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Peter Carleton is a writer that covers banking and investing, breaking down what you need to know about where you put your money. When Peter's not thinking about cutting-edge banking apps and robo-advisors, he runs a creative agency and spends his spare time cooking or reading.
A closer look at BitIRA
BitIRA can help you add cryptocurrency to your IRA, buying and selling it as you direct it to. Your assets will be held by Preferred Trust Company, a licensed custodian that can hold cryptocurrency among other assets.
Fees. BitIRA charges a fee for cryptocurrency purchases based on the amount of the purchase. Thus, fees may vary; check on potential custodial fees before you sign up.
Assets.Through a self-directed IRA, Preferred Trust Company can take custody of assets normally associated with traditional IRAs, like stocks, bonds and mutual funds, as well as cryptocurrencies, precious metals, real estate and other assets. Among the cryptocurrencies offered are bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Ripple, Litecoin, Zcash and Stellar Lumens.
Management. All self-directed IRAs are managed by a custodian. You maintain full control, and the custodian carries out transactions, customizes your investments and administers your account at your direction.
Access.Everything from signup to portfolio management can be accomplished online, though you can also sign up by phone.
Reputation. Since BitIRA doesn’t issue accounts itself, it doesn’t have much of a reputation online. However, it claims to offer a streamlined process for IRS-compliant IRAs and has a AAA rating from the Business Consumer Alliance.
What are the benefits of BitIRA?
Unlike traditional IRAs issued by banks and credit unions, cryptocurrency IRAs let retirement savers invest in digital currencies on a tax-deferred basis.
Through its partner, Preferred Trust Company, BitIRA provides:
Flexibility. Trade cryptocurrency and other asset classes like real estate and precious metals that are typically unavailable through standard, bank-issued IRAs.
Security. Digital currencies operate on blockchains where all transactions are independently confirmed by multiple peers to safeguard against errors or unauthorized changes.
Diversification. With more asset classes available, you can diversify your portfolio to minimize risk and maximize profit.
Tax-free growth. At the time of writing, cryptocurrency is treated as personal property for tax purposes, meaning it can be kept in a digital IRA. Growth is thus tax-free until you withdraw your money. For more information, check out our crypto tax guide.
Decentralized. Digital currencies are decentralized, meaning that authority and influence over their operations is spread across numerous participants rather than a single entity.
Inflation protection. Cryptocurrencies can be protected from inflation through decentralized management, pre-programmed inflation rates or even deflationary economic models.
Insured cold storage. Your cryptocurrency is stored in a vault on a hardware wallet that isn’t connected to the Internet, meaning no one has access to your money. If your digital currency IRA is compromised, your assets are insured by BitIRA‘s solution.
What to watch out for
Digital currency IRAs can be an effective way to save for retirement. But like any investment, they come with potential drawbacks that include:
Fees. You’re charged a $50 activation fee when opening an account plus $300 to $1,000 a year in custodian fees. Other fees include those for stopped payment, sending or receiving wire transfers and closing your account.
Volatility. Cryptocurrency is often more volatile than other assets. Because there’s no regulatory body or intervention from outside institutions, larger traders or “whales” can influence the value of your investment with a single trade.
Inherent value. Some cryptocurrencies have no inherent value, so they pose the risk of becoming worthless while most other asset classes will often be worth at least something.
No reputation. BitIRA is a fairly new company, so there aren’t many reviews from customers or consumer watchdog websites.
Minimum deposit. To open a digital currency IRA with BitIRA, you’ll need a deposit of at least $20,000.
How much does BitIRA cost?
BitIRA helps customers set up accounts through its partner, Preferred Trust Company, which charges a $50 fee to establish your account among others that depend on your balance and needs.
IRA account value
Annual IRA account administration fee
Other Preferred Trust Company account fees
Partial transfer-out fee
Full transfer-out or account termination fee
Incoming and outgoing wire fee
Stopped payments and returned checks
Cashier’s check fee
IRA account conversion fee
ACH or wire rejection fee
IRA service or research fee
$100 an hour
How do I create an IRA through BitIRA?
While cryptocurrency is entirely digital, BitIRA allows you to sign up online or by phone. But you must start by contacting BitIRA by phone or email to let a specialist know you’re interested in opening an account.
Phone: (800) 299-1567.
The specialist helps you complete the paperwork, fund your account and initiate rollovers, if you require them. A digital wallet is then set up for you and connected to your IRA.
To open an account, you must meet requirements that include:
Valid Social Security number or tax ID
Valid US address
Valid state-issued ID
$20,000 minimum deposit
When you open an account through BitIRA, you’ll provide your:
First and last name
Social Security number or tax ID number
Date of birth
Address and other contact details
Bank and contribution information
I’ve signed up. Now what?
Take advantage of your new digital currency IRA and work to avoid unnecessary fees and penalties when using your account:
Manage your account. Log in to your online account to monitor activity, request transactions and more.
Get help. Contact BitIRA by email or at 800-299-1567.
Understand fees. You’re charged for transactions, cashier’s checks, research and many other services.
Keep to contribution limits.The limit for 2019 is $6,000. If you’re older than 50, you’re allowed to contribute an extra $1,000.
Keep an eye out for tax implications. Contributing to your IRA can help you reduce your taxes. Speak with customer service, a financial adviser or your accountant for more details.
Withdrawals. If you’re younger than 59 1/2, you’ll pay a 10% penalty plus any federal and state taxes, unless an exception applies. After 59 1/2, you can withdraw without a fee, but you’re responsible for federal or state taxes. At 70 1/2 or older, you’re required to take minimum distributions.
BitIRA digital currency IRAs may be an innovative way to diversify your retirement investments, offering features and flexibility that you won’t find with traditional bank-issued IRAs. But opening and managing your accounts is complicated, making this retirement vehicle better suited for experienced investors.
If a traditional IRA is more your style, compare your options to find the best fit for your needs.
Frequently asked questions
Yes. Speak with BitIRA or your current custodian to learn whether your account is eligible to roll over to a digital IRA.
After setting up and funding your account, log in or contact a BitIRA specialist to manage your portfolio. You can’t make the transactions yourself, but your requests are carried out by your custodian.
Yes. BitIRA‘s headquarters are in Burbank, California.
No. As long as your cryptocurrency and other asses are kept in your IRA, you can buy and sell without penalty.
If you take any distributions before you’re eligible, you will likely face fees and penalties.
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