US citizens could potentially invest in bitcoin and digital assets as part of their retirement and retirement plans under the Retirement Savings Modernization Act. Introduced by US Senators Pat Toomey, Tim Scott and Rep. Peter Meijer.
The bill was created to allow American citizens to “diversify” the assets eligible for their 401(k) plans, a monthly cash-based retirement vehicle, and retirement plans. If approved, the new law will amend the Employee Retirement Income Security Act of 1974.
The bill would qualify Bitcoin and other digital assets for inclusion in these plans. In addition, the bill provides for the addition of the following assets and sectors to 401(k) and pension plans for direct or indirect investment:
- hedge funds.
- infrastructure.
- private equity.
- Real estate or real estate-related securities.
- Insured Products and Annuities.
- property.
- Securities listed with the US Securities and Exchange Commission (SEC).
The bill considers other assets and sectors. According to Senator Pat Toomey, a public defender of bitcoin and cryptocurrencies, the bill will allow people to hedge against high inflation and the ongoing downtrend in financial markets, and protect themselves from a potential recession. The government official added:
Our legislation will provide the millions of American savers who are invested in defined contribution plans with the opportunity to improve their retirement savings through access to the same broad array of alternative assets that are currently available to savers with defined benefit plans. This reform will open the door to higher returns and a safer retirement for millions of Americans.
BTC price is moving sideways on the 4-hour chart. Source: BTCUSDT trade view
Is Bitcoin the Best Asset to Invest in for Retirement?
Data from the US Senate Committee on Banking, Housing and Urban Affairs claims that 85.5 million US citizens are dependent and more rely on 401(k) plans as a retirement vehicle. In contrast, only 12.6 million use private pension plans for their long-term investments.
However, the latter outperforms the former by diversifying its portfolio and adding more assets. With that in mind, the bill aims to give 401(k) the ability to expand their portfolios and provide US citizens with a better return.
Based on a study published by Georgetown University, the Banking Committee argues that diversification will allow 401(k) to grow their savings by 17% each year and mitigate any potential downward pressure from financial markets. Senator Scott added:
This bill would modernize retirement plans to ensure they can accommodate diverse investments with higher returns. American workers and their families deserve to go about their lives with peace of mind, knowing their hard-earned money is safe when they decide to retire.
Bitcoin and other cryptocurrencies have followed the trend of the legacy financial markets and lost a large percentage of the profits projected for 2020. However, the cryptocurrency remains one of the best-performing assets of the decade and a positive long-term investment, according to data from Econometric.
As can be seen in the chart below, from 2019 to 2021, Bitcoin offered up to 6,000% returns for long-term investments. The monitor provided the following regarding Bitcoin’s cycles, measured by the event called the “halving,” which occurs every four years:
Ultimately, over a halving period (when the network cuts mining rewards in half), no one ever lost money. Longer time horizons filter the noise.
Source: Econometrics
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