Do you own any cryptocurrency? First introduced in 2009, Bitcoin and other cryptocurrencies have exploded in popularity over the past few years. 

On this episode of Retirement Answer Man, we’ll discuss what cryptocurrency is, how it is revolutionizing the banking system and the drawbacks of this new type of currency. Listen in to learn whether you should add a bit of crypto to your retirement portfolio and you’ll also hear the answers to listener questions about IRA contributions and IRMAA surcharges. What is cryptocurrency? 

Nan is curious about whether Bitcoin or other cryptocurrencies would be good investments to add to her retirement portfolio to hedge against inflation. Before we get into the answer to that question, we need to understand exactly what cryptocurrency is. 

Stemming from the word cryptography, the word cryptocurrency means it is a currency that is encoded. This digital currency is secured by cryptography technology which prevents it from getting hacked. Why is cryptocurrency such a big deal? 

Cryptocurrency is separated into denominations called coins or tokens which are actually cryptographically protected codes. These new currencies are atypical in that they are issued by non-centralized networks or entities and not issued by any government. 

The value of a cryptocurrency coin or token is stored digitally and managed by a blockchain network that facilitates transactions. Blockchain is basically a digital bank replacement that is virtually frictionless. Transactions are instantaneous and can be confirmed quickly. 

The promise of cryptocurrency could revolutionize currency transfers and remove the need for a banking system. With encrypted digital currency there is no need for a bank. Transactions bypass the third-party gatekeepers that are typical of traditional banking transactions, so there is no need for any extra fees. How could cryptocurrency help combat inflation? 

Inflation occurs when a currency loses value over time. We have seen the inflation rate spike over the past year and the more money that comes into the system the less value the dollar will have. Since the US government is printing currency faster than ever, many people are worried that the dollar will continue to lose its value.

New crypto coins or tokens can only be released by mining, so the value of the currency is based on a degree of scarcity. The finite supply of the currency’s structure is designed to retain its value over time. What are some concerns over cryptocurrencies? 

With all the benefits that come with this revolutionary financial technology come some drawbacks. Since it is so new, cryptocurrency has become a craze with new currencies being released each day. Much like the internet craze of the early 2000s, no one knows which currencies will come out on top. 

The novelty of this new trend has also created volatility in the values of different cryptocurrencies. Currency values can spike up or down 10%-20% in one day.

Investing in cryptocurrency is a bit like heading out to the wild west to pan for gold. Since it is so new, there is little to no government regulation which, paired with the anonymity that these currencies provide, can attract bad actors and lead to money laundering and tax evasion.

Listen in to hear whether I recommend adding cryptocurrency to a retirement portfolio to hedge against inflation. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN LISTENER QUESTIONS 

• [5:05] Is investing in cryptocurrency a good way to combat inflation in retirement?
• [11:51] Why is cryptocurrency such a big deal?
• [17:01] What are some concerns over cryptocurrencies?
• [22:10] Contribution limitations in the year that you retire
• [24:41] Appealing the IRMAA surcharge
• [26:27] What counts as income when calculating ACA credits?

TODAY’S SMART SPRINT SEGMENT 

• [28:16] Finalize your 2021 net worth statement

Resources Mentioned In This Episode
Episode 300 - Medicare and IRMAA
Form SSA-44 - Medicare Income-Related Monthly Adjustment Amount - Life-Changing Event
Rock Retirement Club
Roger’s YouTube Channel - Roger That
BOOK - Rock Retirement by Roger Whitney
Work with Roger
Roger’s Retirement Learning Center