How do I roll my IRA into cryptocurrencies? Can I do this without encountering any technical or legal hitches? Is there a simple and hassle-free way to do it? I will be answering these questions in today’s article, so here’s your cue to read on so that you can find all the answers you need.
See my top-5 list of Crypto IRA service providers
For starters, I would like to acknowledge that in the last decade that Bitcoin has been existent, it has been dealt with a great deal of skepticism, more so due to the fact that its arrival challenged the essence and idea of a central authority. It also brought with it a large wave of equally useful cryptocurrencies.
Regulators from all over the world have been trying to establish appropriate guidelines to help with the adoption of cryptos in a more controlled manner. The response towards Bitcoin in the first five years of its existence had actually been quite mixed, with a significant number of states and countries banning it right away; others embracing it, and a greater majority still remain indifferent. With time, however, Bitcoin has gained more trust and acceptance and has become more legitimate.
The fact that Bitcoin, and other cryptocurrencies, have carved out a niche for themselves means that a financial ecosystem has already been established, and it may become bigger as time goes by ( it is expected to gradually replace the centralized financial system).
Beyond being used to transact in our day-to-day lives, Bitcoin has also been established to be a suitable asset for use in investment, both in the long-term and short-term horizon. A significant number of investors have already added Bitcoin to their retirement investment portfolio, but they have had to follow the right procedure. So, yes, you can roll over the funds in your IRA into cryptocurrencies, but you have to follow the right procedure and with the help of a Bitcoin IRA.
Why are investors are rolling their IRAs into cryptocurrency IRAs?
As much as traditional investment instruments are still dominating the market, the turmoil in the global economic climate has forced many of them to consider other alternatives. In recent times, events such as Brexit and the slowdown in the growth of the Chinese economy have made a large number of investors turn to Bitcoin and other assets such as gold.
Apparently, this is not a new phenomenon. A McKinsey report highlighted that global alternative asset holdings doubled in the period between 2005 and 2011, to $6.5 trillion. This growth represented a compound annual growth rate of 14% over that period. This was far above the growth realized with the traditional asset classes. To a significant number of investors, it was clear that alternative assets are a rescuer during times of economic crisis. Gradually, with more data from the market, more investors are beginning to turn to Bitcoin as their wait to mature and become more widely accepted.
As much as Bitcoin is still new amongst the globally available alternative assets, it is gaining popularity, and getting closer to becoming a mainstream asset. The thing that surprises most people is that despite the concerns about Bitcoin’s price volatility and the ambiguity about what is to be expected from it in the future, a good number of Bitcoin-related ventures has managed to attract massive investments, with the cryptos being endorsed by new partnerships who are out to establish new payment gateways (that are faster, cheaper and safer).
The above trends could mainly as a result of the fact that many people believe that Bitcoin is similar to the way the internet was in its very early years. As is the case with technology, Bitcoin has its dark side to it (so are all other currencies).
The better option for transactions
Those who have used Bitcoin to transact agree with the fact that it offers a quicker cheaper and more efficient medium for transactions. It is actually gaining popularity in regions where there are few banking facilities. Speculators and investors benefit from the use of Bitcoin, owing to the relatively lower transaction rates. In a Bitcoin network, for instance, you’ll find that the average processing fee per transaction is roughly 0.04 cents, whereas with a typical credit card transaction the rate is about 0.35 cents.
Simply put, Bitcoin has shown its resilience during the economically tough times and has as such come to be viewed as a diversification instrument. Even so, its price volatility has made some people to shy away from dipping their toes into this line of retirement investments. Those who do their research and establish that they can begin investing in cryptos are slowly beginning to add Bitcoin to their retirement portfolio.
Holding Bitcoin in your retirement investment portfolio means that you will stay put even when others are running around as they react to the short-term volatility. When held as a long-term asset, Bitcoin will prove (like it has so far done) to be a worthwhile investment.
