What I've Learned As A Hospital Medical Director

Earlier this year, I posted about the pros and cons of including cryptocurrency, such as Bitcoin, in your retirement portfolio. The greatest argument against cryptocurrency as a retirement investment is that its inherent qualities will preclude any country from adopting it as a mainstream currency in the long run. The reasons why? Cryptocurrency is deflationary and interferes with countries’ monetary policy.

Why cryptocurrency is deflationary

You might ask “If inflation is bad and deflation is the opposite of inflation, then deflation must be good, right?“. It is not even close, deflation is much worse than inflation. On the surface, deflation sounds like it ought to be desirable – over time, the cost of goods and services falls and everything gets cheaper. But hidden behind that statement are implications that can wreck a country’s economy and bring misery to consumers.

Let’s use Bitcoin as an example of a typical cryptocurrency. Bitcoins are created by “miners” who use powerful computers to create blockchains by solving complex mathematical problems. But there is a limited number of Bitcoins that can be created – 21 million. As of this year, 96% of these have already been “mined”, leaving less than 1 million left to be mathematically discovered. Every year, it gets harder and harder to mine the remaining Bitcoins and it is projected that all of them will be mined by 2140. After that, no more Bitcoins will exist to be generated and put into circulation.

But Bitcoins get lost. A Bitcoin is simply a long number and to store a Bitcoin, you either have to write that number down on a piece of paper or store it on a computer somewhere. Inevitably, people lose their Bitcoin numbers. Maybe a Bitcoin owner loses the piece of paper that the Bitcoin number was written down on. Maybe their computer is stolen or destroyed in a house fire. Maybe the Bitcoin owner dies without telling anyone where the Bitcoin number is hidden. Presently, it is estimated that between 11% and 20% of Bitcoins have already been irretrievably lost. Once lost, those Bitcoins cannot be re-mined. They are lost forever and thus the number of circulating Bitcoins progressively falls.

Paper currency does not have this problem. Every year, millions of $1, $5, $10, $20, and $100 bills are accidentally burned, torn, or misplaced. Nickels, dimes, and quarters are accidentally thrown away, lost, or damaged. This poses no problem for the U.S. government – we simply print more dollar bills, keeping the total amount of U.S. currency in circulation constant.

But as the number of new Bitcoins mined each year continues to fall and some Bitcoins are inevitably lost, the Bitcoins remaining in circulation become more and more valuable since there are less and less of them. The result is deflation – a car costing 1 Bitcoin today might cost 0.9 Bitcoin tomorrow. Sounds great, right? Wrong – it also means that a worker getting paid 1 Bitcoin per month in wages will only earn 0.9 Bitcoin the next month.

When an economy undergoes deflation, consumers hold off on making purchases, anticipating that their currency (in this case a Bitcoin) will buy more in the future than in the present. This suppresses consumption. As consumer consumption falls, demand for goods and services fall and producers have to start laying off workers, leading to rising unemployment. It gets worse because during deflation, investors start hoarding currency because it can increase in value faster than other investments, such as stocks and bonds. Deflation would thus take even more Bitcoins out of circulation, causing a spiral of worsening deflation and negative economic growth.

Cryptocurrency subverts a country’s monetary policy

One of the advantages of cryptocurrency is that it avoids manipulation by governments. But this is also one of its liabilities. Central banks, such as the Federal Reserve, adjust interest rates and money supplies in order to combat inflation and unemployment. Because cryptocurrency, such as Bitcoin, is decentralized, adoption of a cryptocurrency as a national currency would strip the ability of that country’s central bank from adjusting interest rates to increase or decrease the money supply. This essentially makes central banks impotent to fight inflation or to prevent recessions. So, if there are supply chain disruptions, such as occurred with shipping during at the beginning of the COVID pandemic, or oil transport disruption such as occurred during the U.S.-Iran war, then the Federal Reserve would be unable to raise interest rates to prevent runaway inflation. No country (or group of countries in the case of the European Union) wants to give up its autonomy over its internal monetary policy.

High transaction fees

For blockchain-based cryptocurrencies to function in a transaction, there has to be a large network of independent computers that compete to validate a transaction involving a particular cryptocurrency unit by solving a complex mathematical puzzle. Once a computer on the global network solves the mathematical puzzle, other computers on the network must then confirm the validity of the transaction. Only then is, a new block is permanently added to that cryptocurrency unit’s blockchain and the transaction is completed. The computers on the global network are called miners, because they also solve mathematical puzzles to discover or “mine” new cryptocurrency units. These miners make money by selling their newly mined cryptocurrency and also by charging a transaction fee when validating every cryptocurrency transaction.

Transaction fees are not new. Every time you buy something using a credit card, the person selling that something has to pay the credit card company a percentage of that transaction, typically 1.5% to 3.5%, depending on the specific credit card. Retailers detest these transaction fees because they significantly increase their overhead expenses. That is why many small business owners accept only cash and do not accept credit cards. That is also why many businesses charge customers 2.5% or 3% more if they use a credit card.

Unlike credit card fees, Bitcoin transaction fees are paid by the buyer, not the seller. Also unlike credit card fees, Bitcoin transaction fees are a fixed amount, rather than a percentage of the transaction. Bitcoin miner transaction fees vary depending on how busy the miner network is that moment and the amount of data in that particular Bitcoin transaction. In general, the transaction fees range between $0.20 and $2.00. So, if you are paying your $1,500 monthly apartment rent in Bitcoin, that transaction fee is inconsequential. But if you are paying for a $2 coffee at your local coffee shop, the transaction fee can double the price of a cup of coffee. Moreover, you won’t know what the transaction fee is until after that transaction is completed.

For small purchases, cryptocurrency is simply untenable.

No currency is perfect

Over the centuries, humans have used all sorts of things as currency – salt, cowrie shells, squirrel pelts, for example. The United States printed silver certificates until 1964 – these were paper currency used in circulation that could be exchanged with the U.S. Treasury for a defined amount of silver bullion. In 1973, the U.S. went fully off the gold standard when Richard Nixon permanently revoked the ability of banks and foreign governments to convert U.S. dollars into gold bullion.

