The mayor of Miami, Francis Suarez, has announced that he plans to take some of his 401k in bitcoin. This is not his first interaction with the digital currency, and they are unlikely to be the last. Is this a sensible move on his part, and will it be something we see more people adopting in the future?

Suarez and Bitcoin

Suarez has been a fan of bitcoin for some time. The Miami mayor already accepts his pay in the form of bitcoin, being paid through the Strike platform rather than receiving the pay check and bank transfer that most of us typically get. He is not even the only mayor to do this. The mayor of New York, Eric Adams, is also drawing his salary through bitcoin.

He is open about the fact that his mayoral income is not 100% of his income, so this is not as big a risk for him as it would be for those who do rely on one source of payments. He has already been vocal about the digital currency for some time as well, having even spoken at the Bitcoin 2021 Convention.

His interest in bitcoin and other digital currencies has also led him to look into the benefits that it could bring the citizens of Miami too. In particular, he wants to set up a digital currency for Miami that would allow its residents to make municipal payments and handle other aspects of everyday life. Doing so would help to establish Miami as a real crypto hub within the USA. Though New York is trying to chase this crown at the moment, there is a chance that Miami could catch up with the right infrastructure in place.

Is This an Option for Everyone?

So, if Suarez is doing it, does that mean that everyone should too? The answer to that isn’t quite so simple. Cryptocurrencies, even well-established ones like bitcoin, are complex things and we need to make sure that we fully understand what we are doing before we jump in. Some people are happy to just set up financial products for themselves and then have them run on autopilot with very little interaction. This is something that simply can’t be done with cryptocurrencies.

Your 401k plan is one of the most important financial products that comes into your possession. With careful maintenance, you can line yourself up for an extremely comfortable retirement with a 401k. Should you take a risk and use some of it on bitcoin, as Suarez has done? There is no reason why you can’t, certainly. However, you do need to make sure that you approach this operation carefully.

If you do not know how to maximize your 401k anyway, you need to do your research to ensure that you are able to get as much as you can out of it. It might be entirely possible to do so without touching cryptocurrency at all. Though diversification is important with investing, whether it is through a 401k or some other type of investment, you need to make sure that you are doing so through means and channels that you understand.

Why is Bitcoin Potentially Not the Right Idea?

As Suarez mentioned, his mayoral income is not his only stream of income. Therefore, he can do what he pleases with it because his lifestyle is protected by those other forms of income that he has access to. Should he make a mistake with his crypto investments, he will still be able to recover financially.

The vast majority of people are not able to do so. If you were to gamble your paycheck on bitcoin, what would happen if the deal did not work out? Would you have additional funds to fall back on to get you through the month? Chances are that you would not.

Bitcoin also raises some issues on its own. It is the most well-known of the cryptocurrencies, and bitcoin and crypto are two terms that are often used interchangeably. However, not all cryptocurrencies are bitcoin, and it is important to remember this fact. The past year has seen the rise and fall of many types of crypto, and bitcoin has been amongst those that have gone up and down. We might see something similar happen in 2022 as well.

What Happens if Bitcoin Fluctuates?

The price of bitcoin will go up and down all the time, just as the value of the dollar rises and falls. However, the value of the dollar will not affect your ability to buy your favorite goods and services unless inflation also seriously rises and prices take a hike. Things are a little different when it comes to bitcoin.

It is fine if you are just holding onto your bitcoin and managing it through your investment schemes. However, it becomes an issue when you then need to convert it back into a fiat currency like the dollar to be able to use it. After all, you can currently pay for very few things with crypto. Though you might be able to find shops online that accept it, you can’t exactly walk into your local grocery store and pay for a cartful of shopping with it.

Therefore, the exchange rate between crypto and the dollar is very important. You might have quite a stock of bitcoin built up, but if the price for them is low then you are not going to get as much as you may have hoped. If you are relying on this money, as many do with their retirement funds, this is not the best position to be in.

So, is accepting and using bitcoin in your 401k, as Suarez has done, a sensible idea? For most of us, the answer is probably not. To be able to do this successfully and safely, you need to be in the same position as Suarez – financially independent and with several income streams available to protect you in the event that your bitcoin investments are not as fruitful as you might have hoped.