Can Blockchain help your future retirement plans?

Blockchain is a peer-to-peer network of connected nodes, or blocks, connected by cryptography. It is the technology that drives cryptocurrencies such as bitcoin and Ethereum. Each transaction in this ledger is validated and protected against fraud by the owner’s digital signature, which also serves to authenticate the transaction. It is very safe and decentralized. Blockchain’s features guarantee that every copy of the data is always available, verifiable and reliable.

Blockchain is one of the biggest technological breakthroughs since the internet, and it has the potential to improve many aspects of daily life, including healthcare. For example, blockchain can be used by government agencies that handle sensitive personal health information to keep such information on a secure network and enable communication between the civilian population and health professionals. Another aspect will be identity management and verification. The organization of this data as nodes on a blockchain increases the security, speed and accuracy of these procedures.

But one thing that can really do with being overhauled and improved is the US pension system. Poor management, limited mobility, lack of trust, too many stakeholders and lack of transparency are just some of the problems that pose a threat to the ability of a significant percentage of the population to live peacefully during retirement. The problems are innumerable; however, let’s consider a significant part: 401 (k) pension savings accounts.

Blockchain could change the way the US manages 401 (k) s. Firstly, having everything stored in one easily accessible place will give people a clearer picture of the pension funds and perhaps motivate them to invest more. In the United States at present, it is mainly up to employees to keep track of previous contributions. There is no pension database that keeps track of the workers’ total amounts paid out or someone who ensures that the pension savings move to where the employee goes. At present, the individual must rely on filling out and archiving complex forms and maintaining their own records over decades. A blockchain-based system will instead allow employees to have all pension accounts in one easily accessible place.

Pair this will be the current lack of faith in the financial institutions that administer pension schemes due to lack of transparency. A shared decentralized ledger may help solve this problem. A better informed population will also be more likely to make smarter investment decisions, and drive economic growth not only for themselves but in the markets in general. In addition, the incorporation of blockchain into this system will result in faster processing times and potentially lower transaction costs, and improve service delivery, as blockchain does not require a third-party intermediary to validate transactions. Finally, blockchain technology is more difficult to hack. Information about the blockchain network is in a shared database that is found on millions of computers instead of in one central location. The decentralized structure makes it more difficult for any person to penetrate the network and steal data or funds.

In sum, the blockchain has the potential to disrupt the US pension system in a positive way. As things stand, blockchain still has some obstacles to overcome before it gets ready for mainstream. One of them, if not the most important, is the lack of government policy. Adequate and appropriate government regulation will create an incentive for investment in blockchain technology, and it will also build trust around it, making its widespread use easier. Like everything else, it will flourish under a supportive political climate, a corporate ecosystem prepared to take advantage of the new opportunities created by technology, and an appropriate industrial mix.