Cryptocurrency as an asset class is finding more ways into traditional investment schemes. It’s now possible to hold crypto under a variety of individual retirement accounts (IRAs). Interest in this option has grown considerably recently when the largest retirement accounts provider, Fidelity Investments, announced plans to offer crypto within its 401(k) accounts. The move is widely viewed as a precursor to making crypto available under the company’s IRAs as well. Boasting significant taxation benefits — such as no capital gains tax, and tax-deductible contributions — crypto IRAs are a new hidden gem for retirement-oriented investors.
IRAs were first introduced by the Employee Retirement Income Security Act of 1974 (ERISA). They’ve long been the staple of retirement investment for the self-employed, freelancers, small business owners or, in fact, anyone who wants to actively manage their own retirement funds. These accounts differ from the employer-sponsored 401(k), and are based on your own individual contributions. IRAs allow you to invest in a variety of asset classes, typically stocks, bonds, mutual funds and index funds, but also less conventional alternative investments. Cryptocurrency is also a legitimate asset to own under an IRA.
However, traditional IRA providers have long been reluctant to offer crypto or any other high-risk asset class to these accounts. Nevertheless, as often happens, the niche hasn’t remained vacant for too long. Over the last few years, several crypto IRA providers have emerged in the market. These financial companies offer cryptocurrencies within their IRA products. Among the most popular crypto IRA providers are Bitcoin IRA™, iTrustCapital, Alto Solutions and BitIRA™. While the niche of crypto IRA providers is still relatively small, it’s growing fast. Fidelity’s plan to offer crypto in its 401(k) products is also an indicator of traditional IRA providers’ interest in this area.
IRAs have typically been used for the tax advantages they offer. Depending on the type of IRA (of which there are several), your tax benefits will work differently. Out of the variety of IRA types, the two most common ones are standard IRAs, also referred to as traditional IRAs (or simply IRAs), and Roth IRAs.
Standard IRAs — IRAs, hereafter — let you make tax-deductible contributions. However, your withdrawals from such an IRA in retirement are not tax-deductible. In contrast, contributions to a Roth IRA are not tax-deductible, but withdrawals you make in retirement are.
The key difference between IRAs and Roth IRAs
Source: AllianceWealthAdvisors.com
The majority of crypto IRA providers offer both IRAs and Roth IRAs. Some providers only have crypto available as an eligible asset class within their retirement account products, while others offer a mix of crypto and various assets.
The market of crypto IRAs is growing by the day, with an increasingly diverse choice of providers and products available to retirement-focused investors. Among this variety, we’ve analyzed and selected the best IRA providers based on six key factors — Bitcoin-specific offers, suitability for beginners, coin variety, suitability for self-directed investments, fees and security — as well as the best overall IRA provider.
We decided to pick two providers as joint winners for our best overall IRA — Bitcoin IRA and iTrustCapital. In the individual categories below, we’ll take a closer look at these two companies. Bitcoin IRA is our pick in the best Bitcoin-specific investment category, while iTrustCapital is the winner of the low fees category.
We’ve chosen Bitcoin IRA as one of the two best overall IRAs because cryptocurrency investing is still heavily dominated by Bitcoin (BTC). This is particularly relevant for retirement investing, since the majority of altcoins are considered more volatile than the world’s first and largest crypto. Thus, it’s not surprising that our best provider for Bitcoin-specific IRAs has been (jointly) crowned as the best overall as well.
As for iTrustCapital, the company’s leadership in the fees category, low barriers to entry for investing and a diversity of assets on offer are its key strengths. These factors help iTrustCapital make crypto IRAs as affordable as possible for diverse segments of investors, something that — in our view — definitely warrants the best overall IRA award.
Bitcoin IRA is our pick for the best Bitcoin-specific IRA. As a large and well-established provider, Bitcoin IRA is capable of offering a 24/7 trading platform, easy setup, and custody insurance of up to $700 million. You can roll over your existing IRAs, and even 401(k) into an IRA product offered by the company. The company’s main IRA product requires a minimum investment of $3,000.
Bitcoin IRA also features a very secure storage system. Your funds are held in cold storage, and are protected by military-grade security solutions.
