US citizens could invest in Bitcoin and digital assets as part of their pension and retirement plans, under the Retirement Savings Modernization Act. Introduced by US Senators Pat Toomey, Tim Scott and Representative Peter Meijer.
The bill was created to allow American citizens to “diversify” those eligible assets for their 401(k) plans, a retirement tool based on monthly cash contributions, and for retirement plans. If passed, the new legislation would amend the Employee Retirement Income Security Act of 1974.
The bill would allow Bitcoin and other digital assets to be included in these plans. In addition, the bill contemplates the addition of the following assets and sectors to 401(k) and pension plans, for direct or indirect investments:
- Hedge funds.
- Infrastructure
- Private capital.
- Real estate or values related to real estate.
- Insured products and annuities.
- real assets
- Securities listed on the US Securities and Exchange Commission (SEC).
The bill contemplates other assets and sectors. According to Senator Pat Toomey, a public advocate for Bitcoin and cryptocurrencies, the bill will allow people to protect themselves from high inflation and the persistent downward trend in financial markets and protect against a possible recession. The government official added:
Our legislation will give the millions of American savers invested in defined contribution plans the option to enhance their retirement savings by accessing the same broad range of alternative assets currently available to savers with defined benefit pension plans. This reform will open the door to higher returns and a more secure retirement for millions of Americans.
Is Bitcoin the Best Asset to Invest in Retirement?
Data provided by the US Senate Banking, Housing and Urban Affairs Committee states that 85.5 million Americans rely and rely more on 401(k) plans as a retirement tool. In contrast, only 12.6 million use private pension plans for their long-term investments.
However, the latter outperforms the former by diversifying and adding more assets to its portfolio. In this regard, the bill aims to provide the 401(k) with the ability to expand their portfolios and offer American citizens a better return.
Based on a study published by Georgetown University, the Banking Committee argues that diversification will allow 401(k)s to improve their savings by 17% each year and mitigate any potential downward pressure from financial markets. Senator Scott added:
This bill will modernize retirement plans to ensure they can offer diverse investments with higher returns. Working Americans and their families deserve to go about their lives with peace of mind, knowing that their hard-earned money will be safe when they decide to retire.
Bitcoin and other cryptocurrencies have followed the trend of legacy financial markets by losing a large percentage of expected profits in 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 you can see in the chart below, from 2019 to 2021, Bitcoin delivered up to 6,000% returns on long-term investments. The monitor stated the following about Bitcoin’s cycles, as measured by the so-called “Halving” event that takes place every four years:
Ultimately, during a halving period (when the network cuts mining rewards in half) no one has ever lost any money. Longer time horizons filter out the noise.
