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Q. My wife and I disagree about investing. She’s more conservative than I am. I wanted to buy a cryptocurrency fund inside my IRA with about 10% of the money I have saved. She thinks I’m crazy. We have about $1 million each in our retirement accounts but we try to agree on the overall investments together. What can I do to convince her?
— Spouse

A. It’s good to hear that you and your wife are able to talk openly and directly about your retirement account investments.

And it’s not unusual for one spouse to have a more conservative outlook about investing.

It can make it a challenge to find a middle ground that is agreeable to both, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

To your question about crypto investments.

“Investing in cryptocurrency such as Bitcoin or Ethereum is not for the faint of heart as the prices are quite volatile and can swing widely from one week to the next,” Mott said. “It’s also important to bear in mind that unlike the U.S. Dollar or a Treasury bill, cryptocurrency is not issued by a central bank and there is no deposit insurance such as FDIC or SIPC to guarantee the value.”

“In effect, the investment could become worthless,” she said.

Before making any substantial changes to your portfolio, be sure you evaluate the importance of the two accounts and the income they are, or may, provide for you in terms of your day-to-day living expenses. Mott said.

You didn’t say whether you’re currently taking distributions from your account, but if you are, and if they are essential at their current level to cover your cash flow needs, you may not want to put yourself in financial jeopardy by making a substantial change in your current asset allocation, she said.

Should you be in the position where the Required Minimum Distributions (RMDs) that must be taken each year are not necessary for your support, perhaps consider using some of the excess funds to open a trading account on a crypto platform or use a taxable investment account, Mott said.

“This would give you the opportunity to experience owning and trading crypto currency or funds without having it directly impact your retirement savings,” she said. “That might be a compromise that your wife would be amenable to.”

When it comes to looking at cryptocurrency funds, it’s essential to understand exactly how they invest and the fees that are associated with ownership, Mott said.

“Unlike many mutual funds and exchange-traded funds (ETFs) that come with very low expense ratios, crypto funds can easily cost 2.0% to own,” she said. “That’s a hefty fee in today’s competitive fund-fee environment.”

Additionally, many of the mutual funds and ETFs that focus on this segment of the market do not own cryptocurrency directly, but rather futures contracts based on Bitcoin or other currencies, she said. As with all investments, be sure you understand exactly what you are buying before making the commitment, Mott said.

“Because of the speculative nature of crypto investing, you might be hard pressed to convince your wife that 10% of your retirement savings should be allocated towards this investment,” Mott said. “This is a significant weighting to put towards such a volatile investment so please consider reducing it if you get the go ahead.”

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This story was originally published on May 2, 2022.

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