Cryptocurrencies are a new asset class that have huge potential but it is hard to know where to start.
Many people want to invest but they are afraid of the volatility and the average investor doesn’t have time to read through all the white papers, technical analysis reports or news articles about cryptocurrency.
They just want to know if it’s safe.
A cryptocurrency IRA allows you to invest in cryptocurrencies through an IRS-approved retirement account. Depending on which IRA company you want work with and what option you choose, you can select to maintain full control over your money at all times. There is also options for the company to custody it for you. We go over your options in this article so you better understand how crypto IRAs work.
We are going to break down the most common types of crypto IRAs, show you how to buy cryptocurrency in an IRA and share all the perks and disadvantages to starting a crypto ira.
How to buy cryptocurrency in IRA?
There are four types of cryptocurrency IRAs:
Self-Directed IRA: This is the most popular type of cryptocurrency IRA. You purchase your coins, keep them online or offline, and hold onto the private key yourself. Unless you self-direct your own IRA, no one else has access to your account!
Custodian controlled Crypto IRA: This is similar to a regular custodian controlled retirement account where you deposit fiat currencies like US Dollars into an investment fund that will be used for crypto investments. The main difference here is you choose which funds to invest in rather than being assigned an option on a robo advisor platform.
Futures Account: Another way some investors work with cryptocurrencies in their retirement account is through futures accounts . These allow you to trade the cryptocurrency market without having to actually hold any. Futures accounts are strictly regulated by government agencies so you have to be an accredited investor with a ton of money.
Trading Account: The final way you can invest in cryptocurrencies is through a trading account. Most of these require you to trade bitcoin futures on an exchange like CME, CBOE or the NASDAQ . These are extremely risky so make sure you do your research before diving into these.
The self-directed cryptocurrency IRA gives investors all the freedom they could want from their investment. However, it takes a lot of work to monitor the price and keep up with all the developments in the crypto world while also making sure you are invested properly. That is where third-party companies come into play!
There are a few great investment firms that specialize in working with cryptocurrency IRAs that will take care of all this for you.
Is Bitcoin IRA a good investment?
We aren’t hear to tell you what to do with your money or give investment advice, we can only give our personal opinion. With that being said, cryptocurrency IRAs are considered to be safer than other crypto investments as they are held in cold storage and protected by the government.
These types of investments are designed to be held longer term so they are perfect for retirement accounts that don’t need to worry about short-term volatility.
The caveat to this is if you choose a custodian controlled cryptocurrency IRA, such as BitIRA or Kingdom Trust . This means that someone else has access to your funds and could potentially steal them without you ever knowing it.
This is why it’s crucial you know exactly where and with whom your assets are stored.
What Are the Benefits of Bitcoin IRAs?
#1. Bitcoin IRAs are FDIC-insured
That’s right! Just like a traditional bank account, your cryptocurrency investments are insured by the government up to $250k!
#2. No early withdrawal penalties.
As long as you keep your money invested and in the same IRA for the agreed upon term, (usually five years) before you withdraw any of it, you can take out as much money as you want and when you want with no penalties.
#3. Investing is simple and easy
All the paperwork is taken care of for you so all that is required from your end is to choose your custodian, make your investment and sit back while it grows!
#4. IRS approved
As long as you adhere to all the IRS guidelines, investing in a crypto IRA is perfectly legal. The only caveat here is that if you invest in futures accounts or exchange-traded funds there may be additional tax implications and requirements so make sure you are aware of the rules before purchasing.
#5. Professional advice is available
Whether you are an experienced trader or just a beginner, you can get advice from industry experts to help you understand the market and how best to invest your money!
What are the disadvantages of investing in a crypto IRA?
#1. You need to be an accredited investor
If you don’t qualify as an accredited investor then this option isn’t available for you. A potential accredited investor must have a certain income level, according to the SEC.
#2. It may not be available in your state
Some states still haven’t figured out a way to regulate cryptocurrency so, if you live in one of those states then you may have to find a different investment option.
#3. High risk, high reward
Due to the volatility of cryptocurrencies, investing in them is a very risky game. If you aren’t willing to lose all your money then this investment isn’t for you!
How do I get started with a Bitcoin IRA?
If you think this option is right for you, there are a few factors that you need to keep in mind when doing your research.
#1. Custodian – Make sure whoever you choose has a good reputation and won’t disappear with your money!
#2. Fees – Look at all the fees that they charge for their services and compare prices.
#3. Cryptocurrencies – Make sure they offer the types of cryptocurrencies you want to invest in! While this is by no means a comprehensive list, it should give you enough information to get started on your research so that you can make the best decision possible!
What’s the future of Bitcoin IRAs?
If you are looking for something more long term then a cryptocurrency IRA may be just what you need, but there is no telling where the market is going in the next few years. There could even be enough changes that they become obsolete. In order to make sure your money stays safe and grows to its full potential, choose a custodian that has a proven track record and is regulated!
Still have more questions? Cryptocurrency can be a complex, confusing and often misunderstood topic and a crypto IRA is no different. We want to make sure you get all your questions answered and have the best advice possible when it comes to selecting the right crypto IRA vehicle.
We have put together a free report to answer your questions and explain in simple terms all the pros and cons to starting a crypto IRA along with a simple-to-follow guide with instructions on how to setup an IRA.
What if you could retire off your crypto investment without paying taxes?
See how you can protect your finances and build wealth with a cryptocurrency IRA.