Cryptocurrencies are slowly entering into the traditional schemes of investment. As an asset class, it is slowly becoming possible for investors to hold cryptocurrencies such as bitcoin in IRAs (individual retirement accounts).
There are multiple reasons why investors are interested in Bitcoin IRAs for retirement. Perhaps, the biggest reason is that it can offer significantly higher returns along with plentiful diversity in one’s retirement portfolio.
However, let us not forget that cryptocurrencies are inherently risky and quite volatile. In this guide, we have put together everything you need to know about investing in Bitcoin IRA companies. You will also find a list of the best Crypto IRA providers to look for in 2023.
What Is a Crypto IRA and How Does It Work?
A Bitcoin IRA (Individual Retirement Account) is a type of retirement account in which the investment portfolio is composed of the cryptocurrency Bitcoin. This allows individuals to hold and invest in Bitcoin within the structure and tax benefits of an IRA.
It is similar to a traditional IRA, but with Bitcoin as the underlying asset instead of stocks or bonds. There are other differences too: For example, IRAs may require borrowers who have more independence to establish and manage the accounts themselves.
These accounts are typically self-directed, meaning, the individual has more control over the investments in their account. They can be set up in the form of a traditional IRA or Roth IRA and are subject to the same contribution limits and tax rules as other types of IRAs.
Who Needs a Crypto IRA? 5 Reasons to Start an Account
Now, let us discuss some of the major reasons why you should start a crypto IRA account. Here are a few potential reasons:
By holding investments in cryptocurrency, an individual can add a new asset class to their portfolio, which can help spread out risk and potentially increase returns.
Potential for high returns: Cryptocurrency has the potential for very high returns, especially in the short term.
With a self-directed IRA, the individual has more control over the investments in their account, which can allow them to make more informed decisions about their retirement savings.
The tax advantages of an IRA depend on the type of IRA you have. Traditional IRA contributions are tax-deductible and grow tax-free until you withdraw the money at retirement, while Roth IRA contributions are taxed upfront and grow tax-free.
Hedge against inflation
Cryptocurrency has the potential to act as a hedge against inflation, as its value is not tied to fiat currency.
The 5 Best Crypto IRAs (& How to Choose the Right Provider)
Bitcoin IRA – Best for Investors of Bitcoin
Bitcoin IRA allows you to trade 60+ cryptocurrencies, which include Bitcoin, Litecoin, ZCash, Ethereum, Stellar, Digital Gold, and a lot more. Furthermore, it is available 24/7. However, this IRA requires an account minimum investment of $3000 to start with. Along with that, it offers a very easy setup for those new to cryptocurrency IRAs.
Bitcoin IRA also offers custody insurance of up to $700 million with top-notch security, as the funds get stored in cold storage. Due to high security, rollover options, and the sheer size of the platform, it is one of the best choices for those looking to invest in a Bitcoin IRA.
BlockMint – Best Bitcoin IRA platform for Beginner Investors
Despite its growing popularity, the cryptocurrency IRA is still an alien concept to many. Investors are still exploring this option and hence, many are not familiar with crypto IRAs. Hence, ease of setup is an extremely important parameter for those who are new to crypto IRAs. This is where BlockMint takes the lead.
This California-based platform offers plenty of tools and top-notch service. A personally assigned BlockMint agent takes you through the entire process when you first open an account. These agents are qualified consultants who help you choose suitable crypto assets and guide you with an investment strategy.
Along with that, BlockMint also offers top-notch customer support. You can reach out to their active customer support via phone, online chat, and e-mail. This allows beginner investors to manage their strategies and portfolios on the go.
But that is not all. BlockMint also offers several other benefits that are in line with the top crypto IRAs such as high-end security and insurance coverage for up to $600 million.
Equity Trust – Best SIRA (Self-directed IRA)
Generally, traditional IRAs have some restrictions in place regarding the type of asset that you can invest in and hold. These generally cover mutual funds, index funds, ETFs, stocks, bonds, and other cash equivalents. These are the less risky assets and are considered more suitable for retirement.
But along with that, there is another category of IRA called self-directed IRA, and crypto IRAs generally fall in this category. These types of IRAs hold alternate investments including lease rights, commodities, real estate, private equity, and cryptocurrencies.
Equity Trust is among the best self-directed IRAs that allow investments in cryptocurrencies along with other alternatives such as private lending, and real estate. It is one of the most diverse self-directed IRA providers in the market.
iTrustCapital – Best Crypto IRA for Lower Fee
Affordability and low fees are two important factors for those investing in cryptocurrency for their retirement. The biggest selling point of iTrustCapital is that it requires no monthly fee for individual accounts. Usually, it is very rare for providers in the IRA market to offer zero monthly fees on accounts.
Another factor that attracts investors to iTrustCapital is the fact that it has a very low requirement for minimum investment. For instance, you can start a Crypto IRA account with iTrustCapital for a smaller investment of only $1000. This makes it one of the most attractive platforms for investors who have a smaller budget.
