5 Best Bitcoin IRAs in 2024
Retirement strategy might not be the first thing you think of when you think of crypto, but Bitcoin IRAs are a great option for many investors looking to capitalize on long-term crypto gains and plan for the future. We’ve got the low down on what Bitcoin IRAs are, how they work, the benefits, the risks, and the best Bitcoin IRAs to research.
What is a Bitcoin IRA?
A Bitcoin IRA (or crypto IRA) is a self-directed Individual Retirement Account (SDIRA) that allows you to invest in cryptocurrencies and enjoy the benefits associated with IRAs, most commonly tax benefits.
5 Best Bitcoin IRAs for 2024
The surge in demand from people looking to add Bitcoin and other alt-coins to their retirement portfolio means there are plenty of Bitcoin IRA providers to pick from, but here are five of the best Bitcoin IRAs to research:
|Minimum initial deposit*
|Types of IRAs offered
|34 + other assets
|1% transaction fee
|Traditional & Roth
|Trading, asset, and custody fees between 0.99% to 4.99%
|Traditional & Roth
|Nominal fees included in spread
|Traditional & Roth
|1.25% to buy, 1% to sell
|Traditional & Roth
|$20 or 0.25% annually, plus 0.99% Bitcoin trading fee
|Traditional & Roth
iTrustCapital offers low and simple pricing with a 1% charge on crypto transactions, and no monthly account maintenance fees. Compared to other Bitcoin IRA providers, iTrustCapital IRA has a low initial deposit of $1000 to open an account and offers a variety of IRA types including traditional and Roth IRAs. When it comes to crypto, you can pick from 34 different cryptocurrencies to invest in using your IRA.
BitcoinIRA is one of the largest crypto IRA providers and despite the title - Bitcoin isn’t the only crypto you can invest in. There are more than 60 cryptocurrencies available, from top ten cryptocurrencies to lesser-known altcoins depending on how much you want to diversify your investments. As well as this, the company also offers BitcoinIRA Earn - where users can loan their IRA funds to earn interest. The minimum initial deposit for a BitcoinIRA account is $3,000 and the company offers different types of IRAs including Roth IRAs. The fee structure for trading, asset, and custody fees varies depending on the size of your account.
BitIRA is a relative newcomer to the crypto IRA market - but offers excellent security for digital assets, backed with unlimited insurance coverage. Users benefit from multi-encryption encoding for transactions in progress and once completed physical keys are kept in a cold storage wallet in a secure location. You'll need a minimum investment of $5,000 to open a BitIRA account, and different types of IRAs including traditional and Roth are available. Customers can trade 17 cryptocurrencies, and unlike many providers, there are no fees, instead, BitIRA includes a nominal fee within the spread price.
CoinIRA offers 17 cryptocurrencies to buy and sell, with a simple fee structure of 1.25% for purchases and 1% for sales. There are a number of different types of IRAs available, including Roth IRAs to suit your investment strategy. However, the minimum initial deposit is $5,000, which is quite steep compared to some other IRA providers.
Unlike all the other Bitcoin IRAs in this list, Swan Bitcoin only offers Bitcoin, so for investors looking to diversify into other cryptocurrencies, it may not be the ideal choice. However, unlike many other providers, Swan Bitcoin does not require an initial minimum deposit to open an IRA account, so it's a great option for those just starting to save. Swan Bitcoin offers both traditional and Roth IRAs and has a simple fee structure. Bitcoin transactions have a 0.99% fee and there is a monthly account maintenance fee of $20 for accounts with less than $100,000 or 0.25% for accounts with more than $100,000.
What are the benefits of a Bitcoin IRA?
Beyond helping you tap into a potentially lucrative future of Bitcoin and other cryptocurrencies, Bitcoin IRAs offer the following benefits:
No withdrawal, no tax: You won’t be expected to pay tax on any gains until you withdraw your funds from the IRA (unless you choose a Roth IRA).
Re-invest gains: By not withdrawing your gains, you can make reinvestments and grow your portfolio tax-free.
Preferred tax rate: When you cash in your IRA, you’ll be taxed based on your income, which will likely be considerably lower after retirement, or with a Roth IRA pay no tax.
Diversify: Adding Bitcoin to your retirement portfolio via a traditional IRA often isn’t possible, so this is your chance to diversify.