Source: Bitcoinira.com
If you want to invest in Bitcoin via an IRA product, Bitcoin IRA is the optimal choice due to its balanced combination of key benefits — the platform’s size and established nature, convenient setup, high insurance limits, numerous rollover options, and great security.
Investing in crypto, especially via IRAs, is an area that is still not intimately familiar to many people. This unfamiliarity creates uncertainty and a lack of understanding about the options and strategies for crypto IRA investments. That’s why suitability for beginners is a key category we’ve considered in our crypto IRA review.
Among the plethora of crypto IRA providers, California-based BlockMint stands out for its great service and tools available to beginning investors. When you open an IRA at BlockMint, you’re guided in the process by your personal BlockMint agent, who is a qualified consultant. This is an outstanding feature for novice crypto investors to help them select the most suitable product, crypto assets and investment strategy.
Past the account opening stage, BlockMint continues to guide you on the platform via a multi-channel support system that includes email, phone and online chat. This provides an opportunity for less experienced investors to adjust their portfolios and strategies regularly, something that many beginners, particularly in the retirement investment niche, often fail to do.
Besides comprehensive support for novice investors, BlockMint boasts other advantages: Insurance coverage up to $600 million and military-grade security for funds’ storage.
Though Bitcoin is still the king of the cryptocurrency world, many investors don’t want to limit themselves to this crypto when devising their investment strategies. Investing in multiple cryptos is becoming increasingly accepted, with some investors actively looking for products with as wide a choice of coins as possible.
When it comes to variety, Regal Assets, a provider of crypto and precious metal investment products, reigns supreme. Regal Assets offers IRAs with which you can choose virtually any crypto to invest in. There are over 20 popular cryptocurrencies, such as Bitcoin, Ether (ETH), Cardano (ADA), Litecoin (LTC), Ripple (XRP), and other high-cap cryptos listed by Regal Assets as available within its IRAs. Additionally, the company offers the option to add a custom crypto, per your preference — truly a dream for investors keen on holding a diverse bucket of crypto coins.
This provider also offers investment in precious metals — gold, silver, platinum and palladium. You can diversify your IRA investment with Regal Assets by combining cryptocurrencies with these traditional assets. This could be a great option for many retirement-focused portfolios, as precious metals are widely regarded as a “safety net” and a low-risk investment, while crypto is a high-risk/high-growth asset type.
The majority of IRAs and Roth IRAs offered by traditional retirement investment providers place restrictions on what types of assets you can hold within these products. Typically, IRAs and Roth IRAs invest in cash and cash equivalents, stocks, bonds, mutual funds, index funds and exchange-traded funds (ETFs). These asset classes are considered to be less risky, and thus more suitable for a retirement portfolio.
However, a special class of IRAs and Roth IRAs — Self-Directed IRAs (SDIRAs) — exists to facilitate investment in a wider assortment of asset classes. An SDIRA may be used to hold alternative investments, such as real estate, private equity, commodities, and even mineral lease rights.
Among crypto IRA providers, our pick for the self-directed investments category is Equity Trust®, a well-known specialist in the niche of alternative investment products. Equity Trust offers investments in cryptocurrency, as well as in a range of other alternative investment assets which include (but aren’t limited to) real estate, private equity and private lending.
Source: Trustetc.com
The choice of asset classes offered by Equity Trust is probably more diverse than at any other crypto IRA provider. By talking to the company’s consultants, you may further customize your IRA portfolio and inquire about additional, even more exotic, asset types. SDIRAs often give you complete freedom with regard to your portfolio’s composition. The only asset types explicitly prohibited in an SDIRA are life insurance, collectibles and S Corporation stocks.
Equity Trust offers both IRAs and Roth IRAs for self-directed investments. Companies may also open 401(k) self-directed accounts for their employees.
Lower fees and other affordability factors — e.g., low minimum investment requirements — are among the most important decision variables for many retirement-focused investors. In this critical category, our choice for the best crypto IRA is iTrustCapital, one of the leading crypto IRA providers in the market.
iTrustCapital charges no monthly fee on individual accounts, which include IRAs and Roth IRAs offered by the company. Very few providers in this market offer zero–account fee IRAs. The company also has some of the lowest minimum investment requirements: You can open a crypto IRA at iTrustCapital with only $1,000. The affordability of the platform is a great opportunity for budget-conscious investors to own a crypto IRA product.
iTrustCapital offers investment in around 60 cryptocurrencies, as well as two precious metals, gold and silver. You may combine crypto and precious metals in your IRA product for further diversification of your retirement portfolio. The transaction fee for purchasing cryptocurrency under an IRA is 1%, also among the lowest in the industry. Precious metal purchase fees are $50/oz. for gold and $2.50/oz. for silver.