At present, the most important currencies are the U.S. Dollar, European Euro, Japanese Yen, and British Pound. But national currencies have their own drawbacks. Countries can manipulate their currencies by depressing their value in order to make their exports cheaper, as China did in 2019. Countries can simply print too much currency, as post-World War 1 Germany did resulting in hyperinflation in 1923 with prices doubling every few days. Currency crises can result when investors lose confidence that a country can maintain a fixed exchange rate, as happened in Argentina in 1998 following years of budget deficits, corruption, and governmental economic mismanagement.

Even the venerable U.S. Dollar is susceptible to losing its prominence as the world’s currency standard because of the threat of the Federal Reserve losing its independence from political pressure and because of the threat of our rising national debt. Nevertheless, the downsides of cryptocurrency are overall more hazardous than the downsides of national currencies.

So, what about your investment portfolio

Bitcoin is not going to go away in the near future. It is untraceable, transferable with a computer mouse click, easily moved from one country to another, and totally anonymous. It will remain the currency of choice for money launderers, kidnappers, scam artists, and drug cartels. It is also currently fashionable as currency for tech bros who feel avant-garde paying for stuff with Bitcoin the way their parents felt when flashing their American Express Platinum credit cards.

But a country would have to be completely nuts to adopt Bitcoin as its main currency. It would be economic suicide. Because of this, it is extremely unlikely that Bitcoin will be a future mainstream currency. And Bitcoin is not alone – there are currently about 30,000 different active cryptocurrencies that have been created on blockchain networks. One of the most notable is $TRUMP, a cryptocurrency and World Liberty Financial, a crypto platform, both created by the Trump family when Donald Trump was inaugurated for his second term in presidency. By selling World Liberty Financial tokens and $TRUMP mime coins to foreign governments and others seeking political favors, Donald Trump and his family personally made over $2 billion last year. It is unlikely that there will be much of a market for WLF tokens and $TRUMP mime coins when Mr. Trump’s term ends and he no longer welds the economic and political power he currently has.

Past generations have bought up Beanie Babies, Cabbage Patch Kids, Hummel figurines, and holiday Barbie dolls in expectation of their increasing in value in the future. Today, these “investments” are practically worthless. Many of today’s highly sought cryptocurrencies are destined for the same future fate as Beanie Babies. So, before you invest in a cryptocurrency as a part of your retirement portfolio, think about whether that cryptocurrency will realistically be used in the future as a mainstream currency to purchase goods and services. If it won’t be, then in 30 years, your retirement portfolio will consist of a bunch of worthless numbers, like a vault full of Beanie Babies today.

Personally, I do not believe that cryptocurrency will be widely used as mainstream national currencies and for that reason, I do not believe that cryptocurrency will hold its value as a long-term investment. That is why I do not have cryptocurrency in my long-term retirement portfolio.

June 19, 2026

In very general terms, the best years to contribute to a Roth IRA, Roth 403(b), or Roth 401(k) are years when your income tax rate today is lower than your income tax rate will be when you retire. There are two ways this can happen, either (1) your taxable income is higher in retirement than it is today or, (2) income tax rates are higher in your retirement years than they are today.

Many financial pundits say that most people’s income is lower in retirement than it is when they are working. But as a retiree myself, I think it is better to save so that your disposable income in your retirement years is higher than during your working years. The reasons why I believe this is that when you are retired, you want to have the resources to do all of the things that you didn’t have time to do when you were working such as travel, take up new hobbies, buy a boat, buy a retirement home, etc. Additionally, healthcare costs increase exponentially such that the average healthcare expenditures for an 85-year-old is $46,500 per year whereas healthcare expenditures for a 40-year-old is only $8,600. Americans need sufficient annual retirement income to cover these increasing healthcare costs. Assuming tax rates remain constant, good years to contribute to a Roth account are:

• Early in your career when your salary is relatively low before you get promotions or gain seniority
• Years when you are off work or working part-time for a few months, resulting in a lower annual income
• When you plan on retiring late in life, resulting in a large amount of retirement savings and thus a high annual retirement income
• If you anticipate a large taxable inheritance during your retirement years, such as an inherited tax-deferred IRA or annuity

Federal personal income tax rates are at historic lows at present. The big question is will they remain low or will Congress increase personal income tax rates in the future? It takes a lot of money to run the federal government and the way governments get money is through taxes. If any government lowers or eliminates income taxes, it has to increase other types of taxes, like excise taxes, capital gains taxes, property taxes, sales taxes, or tariffs. It is kind of like the whack-a-mole carnival game.

Last year, Congress voted to continue the 2016 federal income tax cuts. In order to do this, the government reduced expenses by laying off a large number of government employees and eliminating a large number of federal grants and programs. Reducing expenses alone was not sufficient to permit the low income tax rates, so the President instituted sweeping import tariffs, which are consumption taxes paid by American consumers who purchase products and supplies that originate from other countries – essentially a sales tax on anything that is not manufactured or produced in the United States.

Government spending will rise in the future

The largest federal government expenditures are Medicare & Medicaid (24%), Social Security (22%), interest (14%), and defense (13%). Together, these 4 spending categories account for nearly three-quarters of the annual U.S. budget. Eliminating or cutting back on other federal programs is great for scoring political points but in reality has a negligible effect on the federal budget. There are reasons to believe that none of these four major categories of government spending will decrease in the near future:

Medicare and Medicaid

There are two reasons to believe that Medicare and Medicaid expenditures will rise in the future: healthcare inflation and the aging U.S. population. American healthcare is expensive and increases significantly with age, averaging $26,490 per year for Americans between 65-84 and $46,506 for Americans over age 85-years-old.

Historically, healthcare costs has risen faster than the general inflation rate. Between 2000 and 2023, healthcare costs increased by 121% whereas the cost of all goods and services in the U.S. increased by 86%. Assuming this trend continues for the next 10 years, the cost to provide healthcare to all Americans will continue to outpace the country’s overall inflation rate.