As you can see, the benefits of using a Bitcoin IRA are impressive, but as with all investments, there are risks as well.
What are the risks of a Bitcoin IRA?
Any investment is risky, and with inflation hitting multi-decade highs, it feels like our equity isn’t safe anywhere; that being said, we’d be foolish to pretend crypto isn’t a high-risk asset. You should keep the following risks in mind before you start building your Bitcoin IRA:
Volatility: Bitcoin and other major alt-coins are notoriously volatile, and even though this shouldn't affect you in the long run, the short-term swings can still be nerve-racking
Early withdrawal penalties: Taking your money out of an IRA before you retire can result in a penalty, and you’ll be required to pay income tax.
Is a Bitcoin IRA a good idea despite the risks?
It’s impossible to know which investments will pan out best in the future. This said, Bitcoin has outperformed many traditional assets in previous years. Many investors opt to diversify their portfolio by having a range of assets, including Bitcoin.
How do Bitcoin IRAs work?
Bitcoin IRAs are offered as an investment option within 401(k) plans, allowing investors to contribute cryptocurrencies instead of traditional securities. In a qualifying profit-sharing plan's 401(k) component, employees can allocate a portion of their earnings to their individual accounts.
A custodian, acting as a central entity, ensures that your account complies with government and IRS regulatory requirements specific to your jurisdiction. Similar to a standard individual retirement account, financial institutions like banks serve as custodians to safeguard assets.
How can you start building your Bitcoin IRA?
A normal IRA has a custodian such as a bank, that makes sure that all the legal conditions required to receive tax benefits are met by the user.
While traditional IRA custodians haven’t all warmed up to crypto just yet, our list of the best Bitcoin IRA providers to research above can help you get started building your Bitcoin IRA, and they all follow the custodial rules to ensure you remain above board.
Are Bitcoin IRAs legitimate?
Yes. Bitcoin IRAs are legitimate provided they follow the same custodial rules that all IRAs must follow.
Are there any limits to Bitcoin IRA contributions?
Bitcoin investments must adhere to IRA contribution limits, which are $7,000 for 2024. If you are 50 or older, you can contribute up to $8,000 for 2024, thanks to a $1,000 catch-up contribution.
It's essential to understand that investors cannot independently purchase cryptocurrencies and transfer them to an IRA account. To comply with the necessary regulations, investors must utilize designated IRA providers for such purchases.
Can you buy Bitcoin in a 401(k)?
Some 401(k) plans permit plan participants to include cryptocurrency in their account balance.
One notable provider, ForUsAll, has partnered with Coinbase exchange to enable participants to hold a portion of their assets in cryptocurrency. In certain cases, employers using Fidelity 401(k) plans may allow participants to allocate a portion of their savings to Bitcoin.
Despite the availability of options that enable plan participants to acquire Bitcoin within their 401(k)s, it's important to note that it’s not commonly offered.
The ERISA fiduciary rule requires employer-sponsored plans to offer a variety of investment options while safeguarding participants from significant losses. Given the high volatility associated with cryptocurrencies, employers often avoid including them as investment choices in their plans.
How will your Bitcoin IRA be taxed?
It depends on the type of IRA you have. You may pay no tax at all in the short-term, or tax in the short-term with no tax in the long-term. You can learn more in our dedicated Bitcoin IRA tax guide.
How much does it cost to set up a Bitcoin IRA?
This very much depends on the IRA provider you choose. Many Bitcoin IRA providers require an initial minimum deposit to open your account, and others charge ongoing account maintenance fees.
Does a Bitcoin IRA pay interest?
Some Bitcoin IRA providers like BitcoinIRA offer Earn products that allow investors to earn interest from their held Bitcoin.
What are the pros and cons of a Bitcoin IRA?
The main pros of a Bitcoin IRA are portfolio diversification and tax benefits. Meanwhile, the main cons include potential price volatility and market instability.
How do I buy a Bitcoin IRA?
All you need to do is pick a Bitcoin IRA provider (custodian) and open an account. You may be required to make an initial minimum deposit to do this. Once your account is open, you can use your provider's platform to buy, sell, and trade cryptocurrencies within your IRA account.
Should I put my retirement in Bitcoin?
It’s rarely wise to put all your eggs in one basket. The majority of investors benefit from a diverse portfolio with a range of investments, often including Bitcoin.