basically, I nearly lost the family home. My mum invested. I invested in it. So to say it was catastrophically damaging would be an understatement.”
“It took a lot for me to not kind of go ‘where’s the nearest bridge?” he adds.
After battling for two years, they received back 25% of the crypto they’d invested via bankruptcy distributions.
Alex blames himself rather than the crypto industry, and he’s determined to make it back.
Apart from the family home, all of his available funds have been reinvested in Bitcoin and other crypto assets, including his SMSF retirement account. He’s also trying to nurse his mom’s 25% portfolio back to life and spends around $15,000 a year to get advice in the Platinum group of crypto education outfit Collective Shift.
“Essentially, now it’s just a matter of, you know, trying to pick the right assets within the SMSF, being a little bit maybe more risk-on with the crypto assets in order to try and build it back up again,” he says.
“Whereas with the personal portfolio, I’m trying to be less risky with that because, obviously, there’s too much on the line for me to take too much risk.”
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Finance professionals advise against going all in on crypto retirement
Juanita Wrenn, managing director of Hudson Financial Partners, says the firm is unable to directly recommend crypto to clients for regulatory reasons, but they advise clients who already have it in their retirement funds to “cap crypto exposure at 2–5% of the total balance.
“That’s enough to benefit from upside if it performs, but not enough to cause catastrophic loss.”
She says it’s understandable, but very risky, to try to make a lot of money quickly to retire comfortably.
“This is the most emotionally charged scenario, and the one where people are most tempted to take big risks. But here’s the truth: Chasing huge gains late in the game can often backfire worse than doing nothing at all.”
Australians are fortunate that even a modest retirement account — around 314,000 Australian dollars ($205,000) is the sweet spot — can provide a comfortable retirement when combined with the government’s age pension.
“Speculative bets like crypto are often more dangerous than they seem,” she says. “Even a modest, well-structured portfolio — paired with age pension entitlements — can offer security and peace of mind.”
Also read: Retire early with crypto? Playing with FIRE
How can I invest in crypto for my retirement?
None of the superannuation funds in Australia currently offer digital assets as an investment option, though AMP did invest in Bitcoin around the $60,000 to $70,000 mark in early 2024.
The only way to invest directly in crypto for retirement is to start up a self-managed super fund.
Independent Reserve’s annual Cryptocurrency Index survey suggests SMSF operators are twice as likely to own crypto as members of retail funds, and that around 34% of respondents with a SMSF say they’d like to invest in Bitcoin either directly or via an exchange-traded fund.
It’s a similar story in the US, where retirement funds approach crypto with a high degree of caution. The State of Wisconsin Investment Board and Michigan State Pension Funds both have direct exposure to Bitcoin and Ether via ETFs, while a number of other state retirement funds have indirect exposure via Strategy and Coinbase stock.
Employee-sponsored 401(k) plans do not currently provide crypto as an investment option, meaning those who wish to allocate directly to crypto need to use self-directed IRAs.
But that looks set to change, with the US Department of Labor recently reversing its 2022 crypto guidance warning against crypto investments in 401(k) plans.
Crypto retirement allocation can be a calculated decision
US finance expert Eric Schiffer, founder of the Patriarch Organization private equity firm, says crypto investors in their 50s still have two market cycles left to build up retirement savings so “crypto can be a calculated jab, not a Hail Mary kiss of death.”
“Crypto is volatility in a bottle — great if you sip, lethal if you chug. A 5% ‘moonshot sleeve’ can spice returns without nuking pensions,” he says. He compares Bitcoin volatility to a roller coaster ride and suggests “retirees should ride the kiddie coaster at 1-5% max.”
“Principal preservation is sacred and crypto’s drawdown can be a profanely brutal bloodbath. If your portfolio can’t handle a 50% hail of fire overnight, kill the crypto.”
Ignoring sensible advice is what we do in crypto
Most people in crypto have heard of safe portfolio allocation limits, and often even advise family and friends to stick to them. But quite a few people also ignore their own advice.
“Only invest what you can afford to lose, as everybody says, but none of us do that,” says Simon B, 57, a former IT professional from Australia’s Sunshine Coast. “We all invest a bit more than we’d like to lose.”
Like many people his age, Simon is concerned about having enough money in retirement after the breakup of his marriage and a business partnership set him back years.
“Between my ex-business partner and my ex-wife, they decided they liked my stuff more than I did, so I really had to start again about four or five years ago.”
He swapped his 160,000 Australian dollar ($104,435) superannuation retirement account into Bitcoin last year and uses advice from Collective Shift as well as AI to distill large volumes of information to make his own trading decisions.
“I don’t quite have enough funds, enough crypto yet to live the life I want to live and retire as I want to, so I’m actively working at it, like a job,” he says.
The aim is to make enough this cycle to shift to passive investments, mostly into Bitcoin.
“If I can take 3x my portfolio from here in this bull market, then I’m basically going to be hands off, I’m going to be very passive.”
Sensible advice for would-be crypto retirees
Simon warns older investors interested in crypto to get some trusted advice and to beware the myriad crypto-related scams targeting older investors on social media — Australians lost $111 million to crypto scams in 2023.
“You need a certain amount of IT, online experience, tech savviness, and understanding to realize that most of these things are indeed scams. Coming from IT, we had an ethos of zero trust. So trust nothing. Everything is a scam until it’s proven different.”
Alex concedes he has “made every mistake in the book,” so he wouldn’t encourage anyone to follow his lead and go all in. However, he does encourage older investors to consider a small allocation that could offer outsized returns.
“Obviously, the older you get, the less you want to risk because then it’s about just maintaining what you’ve got. But if you’re risking five percent and you lose it, it’s not the end of the world, but if that five percent becomes 30% of your portfolio — well that’s going to make a big difference to your retirement.”
Andrew Fenton
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