Furthermore, iTrustCapital supports around 60 cryptocurrencies along with precious metals such as silver and gold. You can also diversify your portfolio by combining both precious metals and cryptocurrencies. Its transaction fee of only 1% under the crypto IRA account is also quite low.
BitIRA – Highest Security IRA
Many serious investors consider security to be the most important factor when it comes to their retirement funds. After all, nobody wants their retirement plans to get compromised. In this regard, BitIRA is a notable candidate as it goes the extra mile to provide military-grade security on your Bitcoin Cash IRA.
It makes use of several encryption layers to ensure that your funds are secure along with multi-factor authentication. This means that it becomes very difficult for malicious actors to gain access to your funds by penetrating the company. But that is not all. It has many other security systems in place such as compliance with level 2 CCSS (cryptocurrency security standards) created by a major security certification body called CryptoCurrency Certification Consortium.
And just like any other high-end crypto IRA, BitIRA offers insurance coverage as well. However, the amount is significantly lower at only $100 million. Nevertheless, the main reason why this is an attractive choice is its security.
How Does a Crypto IRA Actually Work?
A crypto IRA works by allowing an individual to hold investments in cryptocurrency within a retirement account. Here’s an overview of how the process typically works:
Setting up the account: The first step is to set up a self-directed IRA, which can be done through a financial institution that specializes in crypto IRAs. The individual will need to choose between traditional IRAs or Roth IRAs, and then fund the account with either cash or a rollover from an existing IRA or 401(k) plan.
Buying cryptocurrency: Once the account is set up, the individual can use the funds in the account to buy cryptocurrencies, such as Bitcoin or Ethereum. This can typically be done through a cryptocurrency exchange or a platform that specializes in crypto IRAs.
Holding and trading: The individual can then hold their cryptocurrency investments in the IRA, and make trades as they see fit. It’s important to remember that all transactions within the IRA must be made with funds from the IRA, and not with personal funds.
Withdrawals: Once the individual reaches retirement age, they can begin taking distributions from their crypto IRA. With a traditional IRA, these distributions will be taxed as income, while with a Roth IRA, they will be tax-free.
Choose the Right Crypto IRA Company for You
There are a number of things that you need to consider before choosing a particular crypto IRA. While crypto IRAs can provide you with several tax benefits, they also come with certain fees such as monthly fees for maintenance, trading fees, setting-up fees, or transaction fees.
So, let us take a look at different types of fees that you should consider before choosing a crypto IRA.
Most crypto IRAs charge you a monthly or yearly maintenance fee which is a flat charge. These fees are usually termed “annual maintenance fees” or “custodial fees”. Regardless of what any particular provider names it, these fees usually serve the same purpose. This is also a smaller fee and is typically a single charge that occurs when you first open a new crypto IRA account. Other than that, trading fees are usually based on percentages of a trade. However, these fees might vary from provider to provider. Some providers might charge a flat percentage while others might charge varying percentages for different cryptocurrencies.
Security is another major concern for most investors who open accounts with crypto IRAs. After all, investors are serious about their retirement funds. Generally, it is a must-have for crypto IRAs to offer strong encryption such as 256-bit SSL encryption. Along with that, you should check whether the crypto IRA puts other important measures in place such as storing funds in cold storage, multiple layers of encryption, multi-factor authentication, and insurance of the digital assets.
Some crypto IRAs may allow you to invest in diverse and alternative assets such as precious metals (silver and gold). Opening an account in such a crypto IRA can allow you to diversify your portfolio and improve your risk-management strategies. So, a market downturn or any chaotic activity in the market will not significantly impact your retirement funds.
It is very important to do your due diligence before opening a crypto IRA account with any particular provider. That is because the market is ripe with scams and fraudulent companies that are ready to steal your money. Such fraudulent companies often claim to be approved by the IRS. So, it is a good idea to talk with a financial advisor who knows about crypto IRAs to make sure that you are taking the right decisions.
While holding crypto in your IRA can increase diversification, the extreme volatility of crypto makes it a poor choice for a retirement investment. Investors require a self-directed retirement account to invest in cryptocurrencies. As the name implies, a self-directed IRA (SDIRA) is an individual retirement account entirely managed by the account holder.
Very few providers in this market offer zero–account fee IRAs. The company also has some of the lowest minimum investment requirements: You can open a crypto IRA at iTrustCapital with only $1,000. Treasury bonds are backed by the full faith and credit of the United States government, making them one of the safest investment options available.
Coinbase has a manageable $10 minimum per transaction, and they charge a 1% transaction fee on every trade. You won’t have to pay any ongoing maintenance fees or an initial setup fee.
We close with this reminder, talk with a financial advisor who knows about crypto IRAs to make sure that you are taking the right decisions. While you’re at it, you may find more financial options on our Crypto Investing and Price Predictions pages.