The U.S. population is aging due to a longer life expectancy and a decreased birth rate. In 1960, the U.S. birth rate was 3.7 children per every American woman. In 2024, the birth rate had fallen to the lowest in history at 1.6 births per woman. This declining birth rate has resulted in fewer young Americans compared to elderly Americans. At the same time, Americans are living longer. After a drop in life expectancy during the COVID pandemic, U.S. life expectancy reached an all-time high in 2024 at 79.0 years. The net result is that the number of retired Americans is increasing relative to the number of working Americans.

Medicare is paid for by both payroll taxes and U.S. government general funds. Payroll taxes that you pay during your working years are not saved in an account somewhere to cover your Medicare expenses later in life. Instead, Medicare costs of today’s retirees are paid by today’s U.S. workers’ payroll taxes. But Medicare is also funded by government general funds and the source of those general funds is federal taxes. As the percentage of Americans over age 65 increases at the same time that the healthcare inflation rate increases, it will put increasing demand on a shrinking percentage of American workers to pay for Medicare through taxes. The bottom line is that the federal government will have to increase some form of taxes to pay for the future increased cost of Medicare.

Social Security

Medicare and Social Security are both funded through payroll taxes. Thus, the declining U.S. birth rate and increasing U.S. life expectancy are affecting Social Security in the same way that they are affecting Medicare. Previous estimates were that the Social Security Trust Fund would run out of money in 2033. Yesterday, the Congressional Budget Office released projections that the Social Security Trust Fund will be depleted sooner than previous estimated, in 2032. The main reason for this is that the CBO revised its economic forecast and now predicts a higher inflation rate than it previously predicted. Because the annual cost of living increase in Social Security benefits is tied to inflation, if inflation rises, so too do Social Security expenditures. Once the Social Security Trust Fund is depleted, monthly Social Security checks will be reduced to equal the amount taken in by payroll taxes each year. Current payroll tax rates will only provide enough money to pay for 81% of future Social Security monthly benefit checks. Therefore, beginning in 2032, the federal government will only have two options: either reduce Social Security benefits by 19% or increase taxes to maintain current Social Security benefits.

Interest payments

The interest rate that the federal government pays on Treasury bonds, notes, and bills is tied to the Federal Reserve’s lending rate. In turn, the main driver of the lending rate is the nation’s inflation rate. Although inflation has cooled since the supply chain disruption caused by the COVID pandemic, it has stubbornly remained above the Federal Reserve’s annual inflation target of 2.0%. One of the main reasons for the persistently high inflation rate this year is tariffs being charged on goods and products imported from other countries. Tariffs are essentially a sales tax on imports that are ultimately paid by American consumers, thus raising the prices of anything manufactured abroad or made from products and natural resources produced abroad.

There are two ways to reduce the amount that the federal government pays for interest: either lower the Federal Reserve’s lending rate or stop borrowing money. The Federal Reserve is currently opposed to reducing the lending rate because rate reductions will worsen inflation. The federal government cannot stop borrowing money because it is spending more than it takes in from taxes and tariffs. Therefore, the government is stuck with having to borrow more and more money at high interest rates. This will grow the amount that the Federal government must pay each year in interest. To make matters worse, as the U.S. deficit increases, its credit rating will eventually fall, resulting in even higher interest rates that the government must pay to borrow more money.

Defense spending

The United States spends slightly less on defense each year than it does on interest. However, the U.S. prides itself on the most powerful and technologically sophisticated military in the world. The U.S. uses the threat of its military for geopolitical leverage. To cut back on military spending would be to allow other world powers, such as China, to overtake the U.S. in military clout. The Congressional Budget Office projects that defense spending will increase by 1.1% between 2025 and 2029 (adjusted for inflation) and then increase a whopping 11% between 2029 and 2039 (also adjusted for inflation). Thus, not only will defense spending not be lower in the future but it will actually be a lot higher in the future.

If the government can’t reduce spending, it will have to increase taxes

With 73% of U.S. government spending most likely to increase, rather than decrease, the only way to avoid spiraling federal debt will be to increase taxes.

Data from the U.S. Department of the Treasury reports that individual tax accounts for the largest percentage of federal revenue at 52%. The vast majority of individual tax is the personal income tax accounting for 91% of individual tax; capital gains tax accounts for about 9% of individual tax. Payroll tax is the second largest income source at 32% and is taxed at 15.3% of gross income with half paid by the employer and half paid by the employee. Payroll taxes only apply to the first $184,500 of gross income – any amount above that is not subject to payroll tax. Tariffs account for 7% of government revenue and are applied to imported goods and products. Corporate income tax accounts for 6% of government revenue and is a flat 21% of corporate profits (gross revenue minus expenses and deductibles). Excise tax is a form of sales tax charged on things like alcohol, gasoline, tobacco, and airline tickets. Estate and gift taxes account for <1% of government revenue and are charged on inherited estates greater than $13.61 million (individual) or $27.22 million (married couples). Gift taxes are levied on annual gifts exceeding $19,000 (individual) or $38,000 (married couples). Estate and gift tax rates range from 18% to 40%.

Tariffs and excise taxes are “consumption” taxes, similar to sales taxes levied by states and local communities. Personal income tax and payroll tax are both types of income tax that are paid by the individual worker and based on the amount that you earn. Corporate income tax and individual capital gains tax are very different from personal income tax in that they only apply to profits – either corporate profits or personal profits from asset sales. Because of this, corporate income tax is ultimately paid by investors in the way of reduced dividends and by consumers in the way of higher prices for the products produced by the corporations. Capital gains tax is simply paid by the individual investor.

Over the past 50 years, the percentage of total federal government revenue from payroll taxes has grown while the percentage from excise taxes and corporate income taxes has fallen. The percentage from individual income taxes has also grown, albeit at a much slower rate than payroll taxes.

Roth retirement accounts and taxes

If the federal government increases personal income tax rates in the future, then investing in Roth accounts now is advisable. But increasing any other type of tax will not affect Roth accounts. Payroll taxes paid by the individual are always paid in the year that you earn money, even if that money then goes directly into a tax-deferred retirement plan such as a 401(k) or 403(b) and thus are not at all subject to the financial forces that govern the decision of whether to contribute to a tax-deferred retirement account or a Roth retirement account. Similarly, capital gains tax is only paid on non-retirement investments and does not affect the decision about whether to contribute to a tax-deferred or Roth retirement account.

