Your Guide To Crypto IRAs

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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When you sell an asset and make a profit, you have to pay capital gains. Crypto taxes can wipe out most of the profits you make from cryptocurrency trades. However, you can get out of paying capital gains taxes with the right retirement account.

Individual retirement accounts reward you for saving money. These funds have tax advantages that provide immediate tax savings or help you avoid capital gains. For several decades, investors have used these accounts to buy and hold stocks, bonds, and mutual funds. As new investments present investors with more options, they have come to expect more out of IRAs. Crypto IRAs make it easy to buy and hold cryptocurrency assets in a retirement account. You no longer have to limit yourself to stocks, bonds, and mutual funds.

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What is a Crypto IRA and How Does It Work?

A crypto IRA is like any other IRA. It provides tax advantages that shield your investments. But, unlike conventional IRAs, a crypto IRA lets you invest in crypto with your retirement account contributions. Virtual currencies are volatile assets that have produced life-changing returns. Some crypto assets have appreciated over 10,000% in a few years.

Significant capital gains lead to noteworthy taxes, but IRAs offer some protection. Some cryptocurrency IRAs let you keep all of the capital gains instead of giving a percentage of your profits to the IRS. All crypto and Bitcoin IRAs are self-directed. These IRAs give you more control over which digital assets you can buy and hold in your retirement account. A certified custodian must oversee the account. Titan handles this step of the process for their crypto IRAs.

How are Crypto IRAs Different from Other Types of IRAs?

Investors can choose from several retirement accounts and asset classes. Crypto IRAs have some differences from other types of IRAs.

Traditional IRA

A traditional IRA lets you buy stocks, bonds, and mutual funds with pretax dollars. These contributions lower your current tax bill, but you’ll have to pay taxes on distributions in the future. A traditional IRA has more limitations on your investment choices. Investors with a crypto IRA can buy conventional assets, but they can also add crypto, precious metals, and real estate to their retirement portfolios.

Roth IRA

A Roth IRA lets you buy stocks, bonds, and mutual funds with after-tax dollars. You won’t get a break on your current tax bill, but you won’t pay taxes when you take money out of the Roth IRA at 59 and a half years or older. Moreover, you won’t owe any capital gains taxes, even if you made a lot of money with your portfolio. In addition, you can get a Crypto Roth IRA that provides more flexibility in which assets you get to purchase.

SEP and SIMPLE IRA

 SEP and SIMPLE IRAs apply to employees. Only employers can add to a SEP account, while employees can add money to a SIMPLE IRA through lecture paycheck deferrals. Crypto IRAs let you contribute as much or as little as you desire. As a result, you have more flexibility over how much and how often you invest in a Crypto IRA.

Are Crypto IRAs Safe?

Crypto IRAs have some risks since the underlying asset is volatile. People have varying opinions about crypto. Some believe crypto is a fad, while others believe it can replace fiat currency. Luckily, crypto IRAs don’t lock you into crypto holdings until you retire. You can trade within these IRAs to capitalize on short-term price fluctuations and reduce your crypto holdings if they become a large percentage of your portfolio. Hackers can try to steal crypto funds, but this threat isn’t exclusive to crypto. 

You can mitigate risk by doing your research and investing a small percentage of your proceeds into a Crypto IRA. You can have several IRAs open simultaneously and put some of your money into stocks, bonds, and mutual funds. Like any investment, crypto becomes riskier as it takes up a more significant percentage of your portfolio.

Get Expert Help To Manage Your Portfolio

Get $10 when you open an actively managed individual or IRA account. Diversify your portfolio with personalized recommendations based on your investment goals.

What are the Benefits of a Crypto IRA?

Are you on the fence about investing in a Crypto IRA? These retirement accounts present investors with several benefits.

  • Tax advantages for your crypto: A tax-deferral retirement account lowers your current tax bill. After-tax retirement accounts shield you from capital gains taxes in the future. The latter accounts can save you a lot of money if your crypto assets skyrocket. The crypto market has had many winners increase by over 1,000% in a few years. Past performance has been strong. If those past performance reports, you’ll get the extra benefit of saving on taxes. 
  • More choices: Even if you don’t invest much into a Crypto IRA, it’s nice to know you have more choices. You’re not stuck with equities and can expand beyond what traditional IRAs offer. Having more choices helps you diversify your portfolio. A diverse portfolio lets you capitalize on more opportunities and limits your downside.
  • You can invest in several cryptocurrencies: Crypto IRAs don’t limit you to Bitcoin. You can also buy Ethereum and other altcoins. A diversified crypto portfolio has a better chance of navigating volatility than a crypto portfolio with a heavy concentration on a single coin. 
  • Easy setup and trading: A crypto IRA with Titan is easy to set up and simplifies trading. This simple structure lets you invest in crypto and build your wealth sooner.
  • Insurance: Crypto IRA providers often have insurance policies to protect your digital currencies in case something goes wrong. If you buy and hold your own crypto, you won’t have an insurance policy. Cryptocurrencies are not FDIC-insured, making any insurance policy incredibly valuable for financial protection.

Do Crypto IRAs have Risks?

Every investment has risks, and Crypto IRAs are no exception to the rule. Cryptocurrencies are volatile assets that can quickly rise and fall. You’ll also have to worry about cryptocurrencies getting stolen, but Crypto IRAs have several protections in place. They use security features, such as cold storage, to keep cryptos off the grid so hackers can’t steal funds sitting in a digital wallet. The Crypto IRA providers also have insurance policies that protect investors in the unlikely event of a breach. 

Alternatives To Crypto IRAs

Cryptocurrencies are volatile assets that have generated strong returns for long-term investors. 

If you want a safer alternative to Crypto IRAs, Titan can help. The company lets you invest in Titan’s actively managed funds. Professional investors allocate funds into equities, crypto, and other assets. These portfolios have $100 minimum investments and a $5 monthly management fee. If you don’t want help, you can buy assets in a Titan account and manage them on your own. All of these features come within Titan’s user-friendly mobile app

Create a Titan account through their website or by downloading the mobile app.

Titan

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