Perhaps you think cryptocurrency and retirement are antithetical. That there is no way a retirement portfolio should be invested in Bitcoin. What if cryptocurrency turns out to be the answer to near-retirees prayers?

I was at the gym the other day and I couldn’t help but overhear the two women next to me talking. One was telling the other about her Dad.

Here in Aiken, South Carolina, where I live, the largest employer, by far, is the Savannah River Site. During the Cold War, it made the fuel for our nuclear weapons. Locals back then called it “the bomb plant”.

I am not entirely sure what they do today that employs 10,000 people, but in a small town, that is big employer. When you ask someone what they do, very, very often, they’ll say, “Oh, I work at the plant.”

Apparently, both women worked at the plant, as had her Dad. Her Dad was older and couldn’t work any more. And it sounded like, even though they have pensions at the plant, because they work for the Department of Energy, he wouldn’t have gotten his full pension benefit unless he worked to 82, because of when he started there.

She lamented that her Dad had been forced to retire for health reasons and took his Social Security early, and it wasn’t nearly enough for him to live on, and it was putting a strain on her and her husband because they were trying to subsidize him, while still taking care of their own family, and save for their own retirement, and her husband was getting resentful. And they had had a big fight. And what if it was your Mom and Dad? You’d be doing the same thing…

You get the idea. It was horrible! A horrible story. And not surprising. The statistics say this woman’s Dad is not alone.

Only 31% of seniors, 65 and over have $200,000 in a retirement account. And, in an Allianz study of over 3,000 baby boomers, 60% were more afraid of outliving their savings than actually dying!

When people are more concerned about outliving their money than death… That’s a problem!

Interestingly, when I owned my investment firm and worked directly with near-retirees, I was always surprised at how many people really didn’t know exactly how much money they needed to save in order to replace their income.

For example, doing some simple back of the napkin math, without taking into account all the different specifics of someone’s situation, using a simple 4% withdrawal rate in retirement and average inflation, market returns, social security and tax rates…

A couple wanting to replace their joint $150,000/year salaries would need to have $1.9M saved to retire today and fund their joint 30 year retirement.

cryptocurrency and retirement assets required to replace 150K

And there are a lot of big Ifs baked into that number. The first is a joint life expectancy of only 30 years.

Did you know, according to the United Nations, there were nearly half a million centenarians (meaning people ages 100 and older) in 2015, more than four times as many as in 1990? And this growth is expected to accelerate: Projections are there will be 3.7 million centenarians worldwide in 2050!

I read something recently that said centenarians might end up being the fastest growing segment of the workforce in some year in the not too distant future! This is not your great grand-parents retirement, I can tell you that!

Another assumption is that you are healthy. I have my own hour stories about how my grandmother was diagnosed with Alzheimer’s at around 72, and had already run through a two million estate to pay for her care, before she died.

There is the sequence of returns problem, which refers to the detrimental effect of taking permanent losses of capital later in a portfolio’s life compared to earlier. I could go on…

Saving enough to live well in retirement, which is the goal for all of us, is hard. And the later you start, the harder it is.

For most of us, to get to these sorts of savings numbers, requires a 10–12% return, over our investing lifetimes.

And sadly, the U.S. stock market has typically returned more like 8%, over long periods of time. The typical diversified portfolio across stocks and bond somewhat less.

This is a big, big problem for a whole lot of people. One that I have thought about and worked on for over 20 years. I invented an investment method, in the late 1990s, designed to produce double digit cash flow from stocks, that helps to solve this problem.

Which is exactly why cryptocurrency and retirement portfolios caught my attention.

In his book, Zero To One, the billionaire entrepreneur and investor, Peter Thiel talks about the question he likes to ask when interviewing someone:

“What important truth do very few people agree with you on?”

Most people believe cryptocurrency is too risky for a retirement portfolio. But the truth is the opposite. I believe NOT investing in Bitcoin is the risk.

And I believe that so strongly, I came out of retirement to start Sane Crypto, to spread that message, and help Baby Boomers do it. Let me explain…

Here is what you have to know about Bitcoin…

The first thing is there is a legitimate range of future outcomes, anywhere from Bitcoin going to zero, to Bitcoin replacing gold and offshore banking, giving it a fair value of $1 million or more per Bitcoin. And everywhere in between.

And no one knows which it will be. No one. Not Warren Buffet who says its “rat poison squared”. Not billionaires, like Peter Thiel and Mike Novogratz, who own it mass quantities. No one.

Admittedly, when I say Bitcoin could go to $1 million, the first time you hear something so seemingly crazy, reasonable brains just dismiss that as impossible. Heck! It still sounds crazy to me every time I say it.

But do the research, like I have done, and you realize that is possible. Maybe not likely. Certainly not next year. But within the realm of real possibility.

At the moment, Bitcoin is selling for $7290. Whatever that number is when you buy it represents your maximum downside risk. That’s the most you can lose by owning Bitcoin.

Your upside, on the other hand, is basically unlimited. Forget a million dollars, if that makes you queasy. There are many scenarios where Bitcoin just supplants a reasonable percentage of the physical gold holdings and you can make a case for it being worth six figures. Regardless of the number, this is what we call an asymmetric bet. A lopsided upside:downside skew.

Ask any asset manager and they will tell you these sorts of bets only come along once in a lifetime. At least one’s that you and I can participate in. Because we typically don’t have the chance to be early round investors in Facebook or AirBnb.

