Investing in Cryptocurrencies with a Roth IRA: Is it Possible?
If you’re considering investing in cryptocurrencies, you may be wondering if you can buy them using a Roth IRA.[0] The answer is yes, but it’s important to understand the risks and benefits of investing in crypto as well as the various types of crypto-supported IRA accounts that are available.
Cryptocurrencies are high-risk investments, so before moving forward, make sure you understand how they work and the risks involved.[0] However, the boom in crypto investing over the last few years has spurred the development of several crypto IRA providers that allow investors to gain exposure to cryptocurrencies as part of their retirement strategy.
A Bitcoin IRA is a self-directed individual retirement account (SDIRA) that holds investments in Bitcoin. A traditional IRA restricts your investment options to stocks, precious metals, or bonds, which is not the case here.[1] There is no IRS-backed account specifically designed for cryptocurrencies, but a Bitcoin IRA is a self-directed IRA that includes Bitcoin as one of its investments.[1]
A Roth IRA is a tax-advantaged retirement account where you can save and invest for the future.[2] Contributions are made with after-tax dollars, meaning you don’t get a deduction in the contribution year but qualified withdrawals in the future are tax-free.[3]
An Individual Retirement Account (IRA) that holds digital assets is referred to as a Crypto IRA. Crypto IRAs are self-managed retirement accounts that permit investments in non-conventional asset classes not found in regular IRAs. Among the assets available are cryptocurrencies, digital assets, precious metals, and real estate.[0]
A reliable service provider can assist investors in setting up an IRA that holds Bitcoin as the main investment. Cryptocurrency investors may benefit from utilizing a Bitcoin IRA provider, which can assist in purchasing digital assets for their portfolio while also keeping the funds secure.
By opening and funding a self-directed Digital IRA with a qualified custodian, you will initiate the process of transferring your 401(k) savings to a bitcoin-based retirement plan.[4] With the right provider, you can leverage this new asset class to expand and protect your retirement investments.[4]
However, there are potential drawbacks to holding investments in a Bitcoin IRA, including both volatility and fees. Fees for crypto IRAs are typically much higher than for traditional IRAs, so you’ll want to factor that in when making your decision.[5]
The IRS considers cryptocurrency property and taxes it like stocks and bonds.[6]
0. “Best Crypto IRAs: Diversify Your Portfolio With Cryptocurrency” milkroad.com, 18 Jan. 2023, https://milkroad.com/ira
1. “How to Buy Bitcoin With an IRA • Easy Steps • Benzinga” www.benzinga.com, 18 Jan. 2023, https://www.benzinga.com/money/buy-bitcoin-with-an-ira
2. “How to Buy Cryptocurrencies With a Roth IRA – The Balance” www.thebalancemoney.com, 18 Jan. 2023, https://www.thebalancemoney.com/how-to-buy-cryptocurrencies-with-a-roth-ira-5226014
3. “Can You Buy Cryptocurrency in Your Roth IRA? – The Balance” www.thebalancemoney.com, 18 Jan. 2023, https://www.thebalancemoney.com/can-you-buy-cryptocurrency-in-your-roth-ira-5225302
4. “How to Buy Bitcoin with a 401(k): What You Need to Know – BitIRA” www.bitira.com, 18 Jan. 2023, https://www.bitira.com/digital-ira/how-to-buy-bitcoin-with-a-401k/
5. “Crypto IRA by Directed IRA” directedira.com, 18 Jan. 2023, https://directedira.com/cryptocurrency/
6. “Cryptocurrency in an IRA – How & Why to Invest in Crypto With …” midlandtrust.com, 18 Jan. 2023, https://midlandtrust.com/self-directed-ira/cryptocurrency/