The impact of increasing different types of federal taxes

Increasing payroll taxes or increasing the maximum income subject to payroll taxes can help keep Medicare and Social Security solvent but will not help cover the increasing federal expenditures on interest and defense spending.

Increasing capital gains tax rates could be applied to increased interest spending and increased defense spending but capital gains accounts for only a very small amount of total government revenue – about 4.6%. Therefore, capital gains taxes would need to be increased to astronomical levels to make up for the projected increases in government spending on interest and defense.

Increasing tariffs could be applied to interest and defense spending but tariffs would need to be dramatically increased. Like any consumption tax, tariffs are inflationary in the short term and this could potentially result in higher interest rates and thus more money that the government has to pay for interest payments to borrow money. However, because tariffs cause a one-time increase in the price of imported goods and products, they have relatively little impact on long term inflation. Another problem with tariffs is that they encourage consumers to buy domestically produced goods and products so that over time, American consumers buy less imported goods and products, thus reducing the amount of money that the federal government brings in from tariffs.

Increasing corporate income tax could be applied to future increased government spending. However, when corporations are faced with increased tax expenses, they either have to reduce dividends paid to investors or increase the cost of goods and services sold. Last year, U.S. corporations distributed $2.26 trillion in dividends. The government collects a total of $5.23 trillion in revenue each year so increasing the corporate income tax rate would seem to be a viable option to solve the looming U.S. debt. Especially because foreign investors own approximately 40% of U.S. stocks, meaning that foreign investors receive about 40% of the dividends from U.S. companies. However, not all corporations distribute dividends, so increasing the corporate income tax rate to 25% or 30% would likely result in increased costs of goods and services purchased by consumers. In other words, inflation.

Excise tax is a type of sales tax ultimately paid by consumers. Currently, the amount of revenue from excise taxes is so small that to cover the looming deficit, the federal government would need to start taxing other goods and services, in essence instituting a national sales tax, similar to the “value added tax” used by 160 different countries. The value added tax used in European Union countries averages 22% and the value added tax used in the U.K. averages 20%. Excise tax and sales tax cause a short term increase in inflation but have little impact on long term inflation.

Estate and gift taxes account for such a small amount of government revenue that any realistic increase in these taxes would have a negligible impact on the federal deficit.

Trying to predict the future

From the above discussion, it is clear that the federal government will need to increase some form(s) of taxes in the near future in order to pay for the projected increases in Medicare, Social Security, defense, and interest spending. The big question is which types of taxes will be increased? Increasing consumption taxes such as tariffs, excise taxes, or a national sales tax would likely be favored by conservatives. Increasing individual income tax rates and corporate income tax rates (particularly on high earners and large corporations) would likely be favored by liberals. Consumption taxes disproportionately affect lower income people whereas income taxes disproportionately affect higher income people.

If the government increases individual income tax rates in the future, then now is a great time to put money in a Roth 401(k), Roth 403(b), or Roth IRA. If the government increases other kinds of tax, then there will be no impact on whether or not to contribute to a Roth retirement account. Does the United States have the stomach for returning to the pre-2016 personal income tax rates? Or will the U.S. increase some other form of tax?

What is clear is that the rates of some type or types of tax are going to have to increase between now and when most working Americans eventually retire.

The safest approach for the prudent investor is to contribute to both tax-deferred retirement accounts and Roth retirement accounts this year. That way, you hedge your bets on whether your personal income tax rate will be higher or lower in retirement than it is today. If political sentiment seems to be shifting toward increasing the personal income tax rate, then change your strategy and put as much money as you can in Roth accounts before the higher tax rates are instituted. If, on the other hand, political sentiment seems to be to increase consumption taxes or corporate income taxes, then the decision about whether to contribute to a tax-deferred or Roth retirement account should be based on your assessment of whether your taxable income today is likely to be higher or lower than your taxable income in retirement. By contributing to both tax-deferred and Roth retirement accounts, you create a diversified retirement portfolio and a diversified portfolio is the strongest portfolio you can build.

Create a diversified retirement portfolio

Your retirement portfolio should be diversified by having money in five different types of accounts:

• Fixed income. This includes Social Security benefits, pension income, and annuities.
• Tax-deferred. This includes a regular 401(k), 403(b), 457, traditional IRA, and SEP.
• Roth. This includes a Roth 401(k), Roth 403(b), and Roth IRA. Not all employers offer a Roth 401(k) or Roth 403(b) and if your income is too high, you cannot directly contribute to a Roth IRA. However, anyone can contribute to a traditional IRA and then do a “backdoor Roth” by then immediately converting that money into a Roth IRA.
• Regular investments. These are investments that you make with your post-tax income such as mutual funds or stocks from a brokerage account. This could also include investment possessions such as gold, art, or real estate properties.
• Cash. This includes money held in your checking, savings, or money market accounts. Holding a lot of money in cash is a poor choice for long term investing because it will lose money compared to inflation. However, even in retirement, it is desirable to keep a cash emergency fund sufficient to cover at least 3 and preferably 6 months of basic expenses in case of unexpected large expenses or a sudden dramatic fall in the stock and bond markets.

By having your retirement portfolio split between these 5 buckets, you can strategically withdraw from different buckets depending on how the market is doing and what the income tax rates are in any given year of retirement. This then allows for maximal annual disposable income while maximally preserving portfolio principal.

February 25, 2026

Cryptocurrencies, such as Bitcoin, have been getting a lot of attention as investment options recently. But should you add cryptocurrency into your retirement portfolio? Financial advisors often recommend a 5 group diversification strategy for retirement investments: (1) U.S. stocks, (2) foreign stocks, (3) U.S. bonds, (4) foreign bonds, and (5) real estate. Instead of buying individual stocks, individual bonds, and individual real estate properties, most investors opt for stock mutual funds (or ETFs), bond mutual funds, and real estate investment trusts (REITs). Many investors are now questioning whether they should add cryptocurrency as a sixth group.

So, what is cryptocurrency really?

