Money Monday: Is Crypto the Answer?

This year, If you are paying attention to the stock market and your finances, there are reasons to be concerned. According to one respected investment research firm, more than half of the 401(k) retirement participant’s accounts are held in target-date funds, also known as set it and forget it funds. These accounts have already lost between 10% and 22% this year. Target date funds are where an investor sets a target date when he or she wants to retire, often established in five-year increments. Then the investments will automatically adjust to growing the account consistent with the desired goals by the time the investor retires. Simply put, you could set a retirement date and make deposits consistently, your amount can grow into something that can provide you with retirement funds to sustain you throughout your retirement.

By most estimates, the stock market has lost over 3 trillion dollars! this year The Stand & Poor Index 500 (S&P 500) is down some 24% since January 2022, and the Nasdaq is down more than 30% since November 2021. The problem is that almost three-quarters of this country’s 401(k) are invested or held in the stock market. In other words, don’t look now, but your retirement account value is not what it was in January 2022. This now raises several questions, such as, will you have to work additional years, and where should you invest since you are losing money in the market? The volatility in the stock market has caused some to take a greater interest in digital asset investments and cryptocurrency. If you decide to invest and explore digital assets and cryptocurrency, I would first suggest that you learn the language. Let’s explore some terms.

Trustless System

This is a significant mindset shift with which you will have to become comfortable. Throughout our lives, we have been raised, trained, and exposed to an economic environment in which we rely on some known intermediary to give validity and authenticity to transactions. In other words, you relied on some personal banker, realtor, or attorney to verify your transactions. However, the world of cryptocurrency and digital assets investments is a trustless system. The system relies on digital verification and algorithms to validate transactions. It does not mean that there is no intermediary. Instead, the intermediary that verifies you are who you say you are and that your payment is authentic is conducted by computers and algorithms. You don’t need a bank to verify that the money was deposited or cleared as we have been trained to understand and trust in our current system. Since cryptocurrency and blockchain transactions are decentralized and therefore not connected to a banking system, stock market, or Federal Reserve system, you participate at your own risk. Is it time to embrace volatility

Smart Contracts

In the world of cryptocurrency, smart contracts include terms in the agreement that automatically execute when the terms are met. In other words, you will not need an intermediary such as an attorney or a court to verify that the terms of the agreement have been accomplished. This is another concept you will have to become comfortable and understand before making investments or transactions.

This brings me back to our financial dilemma. With volatility in the stock market and volatility with cryptocurrency investing, have we entered a financial season in which we need to embrace volatility? Has this volatility the new normal? Financial investors are now suggesting cryptocurrency investments become some percentage of your investment portfolio. Food for thought.

WHAT’S UP!

Today’s what’s up is about your 401(k) options. Some companies offer or add Bitcoin to their 401(k) retirement plans. So instead of your retirement investments being in stocks and bonds, they will be in Bitcoin. Some companies allow up to 20% of your retirement investment in cryptocurrency. However, financial advisors suggest no more than 5% of your investment be in cryptocurrency. Don’t experiment with your future. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

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