Four Tips on How to Buy Bitcoin in IRA

It’s been more than a decade since Bitcoin was introduced as the first form of cryptocurrency and today it continues to gain in popularity with investors. An investment in Bitcoin could result in high returns over time, but investors should be aware that cryptocurrencies are especially volatile to abrupt fluctuations in value – up and down. 

An individual retirement account (IRA) allows people to save money for retirement in a way that defers or reduces tax obligations. A Bitcoin IRA could be a way to diversify a retirement portfolio and achieve maximum tax savings. All potential investors should perform due diligence before making an investment, especially in a fairly new type of investment like this one. 

Here are 4 tips on how to buy Bitcoin in IRA that may help you determine whether to take the plunge and how to do it:

1. Find a qualified and trustworthy financial advisor or fiduciary (preferably local) to discuss your strategy. Sure, you can do a quick internet search and find scores of companies who will sign you up for a Bitcoin IRA, but it is probably more prudent to find someone local you can actually meet with in person and who you can have direct ongoing communication with to help you understand the pros and cons of SDIRAs and a Bitcoin IRA in particular.

Ask probing questions and insist on verification of the financial advisor’s credentials in the cryptocurrency field. This may take several calls and a few in-person visits, but it’s your retirement nest egg, so you want to be certain you have faith in your financial advisors to make it grow.

2. Decide on a “custodian” for a Bitcoin IRA. A Bitcoin IRA or any SDIRA must be opened by a “custodian” who will host the account and allow for cryptocurrency trades. A financial advisor or fiduciary may be able to facilitate the opening of a new Bitcoin IRA or may need to refer clients to someone else who is a qualified custodian.

In choosing a custodian, investors should make sure that the types of accounts and cryptocurrencies and exchanges offered align with their goals. Fees related to the management of these types of accounts can add up, so investors should make sure they understand the fee structure to avoid surprises. Again, it’s best to do this in person instead of all online.

3. Determine a strategy to manage crypto trades through an “exchange”. A crypto “exchange” is the platform to manage cryptocurrency trades, both buying and selling. It’s similar to the way stock markets manage trades. Your custodian may be able to help set you up with a preferable exchange, but remember that a “self-directed” IRA puts the individual in charge of his or her investments, so again, due diligence is imperative for the best results.

4. Find a secure method for storage. Because of their online nature, cryptocurrencies are subject to hackers and internet thieves. Protecting Bitcoin or other cryptocurrency assets is as important as acquiring them. Verify that the custodian has secure storage methods for protection for the short and long term. Some SDIRA providers may provide all of the services needed, but some investors prefer an “a la carte” approach and use separate entities to provide everything needed to properly service the account.

Add Bitcoin to Your IRA Today

Bitcoin and cryptocurrency are relatively new financial instruments and understanding how they work and the inherent risks that come with them are of paramount importance for would-be investors. We listed four tips on how to buy Bitcoin in IRA above that should help would-be investors determine whether to investigate a Bitcoin IRA as a way to add to their retirement portfolios.