Over the last few years, bitcoin has been making headlines, gaining value and significant traction as a viable cryptocurrency investment. As the leader in digital currency, it didn’t take long for talk about investing in Bitcoin with IRA money to creep its way into conversation, much like the digital giant crept into the currency market, and given its success so far, it’s time to start seriously considering if investing in a digital IRA is the right move and there are a few things you’ll want to familiarize yourself with before you make that leap.
A Bitcoin IRA is a Self-Directed individual retirement account designed to allow investors to invest in alternative investments such as Bitcoin. Since digital currencies are considered personal property, this stretch into IRA territory is as logical as it is obvious. Contrary to popular belief, digital IRA’s are not solely for cryptocurrency investment; they can be used for a wide variety of investments from stocks, bonds, mutual funds, assets like real estate and private businesses. It’s no wonder investors are intrigued.
The Benefits of Bitcoin IRA
- You can structure digital IRA as either a Traditional or Roth IRA, which means you get the choice between tax-free withdrawals in retirement or taking your tax deduction now.
- In addition, by using a digital IRA to invest in Bitcoin and other cryptocurrencies, you’ll avoid paying unwanted tax on your investments for as long as they remain in the IRA.
- Another fantastic advantage to investing your Bitcoin into an IRA is that there is no limit on your ability to buy as much cryptocurrency as you want almost instantly, unlike Exchanges that cap your buying potential with a daily limit.
- Finally, digital IRA’s are stored in heavily encrypted wallets, so your investment is safe and secure.
The Challenges of Self-Directed IRA
The tax rules surrounding Self-Directed IRA’s are pretty complicated so you’re going to want to brush up on them because violating these rules can leave you vulnerable to penalties and in some cases jeopardize the tax-exempt status of your IRA.
There are three things, in particular, that may be problematic for you.
1. In a business in which you are or act as a corporate officer, you’ll be prohibited from investing IRA assets.
2. If and when it becomes necessary to seek to finance your IRA purchase, you will need to ensure you’re avoiding combining your personal assets.
3. Many more confusing provisions apply, such as that you are not generating more than a small amount of what is considered “unrelated business taxable incomes.”
Bitcoin Hot Wallet VS. Bitcoin Cold Wallet
A Bitcoin Hot Wallet is an address that users can spend money from at any given time which means it’s virtually always connected to the bitcoin network.
A Bitcoin Cold Wallet, on the other hand, is not intended for regular use and is used for offline storage.
This distinction is important to consider when you decide where to put the bulk of your cryptocurrency; most Bitcoin users recommend you only store a small amount of Bitcoin in a hot wallet at any given time.
IRA Companies That Accept Bitcoin
Many IRA providers consider Bitcoin to be too speculative to be a retirement asset, but we’ve rounded up a few that do.
We recommend the first people you call are Regal Assets as they are the only company in the entire industry that offers full insurance for the market value of your cryptocurrency. They’re insured by Lloyd’s of London. Speaking to an IRA provider specialist will also help you decide what the right plan is for you so that you can feel confident in your choices.
So, Should You Invest in Bitcoin IRA?
Simply put, if you’re interested in Bitcoin and cryptocurrencies as a viable investment, then it only makes sense to hold it together in a self-directed digital IRA. Do your due diligence by researching the right custodian that accepts it, has acceptable fee structure, has positive customer feedback and the ability to guide you through the process and you’ll be well on your way.
Bearing in mind that the current state of Bitcoin both as an investment and currency is still working through the motions, there are certainly risks associated with this type of assets, but as investors know, with risk comes reward.
With that all in mind, it’s best to begin by investing in small portions. The more you learn and feel comfortable with utilizing cryptocurrency, the more you can play around with your investments.