Cryptocurrencies are digital currencies that are contained on networks of computers using a public ledger technology called blockchain. Transactions involving cryptocurrency is recorded in digital “blocks” that are attached to previous blocks of transactions resulting in a chain of blocks that represent the chain of custody of that particular cryptocurrency, for example, a bitcoin. The blockchains cannot be altered but each transaction must be validated by computers on the blockchain network called “miners”. Once the transaction is validated, that transaction block is added to the blockchain and the cryptocurrency then transfers to its new owner.

When you invest in a stock, you buy part ownership in a company. When you invest in a bond, you buy part ownership of a loan to a company (or a loan to a government). When you invest in gold, you own metal that can be converted into jewelry or electronics. But investing in cryptocurrency is like investing in any kind of currency: U.S. Dollars, British Pounds, Euros, Yen, etc. The difference is that U.S. Dollars are backed by the “full faith and credit” of the U.S. government. Similarly, Pounds are backed by the British government and Euros are backed by the European Union government. Cryptocurrencies are not backed by any government or anybody. They are simply strings of computer code that a lot of people have decided to use as money.

The value of any given nation’s currencies is based on the general perception of the strength of that nation’s economy. In turn, that perception is based on such metrics as that nation’s inflation rate, interest rates, GDP, government debt, trade balance, and central bank monetary policies. An advantage of cryptocurrencies is that they are not regulated by any government and are thus immune to government interventions. Additionally, they are decentralized, thus allowing for rapid transfer of money, anywhere on the planet. For these reasons, many people have embraced cryptocurrency as the future medium of exchange to replace currencies of individual countries.

Currently, cryptocurrency is used by 7% of U.S. adults for investment, 1% of U.S. adults for purchases (transactions), and 1% of U.S. adults to transfer money from one individual to another. Men are twice as likely to use cryptocurrency for transactions as women and the majority of cryptocurrency users are under age 60. Interestingly, low income adults making less than $25,000 per year are four-times as likely as middle income or high income adults to use cryptocurrency for transactions. On the other hand, high income adults are twice as likely as other income groups to buy cryptocurrency as an investment.

The problems of cryptocurrencies as retirement investments

As I see it, there are several reasons why investors should be cautious adding cryptocurrency to their retirement portfolios:

• Lack of precedent on long-term returns. A key factor in deciding whether to buy a particular investment is one’s investment horizon. The investment horizon is how long you plan on holding that investment before selling it. For example, saving for a down payment on a new car purchase in 6 months is a short investment horizon whereas saving for retirement 35 years from now is a long investment horizon. It would be imprudent to hold the car loan down payment exclusively in stocks because of the short term volatility of stocks. It would be equally imprudent to hold the retirement investment for 35 years exclusively in bonds because of the low returns of bonds in the long term. Bitcoin was first launched in 2009 and first used for an actual purchase in 2010. Thus, Bitcoin, and other cryptocurrencies, are very new types of investments. In the short time since that first cryptocurrency purchase, Bitcoin has increased in value from $0.30 per Bitcoin at the end of 2010 to $68,000 per Bitcoin today. This represents enormous short term returns. However, no one knows what the long term returns are going to be for Bitcoin and other cryptocurrencies. There simply is no precedent. Are cryptocurrencies a fad or are they the future of money?
• Short term volatility. Cryptocurrencies are unsuitable for short term investments given their volatility. In the past three and a half months (October 2025 to present), Bitcoin has lost nearly 50% of its value. Volatility is acceptable for investments held for long term but excessively risky when used for short investment horizon needs.
• Will cryptocurrency really be used as currency? When was the last time you bought a loaf of bread at the grocery store with Bitcoin? Or a hamburger at McDonalds? Or a tank of gas at an Exxon station? As with any kind of currency, its value is to be able to buy stuff and currently, cryptocurrency is rarely accepted as payment (unless you are a kidnapper, drug dealer, extortionist, or ransomware crook). Unless countries adopt Bitcoin or some other cryptocurrency as official legal tender, consumers are likely to prefer to use the national currency for most transactions.
• Cryptocurrency subdivisions are complicated. With a Bitcoin currently valued at around $60,000 per 1 Bitcoin, a pint of beer at your local pub would cost about 0.0001 Bitcoin. Americans are used to pricing in dollars and cents; Europeans are used to pricing Euros and cents; and British are used to pricing in pounds and pence. Would you prefer to see the price of a beer at $6 or at 0.0001 Bitcoin? Although there are Bitcoin denominations, they are foreign to most people: 1 Decibitcoin = 0.1 Bitcoin, 1 Centibitcoin = 0.01 Bitcoin, 1 Millibitcoin = 0.001 Bitcoin, 1 Microbitcoin = 0.001 Bitcoin, and 1 Satoshi = 0.00000001 Bitcoin.
• Cryptocurrency’s volatility creates excessive risk for retailers and consumers. The substantial daily and weekly swings in the value of Bitcoin and other cryptocurrencies creates enormous problems for those who sell goods and services. For example, let’s say you are a house painter and give a quote of 0.0452 Bitcoin to paint someone’s house but you are currently scheduling 2 months out. If the value of a Bitcoin drops by 20% in those 2 months, then you are going to lose money and go out of business pretty soon. On the other hand, if the value of Bitcoin increases by 20% over a 2-month period, then an employer who hires an employee with an annual contract to be paid 0.09482 Bitcoin each month could face an unsustainable increase in overhead expenses and go out of business. Retailers that carry an inventory of goods would need to change prices of goods on an almost daily basis to account for daily changes in the value of Bitcoin (i.e., the daily Bitcoin exchange rate). For businesses to be able to create workable budgets, they need to confidently predict the rate of inflation (or deflation) in the upcoming year. The same holds for individuals preparing household budgets. Volatility is a budget destroyer.
• Countries are unlikely to give up their own currencies. Governments like to control their own currencies. Great Britain refused to adopt the Euro even when it was part of the European Union. Similarly, Denmark and Sweden also have kept their own currencies rather than adopt the Euro. Each country’s central bank sets its own interest rates based on its own monetary policy. Each country has differing degrees of nation debt. Each country has different GDPs. Each country has differing economic performance, such as unemployment rates and productivity efficiency. Each country has different degrees of geopolitical stability,. And each country has differing trade balances. Because of these differences, the value of a Bitcoin or other cryptocurrency will vary from one country to another. In one country, a dozen eggs might cost 0.00001 Bitcoin but in another country, a dozen eggs might cost 0.000005 Bitcoin. By giving up its national currency, a country’s government loses economic control.
• Transactions take too much time. Cryptocurrencies can only reach maximum long term value if they become used as currency for most sales transactions. For Bitcoin transactions to be validated by miners and new blocks to be added to an existing blockchain requires about 1-hour on average. Each transaction requires multiple different miners to each perform independent validations. Each of those individual validations requires a great deal of complex computations. If the Bitcoin network is busy, there can also be long wait times in the validation queue that results in transactions taking several hours. In addition, each transactions results in a given blockchain becoming longer; as blockchains get longer, it takes more computer CPU to perform validation computations. This makes cryptocurrency, like Bitcoin, unsuitable for day-to-day transactions unless the cryptocurrency is associated with a credit card or a debit card.
• Cryptocurrencies cannot be used during power failures or internet outages. If there is a power failure after a storm or a hurricane, you can still buy supplies at your local hardware store using cash. If your internet service provider has an outage because a construction crew accidentally cut your regional fiberoptic cable, you can still buy a cup of coffee at your local coffee shop using cash. In fact, many small retailers only accept cash and do not accept credit cards because of their associated fees. Although the transaction validation fees charged by Bitcoin miners are relatively small, they can spike upward significantly during periods of network congestion. This could potentially result in dynamic pricing to accommodate these variable validation fees… and consumers do not like dynamic pricing, particularly for day-to-day purchases.
• Transaction validation uses an enormous amount of electricity. Currently, Bitcoin miners consume about the same amount of electricity as the entire country of Argentina every year. This electricity consumption will grow if more transactions occur every year. The only way to create this amount of electricity is to increase fossil fuel power plants or renewable energy sources. Many communities are already facing objections to building new data centers because of their excessive electricity consumption that increases the cost of electricity to everyone in the community. Limits on future electricity generation could pose a barrier to widespread adoption of cryptocurrencies for day-to-day transactions.
• If you lose your key, you lose your Bitcoin. The key is a 256-bit random number that functions as a “master key” or signature to unlock and spend your Bitcoin. It must be kept secret. If you lose that number, that Bitcoin is lost forever. If you store that number on a piece of paper in your home and there is a fire, you lose your entire investment. If that number is kept on your home computer and the computer is stolen, you lose your entire investment. If your number is hacked, you lose your entire investment. Stefan Thomas, a San Francisco programmer, famously lost a hard drive containing the keys for 7,000 Bitcoins – in other words, he lost forever the equivalent of $420 million. It is currently estimated that 20% of Bitcoin keys have been lost, essentially making those Bitcoins disappear. Bitcoins can be held in cryptocurrency exchanges, such as Coinbase, that offer a secure place to store your Bitcoin; however, exchanges charge fees for storage and transactions.
• Mainstream adoption of cryptocurrency is affected by politics. Political leaders can have a profound effect on whether cryptocurrencies become mainstream. For example, they can decide to accept a particular cryptocurrency as legal tender for paying taxes, paying for tickets to enter National Parks, etc. Conversely, politicians can deny mutual funds or ETFs from dealing in cryptocurrency. A single executive order can make or break a cryptocurrency,

