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How to Set Up a Bitcoin IRA

by Alan Daniel
How to Set Up a Bitcoin IRA

With an IRA, you can choose the right investments, and manage your returns.

This gives you the freedom to be in control of your retirement savings and future returns. But an IRA still ensures that you are getting the usual benefits of a specialized savings account, such as tax benefits or exemptions.

For someone interested in cryptocurrency and its evolution over the next few decades, this opens a path to unprecedented possibilities.

After all, the Bitcoin you are investing in right now could become ten times more valuable over the years. With the ability to save on taxes, you can practically make a fortune on those savings alone.

If you have been thinking about setting up a Bitcoin IRA, then here’s all you need to know.

How to Setup a Bitcoin IRA?

The question is simple. The answer is a bit more technical.

IRAs can be set up via for type of asset except for a few choice types, such as life insurance. Cryptocurrencies like Bitcoin can be added to IRAs.

Keep in mind that a “Bitcoin IRA” would follow the same guidelines as a conventional IRA.

Whenever you are to setup an IRA, locate a financial institution that conducts the process for you. The financial institution can be a bank, a credit union, or any other entity that is approved by the Internal Revenue Service (IRS).

An IRA requires a few government regulations to be followed in specifically laid out procedures.

Among other specifics, these institutions let you choose:

  • Your saving methods.
  • The IRA type, such as Traditional IRAs or Roth IRAs (with the latter being free of age restriction).

One drawback of going with general financial institutions may be the lack of access to bitcoin purchases. As such, you may need to go with a self-directed IRA.

A self directed IRA allows an investor to purchase all legal and accepted assets.

Things to Know While Setting Up a Bitcoin IRA

Here are a few things to keep in mind.

  • When choosing a self-directed IRA custodian, you must allocate a certain percentage of funds, and will likely need to provide a trusted bitcoin wallet.
  • Walk through best practices with your self-directed IRA custodian.
  • Ask about fees associated with bitcoin management.
  • Find a provider such as BitcoinIRA.com that meets your specific needs.
  • If you currently hold investments in Bitcoin, you will of course need to convert them to your chosen IRA custodian. But doing so is not easy. Your current investments will first have to be sold if they are to convert into an IRA account.
  • Make sure that your total contributions in a year do not go over the contribution limit defined by the IRS. It is up to $5,500, or $6,500 if you are age 50 or older. Excess contributions are subject to an additional 6 percent tax.
  • You can choose multiple IRAs, but you have to make sure your total contribution in a year does not go over the defined limit.
  • In addition to that, you need to make sure that you are aware of the risks. You are subject to losses due to fluctuations, which my be significant.
  • Watch out for fees and understand the total cost of opening up a self-directed IRA before you start the process.

Find a self-directed IRA custodian that is able to meet your needs and is approved by the IRS. They also have to be transparent and credible. By doing so, you can ensure to setup your IRA with peace of mind.

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