Presbyterian Senior Services, a non-profit in New York that runs community programs for older adults, recently added a new course to its curriculum: “Introduction to Cryptocurrency”
“I’m 73 years old. What’s the biggest risk to my estate planning strategy if I don’t jump on the cryptocurrency bandwagon?” asked one of the attendees to the webinar last month.
Seniors are often advised to move their investments from stocks to bonds because they cash out of their investments more often than younger consumers do. But with record-high inflation threatening even that safe haven, some older adults are eyeing alternative assets, including cryptocurrencies.
It’s easy to see why. Bitcoin’s meteoric rise of 164% in 2021 far outpaced other asset classes, making it an attractive way for pension funds and seniors alike to make up for lost savings—if they know what they’re doing and can manage the serious risks. (Just in the last month, the asset has dropped by nearly $10,000, or 24% of its value.)
Still, the prospect of the crypto world courting older adults is raising questions, if not setting off alarms, about how best to protect people from financial exploitation—including from family members—angling for a cut of the trillions in record-high wealth now sitting in the accounts of US adults over age 70.
Is crypto a retirement asset?
The demand for a bitcoin option from retirement plan sponsors recently prompted Fidelity Investments—the US’s largest provider of 401k plans—to offer bitcoin as an option in 401k plans. The company is starting out by offering the program to employees at business intelligence software firm Microstrategy and then will broaden out. Employers will need to approve the crypto option for their employees to access it.
But others are less considered in their approach. Some players in the crypto space are pretty aggressively marketing their position that crypto belongs in retirement accounts. Onramp Invest—a platform for financial advisors wanting to help clients get into crypto—wrote a 55-page report to the Certified Financial Planner Board of Standards in January. In it, the company made the argument that given the proliferation of crypto assets, it would be a breach of fiduciary duty for financial advisors to not offer advice on digital currencies.
To be sure, retirement fund managers usually target people who are younger and still in the workforce, so they are not necessarily catering to seniors. Still, data suggest that Gen Z and Millennials are hardly the only generations gambling with crypto in their retirement accounts. Last year, Bitcoin IRA told Yahoo! Finance that half of its 100,000 user base is 55 or older, and 75% of users are over age 45.
Overall, however, only 3% of US adults older than 65 have invested in crypto versus 31% of Americans who are 18-to-29 years-old, according to Pew Research.
Whether or not this trend continues depends on how crypto is regulated in the future, if it’s regulated at all. Older investors are likely to be turned off if they get burned by crypto or if the economic outlook improves.
Crypto education can protect people from fraud
For certified financial planner Justin Castelli, crypto education for the 70% of his clients who are seniors, retirees, or pre-retirees is about making sure they’re able to stay ahead of all the misinformation on the web. (Less than 10% of Castelli’s clients have allocated any part of their portfolio to crypto, and he generally advises seniors to limit their investments on volatile assets to no more than than 5%.)
The number of companies looking to educate financial advisors on crypto is also growing. In May, the Digital Assets Council of Financial Professionals released a certificate course for financial advisors. Other investment firms also offer their own online courses for financial advisors to DIY their crypto education.
With how much false information exists about crypto investing, Canstelli said he aims to just make sure that his clients understand the basics.
When one of his senior clients wanted to send bitcoin to their grandson as a gift, Canstelli helped make sure that the client correctly set up a digital wallet through Coinbase. Canstelli also has other crypto explainers planned for his clients to help them become more comfortable with the nascent asset class.
“I’m going to do an NFT drop for my clients that’ll be completely free,” Canstelli said. “There’s gonna be no money exchanged in it, but I want them to understand and learn how to open up a web browser wallet…If my clients are going to be around for 20 years, your Chase account is going to have a wallet on your browser in the future, and you’re going to need to know how to do that.”
So how do you explain bitcoin to older adults?
Presbyterian Senior Services’ crypto course was designed to answer questions its course-goers were already having. “Our members are running into Bitcoin ATMs at their local bodegas and they’re thinking ‘What is this?’” says Laurie Petersen, senior director of community education. “The mayor of New York is Mr. Crypto. The feeling was that it’s criminal not to offer this education because people were being exposed to it.”
The webinar attracted a few dozen online viewers, though it was also streamed on large screens at PSS centers.
Andy Phillips, an advisor at PSS who put together the crypto seminar, says he designed the course partly as a kind of inoculation, so older adults won’t be easily sold on a get-rich-quick scheme. (Estimates suggest older adults are cheated out of a combined $3 billion annually.) People are wondering, “Is crypto something that I dare even venture into? Is it too risky? Is it an opportunity? Are there millions to be made?” he said.
To lead the seminar, he hired “Doc” Severson, an options trader who runs ReadySetCrypto, a trading training site. (He has no certification and his expertise comes from his own crypto trading experience.) Although Severson clearly has faith in crypto’s future, Phillips felt the trader could be counted on not to give the seniors a hard sell.
The first tenet of investment, the instructor told attendees: Don’t get involved with assets you don’t understand. To walk people through their options for buying crypto, he explained how to purchase $1 of bitcoin and suggested sticking to established, consumer-friendly exchanges like Gemini and Coinbase. “With crypto, stay very, very small,” he said, “None of this YOLO stuff” because crypto is “far too dangerous” for that.
Pointing to a typical bitcoin illustration, he explained, “Also understand that they’re not physical. If you see any presentations out there on crypto, you’re more than likely going to see somebody using one of these images, which have these beautiful golden bitcoins.”
“Man, can you just imagine grabbing some of these things and throwing them up in the air, just like treasure?” he continued. “Well, it’s just a marketing gimmick.”
But his advice was less clear-cut on other issues, like figuring out how crypto prices move. “That’s maybe the most fundamental question you could ask—why does the price of oil or bread or peanut butter move up and down? Where do you begin with something like that?”
Or on whether not owning crypto is riskier than owning it, to which he admitted not having an answer. “If we have a loss of the dollar as a reserve currency, if that changes, I don’t know how that changes the value of all the assets that we currently have,” he told attendees. For now the dollar clearly has the upper hand, trading higher against the euro, British pound, and yen even as US inflation soars. Bitcoin, by contrast, appears to be in a freefall.
Still, when Petersen asked whether people were interested in additional educational sessions on crypto, the response was an unambiguous “yes.”