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As markets in the United States have remained volatile and global political unrest has continued, some investors have wondered if they can protect their retirement portfolios by obtaining alternative assets such as cryptocurrency.
Are you worried about your retirement plans? Do you face diffculties in deciding where to invest and how to best manage your crypto investments? Do you wish that there was an easier way? Well, there is!
Crypto individual retirement accounts (crypto IRAs) are an IRS-approved way of purchasing crypto investment options while utilizing the tax benefits associated with traditional retirement investments.
Investing with a Crypto IRA
Cryptocurrency is a growing and popular investment, but it is difficult to purchase in IRAs for two main reasons. The first obstacle to crypto IRA investing is that investors cannot use cryptos, such as other stocks and assets, to contribute directly to an IRA.
The IRS requires that investors only use United States Dollars to contribute to their IRAs. Investors can then use their contributed money to purchase various assets to grow their accounts’ value.
IRS guidelines do not state that investors cannot purchase cryptocurrency with funds inside their IRAs, but most IRA providers prefer not to allow their investors to buy digital assets.
While they have made many investors a lot of money, cryptocurrency investments have a history of being highly volatile. Because of this, most IRA providers do not allow investors to use crypto in their IRAs.
While these providers may enable investors to purchase stock in crypto-focused mutual funds or other indirect investments, many investors prefer to own crypto in their retirement accounts directly.
To accommodate investors that still want to purchase crypto in Roth IRAs, some companies have developed specialized IRAs called crypto IRAs. These IRAs are self-directed and allow investors to trade cryptos while still getting the tax benefits associated with IRAs.
IRA providers choose which kinds of cryptocurrency investors may use for their investment accounts. Some providers have a limited selection to protect investors from risky choices, while others allow hundreds of cryptocurrencies to provide investors with additional freedom.
3 Best Bitcoin Roth IRA Companies
There are many crypto or Bitcoin IRA companies available for investors to choose from. While crypto trading platforms run many of these, cryptocurrency companies run others.
Choosing between these companies can be difficult, but in general, investors should look at the following:
- Account fees such as annual management fees, setup fees or monthly fees.
- Which cryptocurrencies to use in the account (BTC, Litecoin, Ethereum or other cryptocurrencies).
- Any applicable trading fees or transaction fees.
Following these criteria, these are three of the best crypto IRA companies available:
- Bitcoin IRA: Bitcoin IRA operates a crypto IRA called Bitcoin Roth IRA. Despite this, the crypto IRA account allows you to purchase more than 60 cryptos.
- iTrustCapital: iTrustCapital has IRA options that allow investors to purchase precious metals and cryptos for their retirement accounts.
- BitIRA: BitIRA is an excellent choice because it offers various options, including traditional and Roth IRAs, SEP IRAs, and other account types.
How to Open a Crypto IRA Account
The exact process for opening a crypto IRA account will vary depending on your current retirement planning strategy and the crypto IRA company you choose.
However, for most investors, the process of opening a crypto IRA account follows this process:
- Choose a crypto IRA company: A variety of companies offer crypto IRA services, so you should research your options to choose one that works best with your investing strategy.
- Contact them to discuss your goals and investing objectives: Most crypto IRA providers have teams of experts available to answer your questions and ensure you are comfortable with your investment choice before you commit.
- Decide how you want to fund your account: If you invest more than the IRS maximum contribution limits, you will need to roll over from an existing IRA or 401(k).
- Begin self-directed IRA setup: You will need to provide your name, ID and other identifying information for tax purposes during your account setup period.
- Start investing in crypto inside your IRA: Once your account is set up and funded, begin making trades inside your IRA.
Investors use specialized crypto IRAs to hold Bitcoin and other cryptocurrencies in their retirement accounts. Crypto IRAs are one of the only tax-advantaged ways to invest in cryptocurrencies.
Properly research various crypto companies before undertaking investments. Talk to your financial advisor about opening a crypto IRA if you want to utilize these tax benefits and add crypto to your retirement portfolio.
These are the most commonly asked questions about cryptocurrency IRAs.
Is a crypto IRA a good investment?
Though there is never a guarantee of returns, crypto has been an immensely profitable investment for many people in recent years, and diversification generally lowers the risk of investing.
If you want to invest in crypto regardless of the risk, using a crypto IRA is a good way to ensure you minimize losses from tax.
Can you stake crypto inside of an IRA?
Yes, you can stake crypto inside an IRA if you have a self-directed or a solo IRA, but specific tax penalties may apply.