Since November 2014, it has been allowed to include cryptocurrencies such as Bitcoin in a retirement account such as an IRA or a 401(k) Plan period because of the fact that cryptocurrencies have shot up in value throughout 2017, more and more people are now interested in opening a cryptocurrency IRA. If you are considering this as well, then it is important that you understand the ins and outs of these types of investments.
Why Build a Retirement Account Through a Cryptocurrency IRA
When you purchase cryptocurrencies can’t be that bitcoin or any other type, using a self-directed IRA, any income and gain that this investment generates will go back into your retirement account. In the case of a Roth IRA, this money will be tax-free and in the case of a self-directed standard IRA, these games will be tax-deferred. Indeed, the Roth IRA is by far the most popular type of Ira to use with cryptocurrencies because the investment can grow completely tax-free.
How to Use Retirement Saving to Purchase, Hold, or Sell Bitcoin
There are generally two methods available to someone who wishes to purchase cryptocurrencies using their retirement funds. The first is the self-directed cryptocurrency IRA and the second is the Solo 401(k) Plan. Because of the fact that cryptocurrency Investments are still reasonably new and because their value is incredibly volatile, those who offer custodianship of a self-directed IRA will generally require the account holder to be established as an LLC. The LLC will be owned by the IRA rather than by the account holder and it will be through the LLC that cryptocurrency will be purchased.
Should you choose to use the Solo 401(k) Plan, you must be part of a business that does not have any full-time employees other than the company’s owner and they are spouses. Using this type of plan to invest in cryptocurrencies simply means that you must open a self-directed account and roll over any existing cash or retirement funds into it. You will be the trustee of the plan and therefore have checkbook control, which you can then use to make your investments.
Regardless of what type of plan you have to invest in Bitcoin, you must also open a digital wallet in which of cryptocurrencies will be held. These wallets are very easy to open and now even come with mobile applications so that you can always access your cryptocurrencies. Indeed, since recently, there is even a mobile app available for iOS operating systems.
A final thing to remember is that Investments are always volatile and never secure, but that this is perhaps even greater than investing in cryptocurrencies. Because these currencies are decentralized in nature, their value is set fully by what users are willing to pay for it. It is also for this reason that we historically see the value of crypto shoot up before it slowly starts to drop down again. That said, after the drop has been completed, it will usually still be worth a lot more than what it was before it started shooting up.