Add crypto to your retirement investments
With the recent increase in the popularity and price of cryptocurrencies, many people are still trying to find a way to invest effectively in the new digital asset class. While investors would wait for the SEC to hopefully approve the creation of crypto ETFs, which would allow pension funds direct exposure to crypto markets, investors are currently limited to open market options such as private trust. of Grayscale which trades directly on the US stock market. These private trust funds provide an indirect way for investors to gain exposure to the underlying cryptocurrency. However, there may be a better way for investors to use their retirement funds to invest directly in cryptocurrencies through something called bitcoin IRAs. Bitcoin IRAs are basically just an individual retirement account that allows direct access to Bitcoin or other digital currencies within the retirement account.
The terms “bitcoin IRA” and “cryptocurrency IRA” are used interchangeably, such as “Kleenex” for “tissues,” but refer to the same concept of creating self-directed individual retirement accounts (SDIRA) in which to invest directly in. the underlying cryptocurrency. SDIRAs are not a new concept and have allowed Americans using their retirement accounts to invest in many different asset classes such as gold, real estate, private equity, etc. Due to the volatile and speculative nature of cryptocurrencies, most custodians and trustees have not allowed direct investments within their platforms. However, there are a multitude of companies that will allow you to set up a cryptocurrency IRA that can invest directly in these digital asset classes.
The first and largest of these companies is Bitcoin IRA, but also includes companies that have worked with SDIRAs for over 40 years, such as Equity Trust Company. These companies, including Bitcoin IRA, offer most of the largest cryptocurrencies, including Bitcoin, Ethereum, Ripple, and Litecoin, but the types of crypto-curry vary by provider. There are a host of other factors that should come into play in deciding which of these companies to use, including security, fee structure, expertise, web experience, and more.
There are several advantages to setting up a cryptocurrency IRA, including diversification to an asset class that is not correlated with stocks and bonds, the potential for higher returns in the booming industry digital asset classes and the tax benefit of not having the headache of calculating your taxes owed after every transaction you make, because you won’t be taxed as long as the money and securities are in your account.
The freedom of SDIRAs can be a double-edged sword, so keep in mind that they are called self-directed for a reason. You will be the only one to determine the legitimacy, relevance and relevance of your own investments. This can be a very big hurdle for first-time investors or people working to understand highly technical digital asset classes.
While retirement accounts are generally intended for long-term secure investments that will gain in value over time, cryptocurrency IRAs give investors the option of transferring a small portion of their accounts to these SDIRAs to get additional diversification. Investors are not recommended to use their retirement funds for speculative purposes and should generally allocate less than 5% of their accounts to an alternative asset class. Bitcoin and other cryptocurrencies are extremely volatile and should only represent a very, very small portion of your total investments. As always, consult with a tax and / or investment professional before making these important decisions.