5 Facts to Know When Investing Bitcoin in IRA

Posted February 9, 2022 by in Lifestyle
Gold Bitcoins on Pink Surface

If you make trades or invest in a bitcoin IRA, you have an excellent opportunity to make a great deal of money for retirement. While this type of investment is risky and sometimes uncertain, it also offers amazing perks and significant returns. 

Therefore, the following facts will help you understand how trading bitcoin and cryptocurrencies work when investing in an  IRA. 

After this article, you should have the confidence to contact a Bitcoin IRA custodian like Viva Capital.

Bitcoins on Light Pink Paper

1. A Bitcoin IRA is a Self-Directed IRA (SDIRA)

Unlike a traditional IRA, a bitcoin or crypto IRA is a self-directed IRA or an IRA set up for alternative investments, such as crypto, securitized art, real estate, and private equity. This IRA has the same rules as other IRAs. It just is a depository for investments that fall outside the classification of a security, bond, or mutual fund.

2. Bitcoin-Based IRA Trades Are Not Assessed Taxes on Capital Gains

Bitcoin IRA trading is advantageous to the investor, as they are not assessed a capital gains tax if they sell their bitcoin. 

While you will pay tax on your contributions, you will not be taxed on any capital gains you make. If you are interested in trading crypto, this factor alone can be a great advantage.

3. You Need to Speak with a Financial Advisor to Enroll in a Bitcoin SDIRA

To set up a bitcoin SDIRA, you need to contact a company handling this investment type. You will need to speak to a financial advisor who will enroll you and manage your contributions and distributions. 

They will explain how the IRA works and how you can execute crypto trades. You can either roll over part or all of your money from a traditional IRA or a 401(k) or directly invest the funds. Usually, a fee is charged to open an account.

4. A Bitcoin SDIRA Follows the Same Tax Rules as a Traditional IRA

If you sign up for a bitcoin SDIRA, you typically establish your SDIRA like a Roth IRA. The investments are taxed, so you don’t have to pay taxes on distributions during retirement. 

You can contribute up to $6,000 yearly if you are 50 years old or younger, or $7,000 per year if you are at least 50 years old. To receive a distribution, you need to be 59 1/2 years old and account for five years or more. 

5. The Money for the Bitcoin SDIRA is Secured Using a Digital Wallet and Cold Storage

While a digital wallet allows you to store your funds in a secured location online, cold storage lets you keep your money in a digital storage space offline. Therefore, your account is highly connected to hacking or similar forms of theft. Cold storage is also referred to as a cold wallet.

Review the Advantages for Yourself

Use the facts above to establish an investment IRA for bitcoin and cryptocurrency. If you want to diversify your retirement holdings and increase your healthy financial return and growth opportunities, enrolling in a bitcoin IRA is well worth your time and review.

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