The crypto market is exploding. With more than $400 billion in market capitalization, it has more than twice the value of Apple, Disney, and Mcdonald’s combined! Many are bullish on cryptocurrency and believe that it will far outpace any other investment vehicle in the coming years. Others are concerned with volatility and regulation. This guide introduces trading cryptocurrency, ways to buy into crypto via companies providing crypto American IRAs, as well as some caveats for those looking to add a crypto IRA to their retirement portfolio.
What is a Crypto IRA?
A Crypto IRA from Viva Capital is a retirement fund to invest in cryptocurrencies like Bitcoin and Ethereum. Crypto IRAs are different from regular IRAs, but they are still investment accounts. They have the same tax advantages and allow you to diversify your portfolio.
The main difference is that there are different rules regarding investing with one of these accounts. In short, you cannot invest in stocks or any other type of security with a crypto IRA. Instead, all investments must be made with digital currency assets such as Bitcoin and Ethereum.
Who can open a cryptocurrency IRA account?
Most companies that offer cryptocurrency IRAs have an upper age limit of 50 years old. This is mainly because once someone reaches the age of 59 ½, they must begin taking distributions from traditional IRAs. However, some companies allow you to open an IRA with no upper age limit as long as you have earned income.
Types of IRAs
- Traditional IRA is the most popular individual retirement savings account with a tax advantage. With this IRA, any earnings from your investments will not be taxed. The withdrawals at retirement will be taxed at the tax rates at that time.
- Roth IRA provides a good tax balance that equalizes the traditional IRA. There are no upfront tax breaks, and retirement withdrawals are tax-free. There is room for tax and penalty-free withdrawal of contributions. Eligibility to contribute to Roth IRA depends on income and individuals who earn too much to contribute have the option of opening a backdoor Roth.
How to Open a Crypto IRA
There are multiple ways to go about opening a crypto IRA. Most people choose to open an account with an online investment firm. These investment firms let you connect your bank account so that funds can be transferred directly into your account. Some people purchase cryptocurrencies through dealer sites and then deposit them into their new accounts.
TIP: If you want to open your own crypto IRA, be sure to get in touch with a professional firm.
How does a cryptocurrency IRA work?
When you invest in a traditional IRA account, your money goes into a trust that your bank or financial institution holds. The money is then invested in stocks, bonds, mutual funds and other assets. The money within the trust grows over time, and when you reach the age of 59 ½ years old, you can start withdrawing your profit without paying any taxes on it. When investing in a cryptocurrency IRA, a crypto wallet acts in place of the trust. Your money is then invested into various cryptocurrency assets, and once again, when you reach 59 ½, your capital gains will be tax-free.
What you should know after opening your crypto IRA account
Opening a crypto IRA is treated like a taxable event for US taxpayers- this means you’ll have to pay capital gains tax on your investment when you sell it. Capital gains taxes can be as high as 35%, depending on your income level.
Conclusion
A good way to secure your investment is to open a Crypto IRA. This is a retirement account where you can invest your hard-earned money in stocks, bonds, and other investment options. If you haven’t already done so, go sign up for one now!