Source: iTrustCapital.com
iTrustCapital doesn’t compromise on the quality of its offerings, either. The company’s IRAs feature insurance coverage of up to $320 million, secure cold storage, and a 24/7 trading platform.
Our last — though definitely not the least critical — category is security. When it comes to your retirement funds, you don’t want any compromises, do you? So, which crypto IRA provider is the best from a security point of view? The major providers all boast cold storage of funds and generous insurance coverage limits. However, in our view, one provider, BitIRA®, goes the extra mile to achieve the best security for your crypto IRA funds.
BitIRA has all the bells and whistles you may find in a leading crypto IRA provider, such as insurance coverage (up to $100 million) and cold storage of funds. Additionally, BitIRA has implemented industry-leading security measures to maximally protect your investment. First, the company’s insurance coverage provides “end-to-end protection.” This means that your investment is fully covered against theft, hacking, physical loss, or any other form of damage or destruction at the stages of purchase, storage and movement of your funds.
This end-to-end coverage is quite different from standard insurance, which normally protects your funds only at the stage of purchase.
Second, BitIRA uses multiple layers of encryption and multi-factor authentication to protect your IRA investment. Malicious actors who may try to hack your funds will find it incredibly hard to penetrate the company’s multi-layer security system.
Finally, BitIRA’s process of creating a digital IRA for a customer must be compliant with Level 2 Cryptocurrency Security Standards (CCSS), a stringent security standard created by a leading crypto security certification body — the CryptoCurrency Certification Consortium (C4).
With all these measures in place, you can be certain that your funds held in an IRA product by BitIRA are guarded 24/7 by some of the best protection mechanisms in the industry.
Crypto IRAs allow you to invest in cryptocurrencies or to mix cryptocurrency and other asset classes under the same account. Some providers focus only on cryptocurrency investments. A number of others — for instance, iTrustCapital, Equity Trust and Regal Assets — have a range of different assets on offer in addition to cryptocurrency.
Providers with different asset classes are a great choice for retirement portfolio diversification. However, if your crypto IRA provider exclusively offers cryptocurrency investments, you can still diversify your IRA holdings. A common way to do so is to open a crypto-based IRA at a specialist provider, and another IRA at a traditional provider that lets you invest in stocks, bonds and other conventional financial assets. The U.S. Internal Revenue Service (IRS) doesn’t place any restrictions on the number of IRAs you’re allowed to open or hold. As such, you may open two (or even more) accounts in order to diversify your investments.
When thinking about the multi-account strategy, consider two key factors:
As of late 2022, crypto IRA providers offer only fungible cryptocurrencies as an available investment option. NFTs aren’t on the menu! It is possible that with the further development of the crypto IRA industry, NFTs might become a legitimate form of investment under retirement accounts. As it stands now, the use of NFTs in IRAs is a gray area. Many industry professionals doubt that NFTs will be allowed in IRAs, since the IRS specifically prohibits investment in collectibles under these accounts. While there’s no explicit ruling on NFTs yet, they are likely to be regarded as “digital collectibles” by the IRS, making their use in IRAs problematic.
Crypto IRAs offer some significant advantages to retirement-focused investors. The key pros for these investment accounts include:
Crypto IRAs also have some cons or risks associated with them that you’ll need to consider before opening a crypto-focused retirement account. These include:
Crypto IRAs are no longer an exotic or unheard-of choice for retirement investing. This new class of IRA products is growing fast, offering diversification and growth opportunities that weren’t available to retirement-conscious investors just a few years ago.
The IRAs we’ve included in this article all represent a solid alternative for your crypto investment. Your final IRA choice should be determined by which of the six key factors we’ve covered here that you deem to be the most critical.
Source: 7 Best Crypto IRA Companies for Diversifying Your Retirement Plan | Bybit Learn