The arguments for cryptocurrency as a retirement investment

For every ardent cryptocurrency skeptic, there is an equally passionate cryptocurrency advocate. Here are some of the reasons cryptocurrency proponents cite for why people should invest in cryptocurrency:

• The number of Bitcoins is capped. Currently, 19.9 million Bitcoins have been created. The maximum number that can be eventually mined is 21 million. That means that 95% of Bitcoins have already been mined. As a result, the more people use Bitcoins, the more valuable they become. It is sort of like the opposite of inflation – an automobile costing 1 Bitcoin today might cost 0.5 Bitcoin a year from now if Bitcoin replaces traditional currency. As the demand for Bitcoins increases in order to complete more and more transactions, then if there is a finite number of Bitcoins in existence, the value of each Bitcoin will rise. Because of this, the value of Bitcoin will steadily increase as it is used for more and more transactions.
• Over time, many Bitcoins are irretrievably lost. If you lose your bitcoin key, that Bitcoin is gone forever and no one will ever be able to use it. Just like pennies and dollar bills, over time, a certain percentage of them become lost and go out of circulation. Since there are a maximum of 21 million Bitcoins, as some Bitcoin keys are inevitably lost each year, there will be fewer and fewer Bitcoins in circulation, thus increasing the value of those remaining Bitcoins.
• Cryptocurrency cuts out the middlemen. An advantage of cryptocurrency is that it eliminates banks as middlemen for various transactions. In addition, cryptocurrency operates outside of government control, making it immune to monetary policy meddling by governments.
• It is taxed at your capital gains tax rate rather than your income tax rate. When you sell a Bitcoin, any profits you make are taxed at your capital gains tax rate, as long as you have held that Bitcoin for more than one year. For the vast majority of Americans, the capital gains tax rate is lower than their income tax rate. Unless you have a very low income or a very high income, that capital gains tax rate is 15%.
• It is extremely portable. You can take your cryptocurrency across national borders with ease. This makes it efficient for someone sending money back home to their family in Costa Rica and also makes it easy for someone fleeing the U.S. to move all of their assets out of the country without being taxed or having their accounts frozen.
• Diversification. The value of cryptocurrency is affected by different forces than those that affect the value of other investments, such as stocks or bonds. However, cryptocurrency is new enough that the factors that influence its value have not been fully determined. Nevertheless, it provides diversification that may protect investors during periods of stock and bond market decline.

So, what is a retirement investor to do?

