Can You Buy Crypto in a Roth IRA Account?

IRAs for cryptocurrencies are available for tax-advantaged retirement savings. These Crypto IRAs (aka ‘Bitcoin IRAs’) can be opened with a number of account providers. But if you already have a Roth IRA, you most likely cannot put cryptocurrencies into it.

The IRS treats cryptocurrencies like Bitcoin as “property.” Therefore, for tax purposes, cryptos in a Roth IRA are treated much like gold in a gold IRA.

However, if you want to buy crypto in a Roth IRA, there is a simple solution. A Crypto IRA allows you to invest in cryptocurrencies and can gain the same benefits that Roth and other IRAs offer. You can also roll over funds from another IRA to fund your crypto purchases for a new bitcoin Roth IRA.

What are Cryptocurrency IRAs?

A Crypto IRA is a type of IRA that facilitates investments in cash alternatives. They enable you to put cryptocurrencies, precious metals, and other assets into an IRA for properties.

Crypto IRAs offer the tax benefits of their corresponding account types. They make it more affordable/advantageous for those using said investments to prepare for retirement. 

There are a few differences between regular IRAs and Crypto IRAs. Crypto IRAs facilitate a different range of asset class investments. However, they also typically have different fee structures. Crypto IRA providers act as custodians as well, meaning you have the ability to purchase your cryptos through them. This provides a single “turnkey experience” or a “one stop shop” type of feel.

Should You Invest in a Crypto IRA?

The decision to open a self-directed retirement account is highly personal. It is your responsibility alone to weigh the benefits and drawbacks and understand the potential benefits and risks of doing so. Self-directed accounts place more responsibility on investors than managed accounts. However, if you are well-versed in investments, or are willing to take the time to become knowledgeable, self-directed accounts can be very rewarding.

Alternative assets like Bitcoin and other cryptocurrencies are more volatile than most assets. They present a large opportunity for profit, and many people tout them for producing large returns. However, they can fluctuate wildly, and extensive loss is also a possibility. 

Many regular investors create a Crypto IRA to diversify their portfolios. Cryptocurrency prices don’t follow the same market trends that fiat currencies and commodities do. So, diversification can become beneficial when other assets drop in value.

Another factor that draws people to invest in cryptos is that they are regarded as a reliable, inflation-resistant form of value. Those investors tend to play a long game, holding cryptocurrencies for many years.

In the end, only you can make the decision to invest in a Crypto IRA. The best thing you can do is take the time to understand the investments you’re making and the potential consequences, both positive and negative.

The Types of IRA Accounts

There are a few types of IRAs that offer different tax benefits.

Traditional IRA

A traditional IRA is the most commonly used. A traditional IRA is funded with pre-tax dollars, which lowers your income as declared to the IRS. So, you can invest in a traditional IRA to lower your total income, and where applicable, to lower yourself into a lower tax bracket.

Property held in an IRA is sheltered from capital gains taxes. If, for example, your Crypto IRA increases in value, you don’t need to worry about the difference and corresponding capital gains taxes.

You only pay taxes on traditional IRAs once you withdraw them in retirement. Funds drawn from a traditional IRA during retirement are taxed as regular income. Income in retirement usually is more than income during your working years. So, traditional IRAs can produce net savings over a lifetime.

Roth IRA

A Roth IRA provides similar benefits to a traditional IRA, but the order is reversed. You fund a Roth IRA with after-tax dollars. So your contributions to your Roth IRA don’t give you a tax dedication, but they give you something potentially better.

The tax benefit of a Roth IRA is that you do not pay any income taxes when you withdraw funds in retirement. So, if you want to pay taxes now and not worry about them when you retire, Roth IRAs are a potential option.

For example, if an investor deposits $6,000 into their Roth IRA and that account grows to $600,000 over a lifetime of investing, all the funds are withdrawn tax-free during retirement.

SEP IRA

A SEP IRA is an employer-sponsored IRA. This provides tax-deductible contributions similar to a Traditional IRA, but allows for potentially higher contribution limits.

How to Buy Crypto with a Traditional, SEP, or Roth IRA?

Typically, you buy crypto for your IRA through your account provider. Most IRAs are managed by trustees or custodians who offer the assets, including cryptos. Crypto IRAs are self-directed IRAs funded with a rollover or cash transfer. After that, you simply place your orders on the 24/7 platform. Your order is the part where you use your dollars to purchase cryptos for your account.

This process is the same for all IRA types, as they all follow the same regulations. After you start allocating cryptocurrencies for your account, you are not supposed to withdraw them until retirement. Early withdrawals can be made, but with a few exceptions, you will have to pay an early withdrawal penalty to do so unless opting for early retirement. You should also consider other costs associated with the accounts, like trading fees, annual maintenance fees, or any monthly storage fee.

Where to Open an Account to Buy Crypto with a Traditional, SEP, or Roth IRA

You need to find a Crypto IRA account provider to invest in cryptocurrencies through any IRA type. They will be your custodians and enable you to invest in all the cryptocurrencies for which they can facilitate trades.

One popular and rising example is iTrustCapital, which offers Crypto IRAs. You can open a Crypto Roth IRA or a Traditional or SEP IRA if you choose.The platform supports the following coins: Bitcoin, Ethereum, Cardano, Chainlink, Polkadot, Litecoin, Dogecoin, Bitcoin Cash, Stellar, EOS, Uniswap, Compound, SushiSwap, yearn.finance, Polygon (Matic), Aave, Solana, Curve DAO, Basic Attention Token, Enjin, Algorand, Cosmos, Tezos and more.

iTrustCapital also offers precious metal investments for further portfolio diversification aside from digital currencies.

Creating an account with iTrustCapital is easy if you follow the steps and meet the minimum qualifications. You can set up an iTrustCapital account in a matter of minutes by following these instructions:

  1. Go to the iTrustCapital website and select “Make a Account”
  2. Verify your provided email account 
  3. Follow the steps they guide you through for ID verification
  4. Open an account of your choice
  5. Fund your account with a transfer, rollover, or cash contribution
  6. E-Sign your formal application
  7. Purchase the assets you want to add to your account

If you encounter any questions, you can schedule a free 1 on 1 call with one of their crypto retirement account specialists who will help guide you through the process.

You may also like

If you are curious about what cryptocurrency to buy apart from Bitcoin, learn more about other cryptos to invest in.
Read more