BITCOIN IRA: Bitcoin is viewed as a great IRA option by many due to its excellent track record of value appreciation. However, I clearly understand your reluctance because Bitcoin is still a relatively new currency and can be a volatile form of currency.
The good news is that learning more about Bitcoin and how it can be used for an IRA will help you decide whether or not this investment option is right for you. While Bitcoin can be very different from more traditional IRA options, there are also some similarities.
Let’s go over the most important information you’ll need to know in order to make an informed decision about investing in a Bitcoin IRA.
Bitcoin is a highly volatile currency. This means that its value fluctuates dramatically in the short term. Investing in a volatile commodity or currency may not be for everyone because seeing your investment lose a large portion of its value before swinging back up can be extremely stressful.
Fortunately, Bitcoin has mostly risen in value over the years. As previously stated, it has had and continues to have excellent appreciation rates.
Bitcoin is being heavily invested in by large corporations such as PayPal and Square, as well as individual billionaires. This indicates that Bitcoin will be a reliable investment in the long run.
Bitcoin IRA Services
Unlike many IRAs, where you only have to deal with one entity to set up and fund your account, investing in a Bitcoin IRA is a little more complicated because you’ll be dealing with three main entities. These are the entities in question:
- Bitcoin IRA service provider
- Self-Directed IRA custodian
- Wallet/Custody provider
The primary entity with which you will interact will be the Bitcoin IRA service provider. When you want to buy Bitcoin and add it to your IRA or start a new Bitcoin IRA, they will handle the majority of the work.
The self-directed IRA custodian is exactly what its name implies: it is the account’s custodian. These entities could be trust companies, banks, or other IRS-approved institutions.
To invest in Bitcoin, you’ll need a digital wallet, and a Bitcoin IRA is no exception. Your wallet/custody provider essentially stores your Bitcoin for you and gives you access to it. Most Bitcoin IRA service providers will have a deal with a specific wallet that you can use.
We understand that no one enjoys fees, but because you’ll be dealing with multiple entities regarding your Bitcoin IRA, you’ll also be dealing with multiple fees. Here is a list of some of the costs associated with investing in a Bitcoin IRA:
- Transaction fees
- Account setup fees
- Administrative fees
- Platform fees
- Cold storage fees
In some cases, there are also trade fees. These can be as low as 1% per trade but can be much higher depending on the circumstances. Minimum values are also common in trades.
When starting a Bitcoin IRA, you will almost always be required to make an initial deposit of several thousand dollars. This implies that you must be fully committed to this investment.
Finally, if you decide to withdraw all or part of your investment early, you will be subject to additional taxes and fees. This is no different than a regular IRA.
401(k) and Rollovers
Because 401(k)s are a popular investment vehicle, you may be wondering if you can use yours to buy cryptocurrency. The answer is actually a little more complicated. While some businesses are beginning to recognize the potential of cryptocurrencies such as Bitcoin as an investment option, others continue to prohibit cryptocurrency 401(k) rollovers.
In the end, this is a company-by-company decision, and your options will be limited by your employer. However, if you are self-employed, you will discover that you have more options for converting your 401(k) to Bitcoin.
How Safe is Bitcoin?
While no investment can ever be guaranteed to be profitable, Bitcoin has proven to be the best performing asset in human history. In fact, Bitcoin’s value has increased by over a million percent since 2009. Bitcoin is a very solid investment option for retirement because its value is still increasing at an incredible rate.
Despite this upward trend, there are more stable investment options than Bitcoin, such as traditional IRAs. This may be a better option for those who prefer stability to volatility and high appreciation.
The most important thing to remember is that no investment is risk-free. However, by examining the data, you can make educated predictions based on previous events. With this in mind, it is simple to see Bitcoin’s upward trajectory and conclude that it is currently one of the best investments a person can make for their IRA or otherwise.
How to Get Started with a Bitcoin IRA
Investing in a Bitcoin IRA may appear daunting, but it isn’t as difficult as you might think. The first step is to choose which Bitcoin IRA Companies to use. This decision is influenced by a variety of factors, including fees, minimum deposits, and the quality of their customer service.
Keep in mind that a Bitcoin IRA is a long-term investment. As with any other investment of this type, I would strongly advise you to carefully consider how much you’re willing to put in at the outset and how much you’d like to end up with when it’s time to withdraw.