What You Need to Know About Investing for Retirement with Bitcoin
Bitcoin has been around for over a decade, and despite some people’s uncertainty about it, it’s gaining traction. Even in the retirement investing world. That’s right, you can invest in your retirement with cryptocurrency. The options are currently limited, but will potentially open up in the future.
As of now, the only way to invest in retirement with Bitcoin is through a Bitcoin IRA, which is a self-directed IRA (SDIRA) using cryptocurrency. Why an SDIRA and not an IRA? Currently, the IRS has classified cryptocurrency as property, which can’t be used in an IRA. So if you plan to invest with crypto, you’ll need an IRA separate from your IRA with more traditional investments like stocks, bonds, and mutual funds. You can use a traditional or Roth IRA SDIRA.
If you decide to include cryptocurrency in your investment portfolio, you’ll need a custodian or the services of a company that can help you with Bitcoin investments. Such companies include Equity Trust, Bitcoin IRA, and BitIRA, just to name a few.
Before you run out and buy cryptocurrency, you should understand some of the advantages and disadvantages of investing in it.
Advantages of investing with Bitcoin
The main reason some people are excited about investing in Bitcoin is that it diversifies your portfolio. Diversification is important. When it comes to investing, you don’t want to have all your eggs in one basket. The more spread out and balanced your assets are, the more protected your overall portfolio is from market fluctuations.
With cryptocurrency becoming increasingly popular and accessible, more people are looking to it as a viable investment. Some people believe Bitcoin will continue to grow and even come to replace traditional currencies. That hasn’t happened yet, but Bitcoin believers see that expected long-term growth leading to returns over the life of their IRAs.
Disadvantages of investing with Bitcoin
The main argument against investing in cryptocurrency is its volatility. In recent years, crypto has seen major price fluctuations. Fluctuations can be worrisome, especially since we don’t have long-term data to study and make predictions. Any predictions we do make about long-term performance are based on limited data.
Another disadvantage of using Bitcoin in an IRA is the fees. Bitcoin investments are handled differently than normal stock trading and can require more research and diligence on behalf of the custodian, causing higher custodian and maintenance fees. There can also be fees for the initial setup of a self-directed IRA, as well as fees for trading and selling. Usually, fees include a 3.5% fee charged by the custodian and a 1% fee per sale. Percentages may vary.
Some Bitcoin IRA service providers are incentivizing potential clients with discounts to overcome fears and uncertainties about crypto. If you’re interested in investing with crypto, do your research, and work with a financial professional whom you trust and who is familiar with SDIRAs and the crypto world.
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