How do I open a Bitcoin IRA? What can a Bitcoin IRA help me achieve? Why are some investors considering adding Bitcoin to their retirement investment portfolios through Bitcoin IRAs? If you have been looking for answers to questions about investing in Bitcoin for your retirement years, then reading this article is a good starting point. Herein, you will get important information that will guide you in the right direction, so that you don’t make the mistakes that many have made in the past.
What is a Bitcoin IRA?
A Bitcoin IRA is simply an IRA that allows you to invest in different cryptocurrencies using your retirement savings. These IRAs act as self-directed IRAs (SDIRAs) that are offered by a handful of financial institutions across the U.S. Self-directed are gradually becoming popular in the retirement investment space, due to the fact that they allow investors to hold alternative investments, in a bid to diversify their retirement investment portfolio.
If you are curious to know whether you can open your Bitcoin IRA while still holding on to your traditional IRA, then the answer is yes! It is possible for you to retain the funds or assets in your other IRAs, and separately build wealth using a self-directed IRA that allows you to hold cryptocurrency IRA in your IRA.
More about Bitcoin IRAs
As you may already know, in a standard individual retirement account you are allowed to hold traditional assets such as:
- Mutual funds
One of the main differences between the standard IRAs and a Bitcoin IRA is that a Bitcoin IRA offers you the additional opportunity to invest in cryptocurrencies such as Bitcoin.
What about the other cryptocurrencies? Can I still include them in my Bitcoin IRA? Yes, you can. Although you will find most SDIRAs that allow you to invest in cryptocurrencies are referred to as Bitcoin IRAs, this does not mean that you cannot purchase and hold other crypto assets. You can, in fact, hold cryptocurrencies such as:
- Ethereum Classic
- Bitcoin Cash
Why bother to trade bitcoins in a Bitcoin IRA?
A significant number of people usually trade cryptos on their preferred exchange platforms and proceed to withdraw their profits at will. The profits from bitcoin trades are usually taxed in the same manner as profits from stock trades are taxed. If the investor’s stocks are held for one year or less, the gain is classified as short-term and is usually taxed at ordinary tax rates. If they’re held for more than one year, then they’re viewed as long-term and are usually taxed at lower rates (anything between 0% to 20%, depending on your trading income).
When you trade in a Bitcoin IRA, however, you do not have to stress about the taxes anymore, because your gains are usually tax-free or tax-deferred. With a traditional IRA, the contributions made by the investor are usually tax-free, hence the taxes have to be deferred on gains. With a Roth IRA, on the other hand, contributions from the earned income are usually taxed, so that the gains can all be tax-free.
Owing to the very volatile nature of cryptos, they’re mostly for less than one year, where they generate short-term gains in the process. It is such a good idea to trade in a Bitcoin IRA since it shelters one’s gains from taxes.
This does not mean that you cannot invest in cryptos to get the long-term gains, but the truth of the matter is that if you make your entry into the market at the right time, you can amass several thousand dollars without having to break your back for it.
How do I open a Bitcoin IRA?
If you do your research about different Bitcoin IRAs, you will find that they have different approaches to onboard new clients. Whereas a company in this industry may have passed all the quality checks at the time of registration, this does not necessarily mean that its services are genuine and that its staff members have the clients’ best interests at heart. You should, of course, do your research to ascertain that the company you choose has a proven track record. Consumer trust sites such as Better Business Bureau, Business Consumer Alliance, and Trustpilot are good sources of legit consumer reviews. When you find a good fit, you can expect to follow the following account opening process:
- Look for a reliable Bitcoin IRA custodian to administer your account.
- Fill the account application forms on the company’s official website. It is a good idea to have the same type of documentation that you would have if you were opening a regular IRA, including those that prove your name, physical address, Social Security Number, Birthdate, and driver’s license.
- Once your Bitcoin IRA is active, deposit funds into it.
- Start trading cryptocurrencies
Alternatively, if you want to simplify the whole process instead of complicating each step:
then you might want to check out these recommended Bitcoin IRAs I link to below, claim your free guide and contact their support staff so that they can hellp you open your first crypto IRA.
Did you know that you can also transfer some or all the funds in your IRA or 401(k), provided that the terms of that 401(k) or IRA allow it? Instead of having to fund a Bitcoin IRA with your out-of-pocket money, you can simply roll over the funds in your IRA and begin trading cryptos as soon as the money hits your account.
Is it worth it opening a Bitcoin IRA? Honestly?
Well, this is a question that highly depends on a number of factors, the main one being the risk aversion of the investor. Cryptocurrencies have a high-risk high reward profile, that can work for or against you. You can make a killing in such a short time, or lose a significant portion of your retirement capital within no time.
If you are a long-term investor, however, the short-term volatility should not bother you as much. If you study the change in the value of cryptocurrencies over a 5 to 10-year horizon, you’ll be surprised at how much money you can make for hodling your tokens (hodl is a term that means holding cryptocurrencies).
There is a reason why the smart investor worldwide invest in cryptocurrencies.
5% to 10% of your retirement savings are sufficient to bring you some impressive returns if placed in a Bitcoin IRA. This, however, is all up to you, and the retirement financial goals that you have set for yourself and your family.
OR maybe you are interested in another alternative asset:
We have come to the end of this article in which we have addressed the question “How do I open a Bitcoin IRA?”. I hope that you found it interesting and that you now know how to get started with opening a Bitcoin IRA. Let me know if you have any questions about this topic – drop the question in the comments section so that I can get back to you ASAP!
I wish you well,
Eric, Investor and Team Member at Gold Retired!