We look at how to achieve your retirement income goals using staking as part of your savings plan
The ideal retirement for most of us is living off passive income from our investments. But interest rates on savings in the traditional economy are so low that it means our nest eggs must be larger every year to hit our income goals.
Or does it?
Bank savings rates are abysmal. Interest rates at banks like Bank of America or Barclays are 1% or less, as we discussed in our Staking is Disrupting Interest Rates article. For this article, we are going to use a goal of $2500 per month income or $30,000 per year.
At 1% interest, to earn $30,000 every year we need a nest egg of $3 million. To see just how powerful interest rates are and affect the size of our nest egg, at 6%, to earn $30,000 a year you would only need $500,000 in total savings.
Traditional Finance Option: Stock Dividends
Dividends do better but they require market knowledge because you have to be selective or risk your principal declining in value. Dividend yields can be deceiving since they are calculated by the Dividend payout/Price of the stock. So the yield can increase not because the company paid out more, but because the stock price declined. Larger companies are typically safer both:
- for your principal and
- They are more likely to continue dividend payments to investors. Dividends are a choice, not a requirement.
Of very large companies in the US, the 3 highest dividend yields are AT&T, Exxon, and Verizon.
You can see the yields from 4.55% to 7.44% but the ratings on these companies are all HOLD, which is a neutral rating meaning their stock price could decline, affecting your principal for now or later. For Americans, dividend yields are not great.
In the UK, the highest yielding dividend stocks in the FTSE 100 are in asset management, oil, or tobacco with yields from 6.2% to 10.7%. But you have to be a British resident or citizen to open an account with exceptions for some EU residents.
| Stock | Country | Div. Yield | AMT to Yield 30,000 USD | Rating of Stock | Industry |
| AT&T | US | 7.44% | $403,225 | HOLD | Telecom |
| Exxon | US | 6.01% | $499,168 | HOLD | Oil |
| Imperial Brands | UK | 8.8% | $340,909 | BUY | Tobacco |
| M&G | UK | 7.4% | $405,405 | HOLD | Investments |
| Total SA | FR | 7.07% | $424,328 | Neutral/Buy | Oil |
One thing is for certain, dividends are better than savings accounts IF you pick the right dividend stocks. Dividends are an option, NOT a requirement and if a company gets in trouble they will reduce their dividend so they can keep operating.
Cryptocurrency Savings Option: Staking
The cryptoeconomy needs investment and they are willing to pay you well based on:
- Staking for a POS blockchain like ETH 2.0 will be
- Lending on a CeFi platform like BlockFi or a DeFi platform like Uniswap
- Providing liquidity and getting paid interest like a bank savings account
For this article, we will focus on staking as that is the lowest risk of these 3 options.
Staking a POS Blockchain
Staking a blockchain to help that network run gives you a chance to earn money from fees people pay to use the network. As the blockchain and its network grows and build network effects, your investment becomes safer over time.
You can isolate only large-cap blockchains for added safety and still earn a good income. Here are a couple of examples from our site: (Rates are at the time of this writing and can change)
- Solana is the 8th highest value cryptocurrency. You can earn 6.12% with low risk to your principal if you stake SOL.
- Polkadot is the 9th highest value cryptocurrency. You can earn 13.43% with low risk if you stake DOT.
- Binance Smart Chain, the blockchain Binance runs separate from its exchange business, pays you 15.49% to stake the 3rd highest cryptocurrency (BNB) with backing from the world’s largest Bitcoin exchange.
Network effects are the reason why Google, Facebook, and Amazon are so large and valuable. As blockchains gain network effects, they get larger and more valuable too. This makes your investment more secure both in the cryptocurrency’s value and in the fees you earn from that chain. To earn $30,000 per year at these interest rates, for SOL you will need a nest egg of $490,196. For DOT, you need $223,380 and for BNB you need only $193,673.
This is a BIG difference from the $3 million you need for the bank or the $400,000-500,000 needed for these top dividend options.
Risks
Your risk with staking is twofold. Either:
- your coin drops severely in value that the fees generated can’t get you the income they earned before OR
- the blockchain gets less popular (loses its network effects or never gets them) and earns fewer fees meaning it has to pay you less.
That’s why our 3 examples above are well-established blockchains (all in the top 11 in market value) where the risks of these 2 things happening are lower.
| Investment | Yield | AMT Needed to Yield $30,000 Interest | Type of Investment | Risk |
| AT&T | 7.44% | $403,225 | Stock Dividend | Medium |
| Exxon | 6.01% | $499,168 | Stock Dividend | Medium |
| Imperial Brands | 8.8% | $340,909 | Stock Dividend | Low |
| M&G | 7.4% | $405,405 | Stock Dividend | Medium |
| Total SA | 7.07% | $424,328 | Stock Dividend | Medium |
| Solana | 6.12% | $490,196 | Staking | Low |
| Polkadot | 13.43% | $223,380 | Staking | Low |
| Binance Coin | 15.49% | $193,673 | Staking | Low |
Once you learn about the lower risks of staking, putting a piece of your portfolio into the cryptoeconomy this way makes sense. Staking will help you reach your savings goal and make that savings goal smaller and more achievable for the average investor.