In this article, we’ll look at how to buy cryptocurrencies with a Roth IRA and whether it makes sense for your retirement plans.
Can You Buy Cryptocurrency With a Roth IRA?
The first big question is can you buy cryptocurrencies with a Roth IRA? Yes, you can invest in crypto with a Roth IRA account. However, not all Roth IRA accounts support cryptocurrencies. The IRS classifies virtual currencies as property, and while it does not explicitly prohibit virtual currencies in Roth IRAs, it does have restrictions on property investments in Roth IRAs. That makes it difficult to directly purchase cryptocurrencies in your Roth account. Another way to add cryptocurrencies in your Roth IRAs is to open an account with a self-directed IRA provider. There are providers, such as iTrust Capital, who provide specific cryptocurrency IRAs and Roth IRAs, and others, such as Rocket Dollar, that offer Roth accounts for investments in many alternative assets, including cryptocurrencies.
Should You Invest in a Crypto Roth IRA?
One of the biggest benefits of investing in a Roth IRA is that contributions and earnings (subject to certain rules) can be withdrawn tax-free. Before you click the button to sign up for a crypto IRA, take some time to decide if cryptocurrency makes sense for your retirement accounts. While cryptocurrency investing can be fun and profitable for some, it’s also highly volatile and risky. Cryptocurrency may not be a good choice for your retirement investments, depending on your investment goals.
How to Buy Crypto With Your Roth IRA
Suppose you want to move forward and put Bitcoin, Ether, or other cryptocurrencies in your Roth IRA. In that case, you will need to open an account with a Roth IRA provider that supports cryptocurrencies. To buy cryptocurrencies with a Roth IRA, follow these steps:
Find a Custodian for Your Roth IRA
If you want to hold cryptocurrency directly and not through an investment fund or stock, you’ll need a Roth IRA custodian with support for cryptocurrencies. Consider factors such as account minimums, fees, and number of cryptocurrencies on offer before making your selection.
Open a Self-Directed IRA
Opening a self-directed IRA is faster and easier than most people realize. You can open a self-directed Roth IRA for cryptocurrency online in less than 10 minutes. To start the new account, you’ll need personal information, including your contact details and Social Security number. You can connect a bank account or roll over funds from an existing Roth IRA for funding.
Purchase Bitcoin or Other Cryptocurrency With Your Roth Account
If you’ve ever bought stock in a brokerage account, buying cryptocurrency with your Roth IRA is similar. However, where most stockbrokers allow you to trade stocks and ETFs with no added commissions or fees, that’s not the case with cryptocurrency. Because you’ll have to pay trading fees and possibly other ongoing fees, it’s vital to review costs and fees when picking a crypto Roth IRA.
Stay Involved in Your Investing
Some IRA accounts are designed to be set up and mostly forgotten about until you retire, requiring very little intervention. With a self-directed cryptocurrency account, it’s wise to keep up with the news on your holdings and continually evaluate whether they still make sense for your retirement account. Cryptocurrency prices can change quickly with little warning, so always keep up with what’s going on in your portfolio.
The Bottom Line
Cryptocurrency Roth IRAs are easy to use for anyone comfortable with online investing. However, just because it’s easy, doesn’t mean it’s right for everyone. Review the fees and risks before putting cryptocurrency in your Roth IRA. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