How can you add Bitcoins to your retirement investment portfolio?
Most of the individual retirement accounts you’ll come across today are managed by custodians or trustees, for their owners (investors), as required by the law. These IRAs mainly have traditional assets such as stocks, bonds, mutual funds, as well as certificates of deposit (CDs) as the main investment vehicles. Common examples of such IRAs include:
- Traditional IRAs
- Roth IRAs
- Simplified Employee Pension (SEP) IRA
- Savings Incentive Match Plan for Employees (SIMPLE) IRA.
Thing is, however, there are many other opportunities that lie outside of the regular IRAs. You can, for instance, hold assets such as real estate, tax lien certificates, gold, and Bitcoin in your IRA. This is something that you can achieve if you open a self-directed IRA, through a reliable custodian or trustee.
The process of adding Bitcoin to a self-directed IRA is actually quite easy and fast. One only has to open a self-directed IRA through a simple e-sign application process, and then add funds to it through a rollover process. Finally, you will have to complete a Bitcoin allocation order. As is the case with other regular IRAs, you cannot access the funds in your Bitcoin IRA until you are 59.5 years old-withdrawing your funds before then will result in an early withdrawal penalty.
The good thing about having a self-directed IRA is that you are in charge of making the investment decisions, and can allocate your assets as you so please. Edmund Moy, a former director of the U.S. Mint and one of the Chief Strategists at BitcoinIRA believes that cryptocurrencies such as Bitcoin places the power to create money in people’s hands. Note that you do not have to invest all your money in Bitcoin. Most financial advisors ( legit ones) will advise you to invest only a portion of your money into a single asset, and that holds for assets such as Bitcoin.
See Gold Retired’s Top-Recommended Bitcoin IRAs
See Gold Retired’s Top-Recommended Gold and Silver IRAs
If you were here searching for an answer to the question “how do I roll my IRA into cryptocurrencies”, I hope that you got a good answer to get you started. The one thing to note is that holding Bitcoin in your self-directed IRA will mostly be a rewarding bet over the long-term horizon, so you have to ignore the short-term volatility. Invest a small portion of your IRA funds in Bitcoin and let them grow over the years as Bitcoin and other cryptocurrencies mature and become mainstream assets.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
Thanks for sharing another great article. Its been an interesting thing to watch over the past few years has bitcoin. The way it has risin in value from the price of a pizza to the price f a mansion home is absolutely amazing. Just goes to show the power there is in the old supply an demand eh
Thank you for your comment!
Yes that pizza – mansion comparison is pretty telling indeed!
A workaround is to roll my IRA into cryptocurrencies by investing in a self-directed IRA, or an individual retirement account does sound risky. Of course, as with any IRA, you’re shielded from paying taxes on transactions within the account. But is that enough to justify the risks of investing your IRA funds into cryptocurrency IRAs? In my experience, I share Bitcoin remains speculative because its real-world utility remains so limited, plus there are thousands of other cryptocurrencies. Where Bitcoin will be five or 10 years from now is anyone’s guess. I value this article’s review, and I share your content.
First of all, thank you for your comment! Yes crytptos is a risk, but then again so is almost all investments, I would say that 5-10% of your portfolio should be crypto, maybe not more than that unless you are a bit of a “risk-taker” because there is also a good old saying that goes “no risk no reward”
Thank you again for your comment!
Bitcoin has just crossed the $50,000 mark again. And it seems to be unstoppable. I wanted to move into cryptocurrency but I didn’t know where to get started. Thank you very much for explaining things here in a way that is very easy to follow. I have been researching and I am not the only one rolling my IRAs into cryptos.
First of all, thank you for your comment!
Yes it crossed $50k today, am pretty sure it will cross $100k before the year ends, there are also oher cryptos that are very interesting aswell that can 2x or MORE before this year ends for sure, it happens all the time.
Happy to hear you found the post helpful!
Thank you again!