How Buying Bitcoin Could Solve the Global Pension Crisis
Amid fears of a world recession, the pension time bomb is ticking louder. Financial experts warn that the coming pension crisis is of such a magnitude that it will eventually affect everyone. Now, some are looking into Bitcoin as a potential savior of pension plans.
Pension Funds Investing in BTC Could Achieve Annual Returns of over 19%
The deepening of the pension crisis is due to the difference between how much a pension has to pay out versus how much money the pension has available to pay out. Now, this gap is expanding. According to Moodys Investor Services, public pensions are already underfunded by $4 trillion. And, Moody also announces that pension costs will rise through 2020.
So, the pressing question is, how to cover the $4 trillion gap?
In the 2015 audit of state pensions, the avg yield was 3.6%.
6% of investments in "non-government securities." If 0.3% of all assets were invested in #Bitcoin, the pensions would have returned 19.20%. 5.3x the current rate – saving dying pensions.#Cryptocurrency #DeFi pic.twitter.com/POPGQIOTXK
— Adam Cochran (@AdamScochran) August 8, 2019
Adam Cochran seems to have found the answer, at least, until population growth returns to the levels that existed when pensions were devised.
In his newsletter Coffee and Coin, he puts forward an argument for how Bitcoin might save pension funds.
Cochrans article describes how in 2015 the U.S. state and local government pensions distributed their $3.8 trillion in assets, from which only a modest annual return of 3.6% was earned.
Moreover, Cochran specifically highlights Other nongovernmental securities. These are assets that do not adhere to an institutionalized process for public trading on exchanges. Thus, they are usually the riskiest assets held by the pension fund.
So, if pension funds seek to invest part of the money allocated to other nongovernmental securities in Bitcoin, the annual return would be dramatically higher than the current return of 3.6%.
If in 2015, the state pensions had taken 5% of that 6% set aside for Other nongovernmental securities (a.k.a 0.3% of their overall assets) and invested that in Bitcoin, then the pensions overall return would have been 19.20% annually.
In effect, Cochran affirms, That overall rate of growth, over the past 4 years would have amounted to around 171% yield, almost doubling state pensions from $3.8T to $6.5T in that time.
Millennials Are Buying Bitcoin To Save for Retirement
Bitcoin-based retirement instruments have been attracting the interest of young people, as well as influential politicians.
Crypto and blockchain journalist Rachel Wolfson wrote onRead full story on Bitcoinist.com