Bitcoin IRA

This is a relatively new concept for retirement investing that illustrates how cryptocurrency should act an essential role as a viable monetary source. Bitcoin IRA is not much different from traditional IRA. Traditional IRA uses stocks and bonds as an investment vehicle. The global impact of cryptocurrencies, notably bitcoin, had set an intense interest of cryptocurrency IRAs in the heart of millennial and young investors as it provides a tax advantage.

What is IRA?

IRA means Individual Retirement Account. IRAs are investment vehicles in which people save some portions of their current income in a retirement plan during their working years. With a simple reason: they will need funds at a later time. Particularly during their retirement period.

According to Greene IRA data, 38% of Americans use IRAs as a type of retirement savings, but only 15% of Americans make annual IRA contributions.

What is Bitcoin IRA?

You might be wondering if there is a designated retirement account for virtual currencies alone. The answer is Not really. There are no specific IRA backed by bitcoin and other altcoins solely. Therefore, bitcoin IRAs are usually self-directed IRAs, a type of IRA where the custodian allows more diverse investments in the account. In general, self-directed IRAs have been used to invest in real estate, precious metals (such as gold), private placements and similar. And now, self-directed IRAs have been used to hold cryptocurrencies.

You can buy and hold cryptocurrency or shares of dedicated funds that hold bitcoins and other virtual assets in self-directed IRA. With other words, you can use approved cryptocurrencies as funding sources for this investment vehicle. Instead of the IRAs holding paper assets, it would be compliant with bitcoin. Other cryptocurrencies may be good as well, although the most preferred is bitcoin due to its stability and liquidity over the years.

There is no legal difference in the state of an IRA based on the investment. Be it paper assets, such as stock and bonds, and digital assets involving cryptocurrencies. However, most popular IRA providers only allow pre-approved investments, which is the same for crypto as transactions are verified on the blockchain.

Bitcoin self-directed IRAs can include other types of retirement accounts such as Roth IRAs, SEP IRA, SIMPLE IRA, HSA, Thrift Savings Plan (TSP), and 401(k)s.

Adding Cryptocurrencies to Your Retirement Plan

Cryptocurrencies are no doubt the new wave of money which had swept the world on a global scale. The blockchain ideology which includes decentralization, transparency of transaction and privacy is now something usual. This effect is visible in the rise of cryptocurrencies’ values. Currently, the market capitalization of virtual currencies is at approximately 200+ billion US dollars. It consists of over 2000 digital assets, comprising of virtual coins and tokens. This, however, had improved the liquidity of cryptocurrencies notably bitcoin, which is having market domination of about 50%.

Should You Invest in a Bitcoin IRA?
Should You Invest in a Bitcoin IRA?

Motives for the Creation of IRA

Motives behind the creation of IRA’s account are different for each individual. One reason is that people are more interested in the prices of crypto other than the technology in itself. Last year when the value of bitcoin rose, many people looked at it as an option to add it to Bitcoin IRA.

Given this growth, experts expect cryptocurrencies to be common and widespread in the IRAs world as stocks or bonds are. In fact, bitcoin is the perfect and appropriate asset class for retirement savings products such as IRA, because it is non-deflationary and the value increases over a longer period for this reason alone. Therefore, it is essential that the investor or worker study, educate and search for verified information from experts as to which of the cryptocurrencies have the property of not being deflationary. A valid example is the price of Ethereum dropping more than 90% as opposed to early this year.

Is Bitcoin IRA Legitimate?

According to an IRS press release, dated to March 2014, virtual currency is treated as property for US federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Based on this ruling, one can buy cryptocurrencies in a self-directed individual retirement account. Bitcoin IRA cryptocurrency retirement accounts are approved by the IRS as qualified retirement accounts, where growth accrues tax-deferred.

Get Interest on Bitcoin deposit

Bitcoin IRA Reviews

BitcoinIRA (company)

Currently, the BitcoinIRA company is the only option for investors who wish to directly have cryptocurrencies in their investment funds IRAs. They are in partnership with company Kingdom Trust and BitGo for the most advanced cold storage and custody services. You can also see this as another approach to investing in this digital currency.

This bitcoin IRA custodian took its first accounts in early 2016. Investors and workers can through their employers be able to transfer those funds to IRAs backed by cryptocurrencies. It is a compliant company that helps people start a bitcoin retirement account. It follows all the rules and regulations set out for these types of retirement accounts. If you already have an IRA, you can make a rollover IRA to bitcoin. Just transfer those funds into this one and convert it into cryptocurrency. It started offering Ethereum IRAs as well.

Reasons for a Bitcoin IRA Account

Some of the reasons why it is important for millennials to have a cryptocurrency IRA account includes

  • The decentralization of the currency which tends to eliminate third-party and also free from governmental regulations.
  • The currency is secure and all transaction are somehow anonymous which makes them untraceable between the parties involved.
  • Bitcoin IRA has a high return on investment. The investment of $200 in late 2011 would be worth a fortune now.
  • It has a great advantage over paper assets in a sense it is out of government control.
  • The bitcoin is limited in supply as opposed to paper money. The limited value of the bitcoin would cause its appreciation in value over time (just 21 million bitcoins).
  • Lastly is the tax advantage. Investors can buy bitcoin using their tax-deferred retirement funds and send their IRA account holding crypto.

Downside of a bitcoin IRA and bitcoin IRA fees

However, the risks of holding a cryptocurrency IRA account includes the considerable volatility of crypto. Generally, the prices are up and down based on market sentiment – unlike stock and other paper assets which are backed by trusted organizations. Also, bitcoin IRA fees are high. BitcoinIRA is charging as huge as 15% of a custodial fee.

Should you include cryptocurrencies in your IRA?

Our opinion is that it would be good to possess some bitcoin in your retirement plan. Because of the commitment to a new decentralized order and the triumph of the new technology that Blockchain represents. Also because of the advantages. These include profitability and decentralization as opposed to the traditional portfolio. It would be in the interest of investors and employees to have a diversified portfolio of assets such as stocks, bonds, gold, cryptocurrencies and cash for this sole purpose of retirement funding.

But it is crucial that future investors seek valid information and expert advice. Primarily relating to law and financial education to avoid legal problems and loss of investment respectively regarding having a bitcoin IRA investment vehicle.

Related & Notes

Last Updated on