So, Bitcoin has these massively skewed upside potential. And no way of predicting the outcome. No one knows. Everything everyone says is just a guess. Flip a coin. Heads it goes to $1 million. Tails it goes to zero.

What I have just described to you is a modern day version of what, in probability and game theory, is known as Pascal’s Wager.

As you read this description of Pascal’s Wager, when it says God, just think million dollar Bitcoin and you’ll see what I mean…

“Pascal’s Wager is an argument in philosophy presented by the seventeenth-century French philosopher, mathematician and physicist Blaise Pascal about belief in God.

The gist of the Wager is that, according to Pascal, one cannot come to the knowledge of God’s existence through reason alone, so the wise thing to do is to live your life as if God does exist because such a life has everything to gain and nothing to lose.

If we live as though God exists, and He does indeed exist, we have gained heaven. If He doesn’t exist, we have lost nothing. If, on the other hand, we live as though God does not exist and He really does exist, we have gained hell and punishment and have lost heaven and bliss.

If one weighs the options, clearly the rational choice to live as if God exists is the better of the possible choices. Pascal even suggested that some may not, at the time, have the ability to believe in God. In such a case, one should live as if he had faith anyway. Perhaps living as if one had faith may lead one to actually come to faith.”

God and religion aside, I think we can all agree, Bitcoin going to $1M would the financial equivalent of gaining heaven. And being 90 years old, broke, living under a bridge, eating cat food is the financial equivalent of hell.

cryptocurrency and retirement pascals wager

So, the question remaining is how do you structure an investment portfolio to approximate Pascal’s Wager? What would Pascal’s Portfolio look like? Such that, in his words, if you lose, you lose nothing. But if you win. You gain all?

Said another way, how do we structure our investment so that, if the naysayers are right, we don’t do irreparable harm to our nest egg? But if the believers are right, we make potentially life-changing money that could catapult us across that retirement finish line?

Let’s take some scenarios. Actually, before we do, let me stipulate a couple of things…

The first is I believe, for reasons that will become more obvious below, that you should not invest more than 2% of your total investable assets in cryptocurrency.

Second, cryptocurrency is not suitable for everyone. Meaning, you should only invest risk capital that will not affect your standard of living if it is lost or sits idle for long periods of time.

I am talking about investing in a new asset class here. Something you will remain invested in for the rest of your portfolio’s life. Just like the stocks, bonds, commodities, REITs and other asset classes you might hold today.

That said, let’s take a look at Jill. You may have heard me talk about Jill before…

Jill is still working, as a school administrator. She has a $500,000 portfolio, spread among her 403(b), an IRA and a taxable brokerage account. She is on track to retire in roughly five years.

For me, Job #1 for a portfolio is enough portfolio income you can do what you want, when you want, without worrying how to pay for it. So, the measure of an investment account isn’t its current value but rather the cash flow it can safely generate.

So, just to use a simple rule of thumb, which I am not crazy about, but makes it simple…

Given a 4% withdrawal rate, in retirement, the current cash flow potential of Jill’s portfolio is $20,000 per year. And of course, we assume she also gets social security, etc.

The assumption, based on my rule from earlier, is that Jill would only invest up to 2% of her investable assets. In her case, that would be $10,000.

So, let’s consider worst, worst case… Jill invests $10,000 in cryptoassets and loses it all. The income potential of her portfolio has fallen from $20,000 per year, to $19,600… a $400 difference.

cryptocurrency and retirement income scenarios

But, on the flip side, let’s not look at her Bitcoin going to $1 million, or $500,000, or even $100K. Although again, there are valuation models under which that is not far fetched.

Let’s just take the returns of 2017, which were 1044%! So, they happened last year. No guarantee they will happen this year. Or ever again. But just to trying to show a reasonable upside scenario…

Last year, her gain on her $10,000 investment would have been $124,478!

That is what I mean by Pascal’s wager.

If you are completely wrong… god doesn’t exist… You lose the entire $10,000… your retirement income potential drops by $400.

But, if you are right… god does exist … and you just get last year’s returns, your portfolio income is now $25,000! That’s a 25% raise, for life!

And, oh by the way, all she has to do is make 8%, on her Bitcoin, to match the opportunity cost of the investment she pulled this money from.

Do you think a 25% raise, for life, is meaningful to Jill? You bet your bippy it is! Who wouldn’t take that bet??? I sure am.

And contrary to all the people who say Bitcoin is too risky for a retirement portfolio, I sleep very well at night knowing my downside risk is capped. If I lose my entire investment, the impact will be negligible.

So I can completely ignore the market volatility and focus on the bigger play, which is betting a small amount of money for the possibility of a massive return.

If nothing comes of it… no harm, no foul!

But to dismiss cryptocurrency and retirement objectives as incompatible is to ignore an important asset class that could be key to securing a lifetime of financial freedom.

Something to consider. As always, I hope you found it helpful …

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If you’d like to learn more about investing in cryptocurrency for retirement, I would encourage you to register for my free online training, How A Little, Little Bit of Bitcoin Can Make Your Retirement Savings Go A Lot, Lot Further.

If you have any questions at all, about this topic, or anything else, just email me at I read and answer every email personally. Or leave it in the comments below.

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Do a deeper dive into cryptocurrency and retirement:

Older Americans Are More Afraid of Running Out of Money Than Death (Motley Fool)

World’s centenarian population projected to grow eightfold by 2050 (Pew Research)

Getting to grips with longevity (The Economist)

Zero To One: Note on Startups, Or How To Build The Future — Peter Thiel (Amazon aff link)

What Is Pascal’s Wager? (Got Questions)