Bitcoin IRAs The Alternative to Owning Crypto in Your IRA

Bitcoin IRAs The Alternative to Owning Crypto in Your IRA

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Bitcoin IRAs The Alternative to Owning Crypto in Your IRA

If you're a Bitcoin investor looking to diversify your retirement portfolio, you may have considered using your Roth IRA as an investment vehicle.

Fortunately for individuals committed to including Bitcoin in their IRAs, self-directed IRAs (SDIRAs) more frequently allow for alternative assets like cryptocurrencies.

Recently, custodians and other companies designed to help investors include Bitcoin in their IRAs have become increasingly popular. Some of these companies include BitIRA, Equity Trust, and Bitcoin IRA, one of the early leaders in the field.

This doesn’t necessarily mean that holding crypto in your Roth IRA is a good idea, though. Some argue that crypto can add further diversification to Roth IRAs, and others argue that cryptocurrencies (and the Roth IRAs that hold them) will continue to increase in popularity and price long into the future. On the other hand, crypto is characterized by extreme volatility, and this represents a huge risk for those investors approaching retirement who cannot wait out a downturn.

You can hold cryptocurrency in a Roth individual retirement account (Roth IRA), but you cannot contribute it directly. Since 2014, the Internal Revenue Service (IRS) has considered Bitcoin and other cryptocurrencies as property.

That means they must be held in a custodial account like a self-directed IRA or robo-advisor. Think of it like this: If you hold stocks in your Roth IRA, for example, you can't just buy them directly from your bank account and put them into your retirement account. You have to go through an intermediary that holds them for you until you want to sell them back out of your account.

In addition to the custodial accounts required by the IRS, there are still fees associated with setting up an IRA and maintaining it—as well as trading fees charged by providers of such services—that can negate the tax advantages offered by IRAs if not handled correctly.

Here are the most commonly asked questions about cryptocurrency and your IRA.

Is a crypto IRA a good investment?

It depends. While holding crypto in your IRA can increase diversification, the extreme volatility of crypto makes it a poor choice for a retirement investment.

Can I have multiple Roth IRAs?

You can have multiple traditional and Roth IRAs, but your total cash contributions can’t exceed the annual maximum, and your investment options may be limited by the IRS.

If you want to invest in cryptocurrencies for retirement, you can do so with a self-directed IRA.

A self-directed IRA allows investors to open an account and invest in alternative assets, such as real estate, gold and other precious metals, oil and gas wells, tax liens, and more.

The IRS has long considered cryptocurrencies—including Bitcoin—as property. This means that you can’t contribute crypto directly to a Roth IRA. However, it may be possible for you to add cryptocurrency to your retirement accounts by purchasing it through an exchange.

Many traditional providers of IRAs don’t allow customers to invest in alternative assets like crypto or real estate through their IRAs. Fortunately, there are alternatives: crypto IRAs that allow investors to purchase cryptocurrencies for their retirement accounts.

 

This is our disclosure:  This summary is for informational purposes only. This summary is not intended to be a recommendation for or give advice for any company or individual.

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Nicole Jolie

Nicole Jolie brings you updated information on retirement including where to travel, health, investment trends and planning.  Whether you're a GenX'er, Baby Boomer or about to retire this site is for you.

 

This is our disclosure:  This summary is for informational purposes only. This summary is not intended to be a recommendation for or give advice for any company or individual.

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