Here’s how American workers can benefit from the blockchain for their retirement plans
The current financial world is an overwhelmingly diverse and technologically advanced environment. Just to list the actors and platforms acting out their financial plans would make anyone dizzy and nauseated. This is to say that the financial industry is abounding with changes and improvements.
When it comes to our personal finances, some of us are pretty savvy while some – not too much. One of the ways that we manage our finances is by making lifetime plans and accounts such as retirement plans, deposits, etc. In terms of retirement, the U.S. households in the age group of 32-61 have averaged at about $100,000 in retirement savings which reveals the trend that not many Americans are pursuing this future-planning course.
However, there are other problems with making a retirement plan in the US that can work on a long-term basis. This issue has something to do with a unified database that can effectively transfer retirement plans from one job to another. However, there’s a solution to this problem and we’ll discuss that in this article – along with the problem itself.
The most secure and stable platform in the world
One of the most impressive technologies that the modern financial world came up with is blockchain. It was created in 2008 alongside Bitcoin – a cryptocurrency embedded in this system, and it promised to take the global finances to the new heights.
Now, the world has heard a lot about blockchain through cryptocurrencies, therefore, everyone thinks that money and currencies are its only purposes. And while that’s partially true – since Bitcoin, Litecoin, and other cryptocurrencies cannot operate outside the system – blockchain is so much more than that.
Among the myriad of perks and advantages of blockchain, there is one particular upshot that can be beneficial to so many industries, including our retirement plans. Essentially, blockchain is a ledger just like Google Spreadsheets that take note of every single operation that takes place between its members. For example, if John sends money to Jane from Australia all the way to Greenland, the transaction will be safely stored in the system.
Or, if you’re playing online slots in Canada or anywhere else for that matter, the blockchain system will ensure that your bets are safely stored. There have been many cases where the gambling establishment was refusing to pay the punters their winnings due to the system errors. With blockchain, however, the blocks that contain every detail about your bets will be interconnected to the other blocks of the system, making it incredibly difficult to make changes.
What’s more, blockchain is probably the most secure platform on the planet. It builds a defensive firewall every single time a transaction is made, and so, one can say it’s pretty protected right now. This also translates into stable and protected transactions, as well as other processes inside the system.
The problem with retirement roll-over
Now, how is blockchain beneficial to the Americans’ retirement plans exactly? Let’s take a look at the problem first and then it’ll become pretty self-explanatory. In the US, there’s no universal database or any particular system which keeps track of Americans’ retirement plans on one specific job or another.
So, it might be straightforward to have one retirement plan on a job and keep it regularly updated. However, when or if the time comes for you to change the job, things get really complicated. Since there’s no system that stores your current retirement plan, it might be impossible to roll it over to your next job.
As a result of this inconsistency, a lot of US retirement plans are completely lost without their owners ever getting their funds back. According to a report published by NBC News in 2017, almost $2 trillion in retirement plans – also known as 401 (k) – was lost as a result of changing jobs in the country.
And even though some of the employers find it important to keep track of those funds and then transfer them for their employees, they only do that with those plans that are less than $5,000 in total. It means that all those chunky savings are going to be lost forever.
Store your pension plans on blockchain for fewer complications
However, it might not have to be that way. As we mentioned earlier, blockchain is a ledger system that holds everything in place forever and that’s what it can offer to the American workers. No matter whether blockchain is used by private or public enterprises, it can directly improve the retirement account holders’ situation and sometimes even boost the savings volumes.
So, here’s the most basic explanation of how this system can be used in our pension savings: when we start a new job and decide to open up a retirement account, we can choose blockchain as our main system of record. What this means is that every single detail – be it financial, operational, or anything else – will be safely stored on it in an encrypted state.
After everything’s finished, only the account holder will have access to their private credentials which they can effectively roll over to their next job without too much fuss. The fact that blockchain uses cryptography, no one will be able to somehow change the details about your funds in any possible way.
Some obstacles along the way
And while blockchain is a very promising technology for the American pension funds, there are many obstacles that face it. The biggest drawback of blockchain is that its popularity is somewhat behind the curtains – not many companies know its full potential to risk their platforms for it.
And this can immediately alleviate all its potentials in the retirement industry. If a company doesn’t have a blockchain retirement platform, the next new employee that comes will have to face the fact that their blockchain-powered funds are going to be lost.
Besides, the US government has its own opinions about blockchain as well. Some of the most notable cases include a Senator coming out with an idea to outright ban blockchain and Bitcoin in order to offset the threats to the national security. What this means is that the government will have a final say in how widespread blockchain becomes in the near future.
And, to give the devil his due, you can always use blockchain’s own currencies to store your future funds reliably. And we’re not talking about cryptocurrencies since they can be pretty volatile in price fluctuations. No, we mean stablecoins that are somewhat new inventions on this platform and as their name suggests, they’re exceptional for their stability and low volatility rates.