The future value of cryptocurrency depends entirely on whether its use for transactions increases. If so, then the value of cryptocurrencies, such as Bitcoin, will increase and likely increase a lot. On the other hand, if cryptocurrencies fail to be used for future transactions, then they will have little or no future value. In that sense, buying and holding cryptocurrency is more speculation than investing. Cryptocurrency will either be a boom or bust as a long term investment. There are so many variables that will affect whether cryptocurrency goes mainstream that it is impossible to confidently predict the future of cryptocurrency. Twenty years from now, either cryptocurrency’s advocates or naysayers will be saying “I told you so” but no one knows which group it will be.

A third possibility is that cryptocurrency continues to be used for a some transactions and as a means of transferring money from one individual to another. In this regard, cryptocurrency is a great way to launder money if you are a criminal or to avoid taxes on money transfers if you don’t want the IRS to know about the transfer. It is far easier for a drug cartel to charge a few hundred Bitcoin for a shipment of cocaine than to try to figure out how to move a pallet of $20 bills across the border.

If you do decide to include Bitcoin or some other cryptocurrency in your retirement portfolio, it should be a relatively small percentage, 1% – 5%. If cryptocurrency has future widespread adoption, that small percentage will be worth a fortune in 10 or 20 years. If cryptocurrency does not become widely used for ordinary transactions in the future, then a total loss of only a small percentage of one’s investment portfolio will not result in a significant loss of one’s total assets. If Bitcoin does not go mainstream but continues to be used by drug dealers and ransomware criminals, then you probably won’t make a fortune on your Bitcoins but you probably won’t lose your initial investment, either.

February 22, 2026

Traditional retirement investments consist of 5 types of holdings: U.S. stocks, foreign stocks, U.S. bonds, foreign bonds, and real estate. But in reality, you can put any kind of holdings in your retirement portfolio, from fine art to cryptocurrency, from pork belly futures to stamp collections, and from collectible sneakers to gold. But should you?

As an investment, gold has recently received a lot of attention because it has increased in value by 162% in the past 2 years. At the same time, the S&P 500 stock index increased by 24%. The graph below shows how an investor would have performed by investing $2,000 in either gold or the Vanguard Total U.S. Stock Index Fund (VTSAX) in January 2024 through January 2026.

Based on the returns for gold during the past 2 years, it looks like a great investment. But is it really and is now a good time to invest in gold?

Gold as an investment

For hundreds of years, gold was treated as a form of money. Until the Great Depression, the United States tied its currency to the value of gold, the so-called “gold standard”. But today, you cannot pay for your groceries or pay your rent using gold. Gold’s value is because of its value as a commodity.

A commodity is a raw material or primary agricultural product that can be bought and sold on a commodities market. Commodities include things like wheat, corn, copper, crude oil, and gold. Commodities can typically be consumed or made into a product that can then be sold. Wheat can be made into flour, crude oil can be made into gasoline, and gold can be made into jewelry. As an investment, gold is unique among commodities because it does not spoil if you hold it too long (unlike wheat or corn) and it is small enough that the average person can keep it in a safe at home or in a safe deposit box at a bank (unlike crude oil or copper). Because of these qualities, gold (and other precious metals) can serve as a long term investment for the average person.

There are many factors that can affect the price of gold. Gold is considered to be a safe haven asset, meaning that in times of geopolitical instability, gold is generally considered to hold its value better than the currency of unstable countries. Thus, when there is geopolitical tension, the price of gold usually increases. During periods of economic uncertainty, the central banks of countries buy gold as a hedge agains uncertainty and this can further drive up the price of gold as demand increases. Gold is viewed as a hedge against inflation so when the rate of inflation increases, the price of gold increases. Also, when the value of the U.S. dollar falls, the price of gold in the United States increases. Interest rates can additionally affect the price of gold – when bond interest rates increase, the price of gold decreases since unlike bonds, gold does not pay out annual interest or dividends, making bonds more attractive to investors than gold.

In the long term, stocks outperform gold

Since 2000, gold has outperformed stocks but over a longer period of time, stocks have outperformed gold. The table below shows the current value of $1 invested in either gold or stocks, assuming that stock dividends are reinvested.

One the surface, it appears that gold is the better investment over the past 25 years. However, if you compare the returns from gold versus the S&P 500 between 2000 and 2019, those returns are similar – most of gold’s increase in value has occurred in the past 6 years, related to the COVID pandemic, geopolitical instability related to the wars in Ukraine and Israel, and more recent global economic instability related to tariffs and the falling value of the U.S. dollar. The risk of gold today is that it may be overvalued – easing of geopolitical tensions and greater global economic certainty could result in gold falling in value in the future.

In the short term, gold is highly volatile – even more volatile than stocks. This makes it a poor choice for short term investing. Thus, the role of gold in a retirement portfolio should be as a long term investment.

How do you invest in gold?

The most direct way to invest in gold is to purchase gold bars or gold coins. However, this means that you need a secure way to store it, such as in a safe at home or in a safe deposit box in a bank. Even with seemingly secure storage, physical gold can be subject to theft. Buying gold bars or coins from a gold dealer also requires paying a commission – generally 1% to 5% of the purchase price. These commissions are not reflected in graphs showing an increase in the price of gold and these commissions can significantly erode investment returns. Additionally, secure storage can add costs that can further erode the overall return on investment in gold. To summarize – the cost of buying, storing, and selling physical gold can negate a lot of the returns from increases in the price of gold as a commodity.

Physical gold can also be held in an IRA for retirement. However, there are specific IRS rules about gold IRAs. For example, the gold must be stored in an IRS-approved third party storage facility – you cannot store gold in a bank safe deposit box if that physical gold is in an IRA. The IRS also requires that the gold in a gold IRA be purchased by an IRS-approved custodian and that the gold bullion be IRS-approved (> 99.5% purity). Fees paid to the custodian to buy and sell gold in the IRA and fees paid to the storage facility to store and insure the physical gold in the IRA can significantly erode the returns from investment.

An alternative to physical gold is to purchase shares of a gold mutual fund or gold ETF where the fund then holds the physical gold in a secure location. Gold ETFs have expense ratios of around 0.40%, which is considerably cheaper than the commissions paid when buying physical gold from a gold dealer. In addition, the ETF expense ratio also covers the cost of storaging and insuring the physical gold that is held by the ETF. When compared to a gold IRA, having a gold ETF in your regular traditional or Roth IRA is much less costly and avoids the rather high custodian fees, storage fees, and dealer mark-ups associated with gold IRAs.

