How a Crypto IRA Works and How to Start One

To diversify your retirement account, you’ll want to add a Crypto SDIRA. [...]

To diversify your retirement account, you’ll want to add a Crypto SDIRA. This is an alternative IRA that makes it possible for you to include crypto into your retirement portfolio. The more you diversify your account holdings, the more you spread the risk. 

So, how do you enroll in an IRA account that features crypto? How is this account different from a traditional IRA or a Roth IRA?

How to Set Up Your Crypto IRA Account

You can set up your crypto IRA account on a website, such as Viva Capital. When you enroll, you’ll work with a custodian who’ll also serve as your advisor. He or she will make crypto trades for you, according to your directions, and also handle all the administrative details.

These activities include establishing the IRA, performing any rollovers, and managing contributions and distributions. Trading crypto works in the same way as trading stocks. Instead of a stock exchange, you’ll trade crypto over the crypto exchange.

An Alternative IRA Investment

To understand how a crypto IRA works, you need to define it first. This type of IRA is called a self-directed IRA, or SDIRA for short. It basically works the same as a regular IRA but, instead, features alternative investments such as crypto, precious metals (gold or silver), real estate, or art. 

By contrast, a traditional IRA features investments, such as stocks bonds, mutual funds, and ETFs. You just can’t include crypto in a traditional IRA nor can you place stocks or bonds in an SDIRA. Whether your IRA is traditional or self-directed, it has the same investment limit. 

IRA Investment Limits

You can invest up to $6,000 in any type of IRA until you’re 50 years old. Most investors, 55 or older, can invest up to $7,000, as this extra amount is a “catch-up” amount. When you invest in a crypto IRA, it is best to choose a Roth IRA, as this type of IRA is more investor-friendly. 

Rules for IRA Withdrawals

You have to start making withdrawals out of regular IRAs when you are 72 years of age. Also, you have to pay taxes on the withdrawals. 

While you have to pay taxes on Roth contributions, you don’t have to pay capital gains on your crypto, which simplifies both trading and taxation.

Also, you don’t have to withdraw the money at a certain age. You can make contributions as long as you like. You just can’t make any withdrawals until you’re 59 1/2 years old – as long as you hold the account for five years. The five year holding period also applies to you if you’re 60, 70, or 80 years of age. 

In addition, you won’t be penalized for making an early withdrawal from a Roth IRA if you use the money for the first-time purchase of a house, to pay for college costs, or to cover adoption or birthing expenses.

Enroll in a Crypto SDIRA Today

Make sure you reduce the risk of investing for retirement. Diversify your holdings by signing up for a crypto SDIRA today.

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