Traditional individual retirement accounts (IRAs) are an excellent tool for building financial stability. However, as global markets become more volatile, some investors are looking to diversify their portfolios by seeking new asset opportunities such as cryptocurrencies.
What is a Cryptocurrency IRA?
Since the IRS declares Bitcoin and other cryptocurrencies as property, you can now invest in them just like stocks and bonds in what’s known as a crypto IRA.
A cryptocurrency IRA is a self-directed retirement account similar to a traditional IRA.
The key difference is that self-directed accounts allow you to invest in alternative asset classes such as real estate, precious metals, and cryptocurrencies under the management of a custodian.
How Does a Cryptocurrency IRA Work?
Cryptocurrency IRAs are funded through savings or rolling over an existing IRA or 401(k) account. You also have the choice between a traditional and Roth self-directed IRA and face the same annual $6,000 contribution limit (or $7,000 if you’re over the age of 50).
While similar to a traditional IRA, there are three key differences to keep in mind when considering a cryptocurrency IRA:
- Custodian: The financial institution responsible for keeping your account holdings secured while also ensuring that they adhere to government regulations.
- Exchange: Cryptocurrencies are bought and sold on a Digital Currency Exchange (DCE), a platform that permits customers to trade cryptocurrencies for other assets, such as cash or other digital assets.
- Security: A key piece to invest in cryptocurrencies is knowing that your account is adequately secured from hackers. Proper security measures include multi-encryption coding for transactions and offline cold storage of private keys.
How to Choose a Cryptocurrency IRA Account
While finding a custodian who would accept a cryptocurrency IRA used to be challenging, recent market trends have created new opportunities for investors to invest in cryptocurrencies.
Because of the digital nature of cryptocurrencies, you want to find a custodian specializing in digital asset services and security that separates itself from firms that traditionally manage physical assets. Some of the most important attributes to look for in a firm are domain expertise, investment in security, and a reasonable fee structure.
With that said, here are a few leading cryptocurrency IRA providers.
iTrustCapital for Competitive Rates
Learn how you can invest in cryptocurrency as part of your retirement plan using the self-trading platform iTrustCapital.
If you’re looking to open an account with expert consultants and transparent pricing, look no further than iTrustCapital. Since its founding in 2018, iTrustCapital has made it easy to buy and sell cryptocurrencies and physical gold.
iTrustCapital is great for new investors since they offer some of the lowest rates and have just a 1% trading fee. Customers also pay a small $29.95 monthly service fee instead of paying initial purchase fees, broker fees, or other fees often charged by other firms.
If low fees are your main deciding factor, iTrustCapital is the best option due to its 1% transaction fee and low $29.95 monthly service fee. If you’re new to crypto investing or don’t have much to get started, they are your best option.
Bitcoin IRA for Full Services
Established in 2016, Bitcoin IRA is the first and largest cryptocurrency IRA company on the market. Because of their size, they’re able to offer a full suite of services, including 24/7 real-time trading, secure offline cold storage, and a $100 million insurance policy.
Their user-friendly website and extensive knowledge base also make it easy for new investors to get started right away. They also give you the option to trade up to nine types of cryptocurrencies, including Bitcoin, Ethereum, Ripple, and Litecoin.
Bitcoin IRA takes the spot for the best overall provider due to its full suite of features and support. They make it easy for new investors to get started and offer top-line security to protect your funds. You can open an account with a minimum initial investment of $3,000.
BitIRA for Integrated Experience
Established in 2016, Bitcoin IRA is the first and largest cryptocurrency IRA company on the market. Because of their size, they’re able to offer a full suite of services, including 24/7 real-time trading, secure offline cold storage, and a $100 million insurance policy.
Their user-friendly website and extensive knowledge base also make it easy for new investors to get started right away. They also give you the option to trade up to nine types of cryptocurrencies, including Bitcoin, Ethereum, Ripple, and Litecoin.
Bitcoin IRA takes the spot for the best overall provider due to its full suite of features and support. They make it easy for new investors to get started and offer top-line security to protect your funds. You can open an account with a minimum initial investment of $3,000.
BitIRA for Integrated Experience
As its name refers, BitIRA is a Bitcoin IRA company you can use to diversify your retirement investments and invest in cryptos as part of your IRA accounts. They integrate all you need to get started with the process, from a Self Directed IRA to maintain control of your investments, access to the exchange to buy and sell digital currencies and a crypto wallet to keep your assets secure.
Regal Assets for Varierty of Investments
Finally, if you’re looking for a firm that offers the most variety in investment opportunities, look no further than Regal Assets. They support all popular cryptocurrencies and hard assets, giving you the freedom to tailor your portfolio to how you best see fit. The only downside is this may not be a viable option for new investors since they require a $25,000 initial investment.
The Pros and Cons of Cryptocurrency Investing for Retirement
As more firms give their clients the option to invest in alternative assets like Bitcoin, it’s essential to understand the pros and cons of a cryptocurrency IRA.
Pros
- Diversification: Since cryptocurrencies aren’t tied to any particular company or government, they typically behave differently than stocks and bonds. Having some crypto in your portfolio may help protect you during market downturns.
- Potential High Returns: Cryptocurrencies have seen incredible growth in recent years. For example, the past five years have seen Bitcoin’s value rise 875% to around $43,000, and Ethereum’s value increases 975% to about $3,000.
- Tax Advantages: Investing in a tax-advantaged account like a cryptocurrency IRA alleviates your tax burden as long as you don’t withdraw from your account. You also get the added benefit of realizing compound growth without taxes digging into your gains.
Cons
- Volatility: Cryptocurrencies are an extremely volatile asset class, with prices sometimes swinging as much as 10% on a given day. If you’re nearing retirement or want a low-risk portfolio, investing in cryptocurrencies is not for you.
- Capital Losses: Due to the tax-advantaged status of a cryptocurrency IRA, you’re unable to deduct any losses you incur to offset any gains with other investments you may have.
- Complexity: Cryptocurrencies are a technology still in its infancy, with new coins and use-cases seemingly created every month. As these digital assets continue to evolve and take on more meaning than just “stores-of-value,” it can be hard to navigate what’s worth investing in and what’s a fad.
Costs and Fees of Cryptocurrency IRAs
Because self-directed IRAs give you the freedom to invest in more asset classes, it comes at a cost. Specifically, the cost comes in the form of fees that firms charge, such as set-up, trading, and management fees. So before opening a cryptocurrency IRA, do your research to understand each firm’s fee structure and how much it will cost you. Find below the companies that can offer solutions for investing crypto and other alternative assets as part of your IRA accounts. Learn how you can invest in cryptocurrency as part of your retirement plan using the self-trading platform iTrustCapital. Learn more about Bitcoin IRA, a cryptocurrency investment platform to self-trade bitcoin and other crypto using your IRA retirement accounts.
Best Cryptocurrency IRA Companies
How to Open a Cryptocurrency IRA
Once you’ve decided on a cryptocurrency IRA, opening an account is a simple three-step process:
- Pick a Custodian: Determine which custodian fits your needs and create an account.
- Transfer Funds: Rollover an existing retirement account or add new funds to your cryptocurrency IRA.
- Start Trading: Research which coins you want to buy and sell to structure your portfolio to your liking.
