It is becoming increasingly common for people to start a bitcoin IRA to fund their retirement. Whether or not doing so is a good idea depends entirely on your individual needs. This is true for any type of investment. However, if you do want to open a bitcoin IRA, it is important that you understand that this must be done through a self directed account comma which means you do have to build a little bit of knowledge about investing in general.
What to Know if You Want to Start a Bitcoin IRA
Many people think that bitcoin investments are hugely complex and very risky. In fact, some have gone so far as saying it is disrespectful to your hard-earned capital. However, if you are able to build some expertise and learn things about cryptocurrencies, then it is by no means riskier than any other form of investment. You may need help buying bitcoin and comprehending everything; mitigating risk. In fact, most experts would agree that it is far less risky since interest in cryptocurrencies is growing tremendously, as has its value.
Investing in Bitcoin is slightly more complex than investing in other, more traditional asset classes. That doesn’t mean it isn’t doable, however. Not just that, with more and more custodians offering self directed bitcoin accounts, it is also becoming easier. Bitcoin and cryptocurrencies are being normalized as an asset class. In fact, there is even talk of ETFs being set up, creating mutual funds that allow people to invest in Bitcoin using the stock market.
All that being said, right now the only option is to open a self directed IRA, which can be either a traditional IRA or a Roth IRA, and use that for your investment. This is essentially a three step approach. Those are:
- To make sure you have the correct retirement account. A Roth or traditional bitcoin IRA must be self directed. It is important that you find a custodian that offers true self directed IRAs, meaning that you can decide what you invest in rather than being allowed to choose solely from the asset categories that the custodian offers. Not just that, you do have to decide whether you want to invest in a traditional IRA or a Roth IRA. With traditional, you don’t pay any taxes on the money you put in comma instead of paying it over the money you take out once you retire. With the Roth IRA, you pay taxes on the money you put in but will not have to pay any on your eventual deductions, no matter how much growth your account has experienced.
- To place money into the account. With most IRA custodians, this means you will have to register as an LLC, owned by the IRA. Remember that the IRS has strict rules in place in terms of how much money you can put in an IRA every year and where that money can come from.
- To open a bitcoin wallet, which is what you will need in order to actually purchase the cryptocurrencies. Make sure you do your research so that you find a digital wallet that is most suitable to your particular needs.