Lastly, you can buy shares of stock in gold mining companies; however, this poses additional risk since the companies can lose value from operational problems, poor management, or political upheaval in the country where the mine is located – even as the value of physical gold as a commodity is increasing.

So, should you have gold in your retirement investment portfolio?

Gold’s volatility makes it a poor choice as the main component of a retirement portfolio. However, as a minor component, it can serve an important role as a hedge against inflation and hedge against falling purchasing power of the U.S. dollar. Gold usually (but not always) increases in value when bonds decrease in value. Sometimes gold will also increase in value when stocks decrease in value. In a retirement portfolio, this gives the retiree the ability to strategically draw from gold investments during months or years that stocks or bonds have fallen in value.

Whether to have gold in your retirement investment portfolio and what percentage to have will depend on several factors:

• Comfort with investment risk. The percentage of one’s retirement investment portfolio invested in gold will depend on one’s personal degree of risk aversion. As an example, someone who is risk averse from an investment standpoint may want to have no retirement holdings in gold whereas someone who is comfortable with investment risk may want to have as much as 5% of the portfolio invested in gold.
• Years until retirement. As with any volatile investment, the closer one is to retirement age, the lower the percentage of volatile investments one should have in their retirement portfolio. There is too great of a risk that gold could lose significant value in the short term and if an investor is dependent on gold to provide a large percentage of their annual retirement income, then that investor could need to draw from the gold investment at a time when it has lost value. It is unwise to make a large new investment into gold a year before retiring.
• Projected annual retirement income to living expense ratio. The closer a retiree’s annual income from investment is to their basic living expenses, the lower the percentage of volatile investments should be in their portfolio. The danger is that if there is a fall in value of a volatile investment in any given year, the retiree may have to withdraw a greater amount of their total portfolio to pay the bills and risk running out of money later in life. On the other hand, if the annual retirement income is considerably greater than annual basic living expenses, then the retiree can simply reduce discretionary spending for a year or two when volatile investments fall in price and thus preserve total investment portfolio value for the future.
• Life expectancy after retirement. A longer life expectancy from the year that one retires means a longer investment horizon for retirement investments. The longer the investment horizon, the more volatility and risk the investment portfolio can withstand since some of that investment can be considered long term. On the other hand, if one anticipates a relatively short life expectancy after retirement, then the portfolio should predominately contain low risk, non-volatile investments since they will all be short term investments. Factors that can affect life expectancy after retirement include one’s age when retiring, the presence of any chronic diseases, whether one smokes, whether one is obese, and how long one’s parents and grandparents lived.
• The amount of one’s Social Security benefit or pension. Social Security and pensions are considered fixed income sources – they may keep up with inflation but they do not increase in value above inflation. The advantage of a fixed income component in one’s retirement portfolio is that it serves as a financial buffer during times when stock, bond, or gold investments drop in value. The larger one’s annual fixed income, the greater risk and volatility one can tolerate with other retirement investments. On the other hand, someone with no pension and a relatively small Social Security benefit cannot tolerate excessive volatility in their investment portfolio and gold would be a poor choice.
• One’s opinion about the future. No one can predict if the U.S. or other major powers will become enmeshed in a future war. No one can predict whether future U.S. policies will result in a fall in the value of the U.S. dollar. No one can predict when the next surge in U.S. inflation will occur. No one can predict when the surging federal deficit will reach the tipping point and cause a new wave of U.S. austerity. If you are a pessimist about the economic and geopolitical future, then a higher percentage of gold in your retirement investment portfolio is warranted. If you are an optimist about the future, then a lower percentage of gold would be more appropriate.

When should you buy gold for your retirement investment portfolio?

The general rule of investing is to “buy low and sell high”. One of the challenges is that you never know if the price of any investment is going to go up or going to go down in the future. However, understanding the factors that affect the price of gold can provide some direction to the investor. Historically, the best time to buy gold has tended to be during periods of low inflation, rising interest rates, geopolitical stability, a strong U.S. dollar, and U.S. policies fostering economic stability. These are times when the price of gold is relatively cheap. On the other hand, the worst time to buy gold is during periods of rising prices, falling interest rates, geopolitical turmoil, a weakening U.S. dollar, and U.S. economic uncertainty. These are times when the price of gold is relatively expensive.

My personal opinion is that we are currently in the latter times. Inflation has proven to recently be sticky with tariffs increasing consumer prices. Although interest rates remain high, they appear to have crested, with gradual reductions over the past year. We are currently experiencing tumultuous geopolitical events with the persisting Ukraine war, U.S. involvement in Venezuela, U.S. posturing toward Greenland, and political instability in Iran. The U.S. dollar has weakened approximately 10% over the past year, largely as a result of U.S. tariffs, federal government shutdowns, and perceived threats to the autonomy of the U.S. Federal Reserve. There is considerable economic uncertainty with threats of even greater tariffs that can result in higher inflation, the increasing federal deficit, the impending exhaustion of the Social Security Trust Fund, and the realignment of traditional U.S. trading partners resulting from “America first” policies.

Should you have a gold component in your retirement investment portfolio? Yes, it can be an important diversification component that will strengthen an investment portfolio. But I believe that now is not the time to buy gold for one’s retirement investment portfolio. Instead, now is the time to be selling gold that you already have in your investment portfolio. Then wait until the various factors historically associated with lower gold prices emerge and then buy gold bars, gold coins, gold ETFs, or gold mining company stocks. Avoid gold IRAs since they have excessively high expenses – if you want a gold component in your IRA, then buy shares of a gold ETF instead.

Because there is no way to know when gold (or any other investment) has bottomed out in price, a good strategy for buying gold is dollar cost averaging. That is, buying small amounts of gold every month or so over a long period of time. Then rebalance your portfolio every year by buying or selling gold to maintain whatever the desired percentage of your total investment portfolio you have decided should be invested in gold, generally 10% or less. As an investment, gold may look hot today, but that just means that you should have bought it 5 years ago.

February 3, 2026