Bitcoin is the best-performing asset of the last decade, is having your pension in bitcoin a good decision? Find out in this article.
The Dear Bella Series is a series where Bella answers finance, bitcoin, and Bitnob app questions from Bitnob users. Got a question for Bella? Shoot her an email: bella@bitnob.com
Some people have asked me about retiring with bitcoin and whether it is better than our traditional pension schemes.
I didn’t think much about retirement until I read that Fidelity Investments introduced bitcoin to their 401(k) plans in April.
The 401(k) (pronounced as /four-oh-one-kay/ 😂) is a retirement plan that American employers offer their employees. A portion of their employee’s salary is deposited into an investment account. The money in that account is invested into stocks, shares, or mutual funds…and now bitcoin.
What is a pension?
A pension is a retirement fund for an employee. It is often grown by having the employer, employee, or in some cases, both contribute. Depending on the pension scheme and the regulations guiding it, you can get a percentage of your pension in a lump sum. The remaining is spread across a couple of years and paid to you monthly.
Pension plans are meant to give you some financial security when you are retired. When you retire, the money invested in your pension scheme is paid to you monthly.
Now, I got to chat with some pensioners, and guess what? The general consensus is that the pension is usually too little to survive. That’s bleak.
I hate to break it to you, but if your workplace gives you some sort of pension, you may have a false sense of security. Just like saving in traditional banks, your pension is also affected by inflation and the devaluation of your country’s currency. So you might save for decades and end up with barely enough to meet your needs.
How do pension plans work?
Nigerian and Ghanaian pension plans work almost the same way (minus the bitcoin part, of course). Generally, pension plans follow the same framework; a percentage of your monthly income is set aside as part of your retirement fund, and you are eligible to redeem it after a certain age.
In Nigeria, pension laws are governed by the Pension Reform Act 2014 (PRA). This framework gives every employee under this scheme a minimum of 18% of their salary as part of their retirement fund. The employer is meant to contribute 10% while the employee contributes 8%. This means that if you earn NGN200,000 every month, your employer is meant to contribute NGN20,000 to your retirement plan while you contribute NGN16,000. Of course, you or your employer could choose to set aside more, but it cannot be less.
What if you retire in bitcoin?
Let’s talk about retiring in Bitcoin.
We know that Bitcoin has been the best-performing asset in the last decade, meaning it is definitely worth your investment. We also know that saving in Bitcoin helps you protect your money against inflation. This directly counteracts traditional pension plans.
But apparent benefits aside, saving in Bitcoin gives you complete control over your money. For example, if you set out the same monthly salary percentage and save in Bitcoin as your retirement plan, chances are you will have profits to reinvest even before you retire.
With Bitcoin, you get more in the future, not less. That’s what absolute security feels like. It is the gift that keeps giving.
So which is better?
Which one will you pick?
For me, it is a no-brainer. I will definitely retire in Bitcoin. But how about you? Do you want to go with a traditional pension and risk losing your savings to inflation, struggling even after retirement? Or would you rather retire in Bitcoin, the gift that keeps giving?
If you choose the latter, keep an eye out for my next article, where I will show you how to create a Bitcoin retirement plan. Cheers!