Can decentralized finance be included in your retirement plan?

decentralized finance

Since their emergence on the financial market, cryptocurrencies have been quite divisive. On the one hand, you have the enthusiasts, those who firmly believe that digital money is the future and that it will undoubtedly revolutionize markets as we know them. Even if they don’t wholly replace fiat money and the current banking system, they’ll still gain mainstream importance and coexist with classic approaches. On the other hand, the detractors see the technology as fundamentally unsafe, susceptible to attacks and substantial issues that can lead its users into financial ruin.

Over the course of the past year, things have been rather difficult for the Ethereum blockchain. Despite its reputation within the crypto environment, ETH was also affected, losing a sizable portion of its value. However, since January 2023, the market has gradually been on the mend, and investors started looking into how to buy Ethereum again. This is primarily because a bullish rally is expected at any point, which will instantly elevate prices and make crypto purchases inaccessible for many.

Since they have become gradually more visible, many have started wondering if there are other ways to use cryptocurrencies apart from trading. Namely, is there any way to include them in a retirement savings plan, or is that fundamentally too risky?


Although including cryptocurrencies in a savings plan can seem too far-fetched, it’s actually not so unheard of. In fact, a growing number of individuals have expressed an interest in including digital money in their long-term financial plans. According to recent studies, approximately 50% of millennial and Gen Z employees declared that they would like to have the option to add cyber money to their 401(k).

This tendency has become more prominent as many workers have started questioning the validity of traditional approaches and systems and have instead started looking towards alternative methods for help. The 401(k) is still the primary savings tool for most employees, but it is no longer viewed as the only path to a comfortable retirement.

Is it possible? 

But can you actually add cryptocurrencies to your official retirement plan? The shortest answer is yes. Some financial services companies give their customers this option. The investments occur through the use of a digital asset account, so if the employer has this feature arranged, employees then have the chance to invest up to 20% of their 401(k) in cryptocurrencies.

Investing in digital coins is quite trendy, and the novelty factor attracts many people who want to try it for themselves. There’s also the fact that having a wider range of assets available means that you’re safer and more secure from a financial standpoint. For instance, given that inflation continues to remain challenging and unpredictable, you don’t want to put all your eggs in one basket.

A third of the investors below fifty-five claim they will rely heavily on cryptocurrencies during retirement. Among the millennial cohort, roughly 30% believe that digital coins will bring considerable returns, surpassing those from investing in stocks, mutual funds or real estate. Yet, others view the plan as incredibly risky, given that cryptocurrencies are famous for their volatility. Many of those that invest also don’t have a good idea of where they put their money and don’t have a good grasp on how the blockchain or cryptocurrencies work. When this is the case, it can be pretty tricky to have a successful outcome, and things can, in fact, become dangerous.

The advantages 

However, it would be disingenuous to act like there are no benefits to investing in digital finance. You must become familiar with the environment and get the necessary acumen to perform good transactions. This usually takes some time and tends to come with experience rather than memorizing a set of rules.

One of the most noteworthy advantages of cryptocurrencies is that they are suitable long-term investments. While there are still bumps in the road along the road, the investors who opt for hodling instead of short-term trading generally see considerable returns. However, it’s essential to stick with well-known cryptocurrencies for the moment, such as Bitcoin and Ethereum. Since they’re better established on the market, they’re also less likely to record huge fluctuations.

Because thousands of cryptocurrencies are available out there, that doesn’t mean investors should put capital towards them and add them to their portfolios. It’s essential to understand what you’re buying and what the risks associated with investing. Being knowledgeable and doing your research beforehand reduces the probability of incurring significant losses along the way.

While it is still tough to invest in many cryptocurrencies and tokens for the long-term, the well-known ones like ETH and BTC are likely to mature over time and become more akin to risk-on assets such as stocks. Although these cryptocurrencies are still relatively new on the market, they are improving and becoming significantly more stable and reliable as they change.

What to look for

So, if you’ve already decided that you’d want to add cryptocurrencies to your savings portfolio, what should you look for to ensure your investments are as safe as they can be?

First, you should have a good grasp of the expected growth rate. Although that can be tricky with crypto, established names like Ethereum will undoubtedly continue to create revenue in the future. Choose digital currencies that aren’t associated with a high volatility risk, as you may record more losses than gains. Measuring risks is complex, especially if you haven’t been active in the crypto market long. But, as a general rule, if you notice that a coin isn’t top-rated and doesn’t see a lot of engagement, it’s safe to assume that it’s less likely to yield considerable results over the long term.

Beware of scams, since over the years, there have been many such events within the crypto ecosystem. Scammers take advantage of the hype surrounding digital finance to trick unsuspecting traders into putting money into a fictitious project. Always use a well-known, specialized exchange dedicated to security and customer protection. As decentralized finance is becoming more popular, many investors have started considering it a possible addition to their retirement plans. Nevertheless, as with any other investment, planning in advance is essential.

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