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The Best Crypto IRAs and Benefits
As cryptocurrencies continue to rise in popularity, many investors are considering including them in their retirement portfolios. Crypto IRAs offer investors a unique opportunity to invest in digital assets while enjoying the tax benefits and the diversification of crypto. This guide will define crypto IRAs, explain why you might want one, and highlight the top factors to consider when choosing a crypto IRA.
What is a Crypto IRA?
To understand a crypto IRA, let’s first define a traditional IRA.
Traditional or Roth IRAs
An IRA (Individual Retirement Account) is an investment that allows individuals to save for retirement while receiving certain tax benefits. Contributions to a traditional IRA are tax-deductible, reducing the individual’s taxable income for the year they made the investment.
Rather than paying taxes when they originally earned the income, IRAs allow investors to defer taxes until they withdraw funds, typically during retirement when their tax bracket may be lower.
Although closely related to a traditional IRA, a Roth IRA has one major distinction: investors contribute to a Roth IRA with after-tax dollars. So, a Roth IRA doesn’t offer the same immediate tax benefit as a traditional IRA. However, since investors pay taxes at the point of their initial investment, they don’t have to pay taxes when they withdraw their money.
These two different tax benefits of traditional and Roth IRAs explain why they’re both popular options today.
Managed or Self-Directed IRAs
Both traditional and Roth IRAs can either be managed or self-directed. In a managed IRA, the investor hires a financial advisor or investment manager to make investment decisions on their behalf, usually through the institution where their IRA is held.
This can be both an advantage and a disadvantage:
- An advantage of a managed IRA is that investors can simply leave their money with the financial institution and forget about it until they’re ready to make withdrawals (usually by retirement age). Since an investment manager makes the decisions on the investor’s behalf, investors can benefit from a professional’s experience without putting in the day-to-day effort.
- However, since managed IRAs depend on an investment manager, investors have less direct control and less say in their investments. This can be limiting for investors who want more flexibility and control.
The alternative to managed IRAs is a self-directed IRA. In a self-directed IRA, the investor makes their own investment decisions, expanding the types of resources they can invest in.
While investors have more fine-tuned control in a self-directed IRA, there are still limitations—a self-directed IRA will have a custodian from the financial institution who oversees the account. Different custodians from different institutions will allow different types of investments, and cryptocurrency is just one of the types of investments a custodian might allow or not allow.
A crypto IRA is a self-directed IRA that allows investors to invest in cryptocurrencies such as Bitcoin and Ethereum. This type of IRA follows the same rules and regulations as a traditional IRA, so investors can enjoy the same tax benefits while investing in digital assets.
However, crypto IRAs also have unique risks. Since investors are managing their investments rather than relying on an investment manager, their level of risk depends on their expertise.
Top 5 Reasons to Open a Crypto IRA at iTrustCapital
Here are some key benefits to consider when choosing a crypto IRA:
1. Tax Advantages
Crypto IRAs can be structured as either traditional or Roth IRAs. While traditional crypto IRAs are more common, this flexibility allows you to choose the best product for your tax needs.
Since both traditional and Roth IRAs have unique tax advantages, it’s important that investors are able to choose which type of crypto IRA to invest in. While consumers have the ability to invest in crypto without using a crypto IRA (and could still see a return on their investment), they would miss out on the tax benefits of an IRA.
2. Off-Balance Sheet Options
When companies store customer accounts “on-balance sheet,” that means their customers’ assets are incorporated into the institution’s total assets. In other words, in an on-balance sheet account, the financial institution can use their client’s assets as leverage for their own investments.
An off-balance sheet account is separate from the institution’s assets, which means there’s an arm’s length between your assets and the institution’s. While exchanges like Coinbase, Binance, and the recently collapsed FTX operate on an on-balance sheet approach, iTrustCapital is strictly an off-balance sheet organization, providing an added layer of security and protection for your investments.
3. Low Fees
One of the big variables between investment platforms is their trading fees. At iTrustCapital, you pay less in fees than most other self-directed IRA technology platforms. By saving on fees, you can maximize your overall return.
Many platforms aren’t up-front with their fees, so be cautious of hidden expenses from less transparent platforms. When searching for the best Crypto IRA, always ask the platform to provide a list of their fees so you can make an informed decision.
4. Client Experience
When you consider what you want out of your investments, a good return is likely your top priority. But that’s only one aspect of your investing journey: the service you receive is also an important consideration.
iTrustCapital prides itself on its reputation for excellent client experience. Our team of experts is here to help with every step of your journey, from your initial investment until retirement. That means you can have peace of mind knowing you have the support and guidance of a team of experts.
5. Investment Options
The curator of a self-directed IRA (such as a crypto IRA) has the final say over which types of investments they’ll accept. While some curators may not allow clients to invest in crypto at all, others may have limited options.
iTrustCapital offers a wide range of investment options, including Bitcoin, Ethereum, and more. We’re also constantly adding new investment options to the platform, keeping you up to date with the latest trends in the crypto market.
iTrustCapital’s Crypto IRA
A crypto IRA can be a good way to diversify your retirement portfolio and potentially increase your returns.
If you’re considering opening a crypto IRA, iTrustCapital is the one platform to consider. With tax advantages, off-balance sheet operations, low fees, excellent client experience, and lots of investment options, our crypto IRA offers a solution for anybody interested in adding cryptocurrency to their retirement portfolio.
Start investing in cryptocurrency today. Create an account.
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
iTrustCapital is a cryptocurrency IRA software platform. It is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager, or adviser in the United States or elsewhere. iTrustCapital is not affiliated with and does not endorse any particular cryptocurrency, precious metal, or investment strategy.
Cryptocurrencies are a speculative investment with risk of loss. Precious metals are a speculative investment with risk of loss. Cryptocurrency is not legal tender backed by the United States government, nor is it subject to Federal Deposit Insurance Corporation (“FDIC”) insurance or protections. Clients do not receive a choice of custody partner. The self-directed purchase and sale of cryptocurrency through a cryptocurrency IRA have not been endorsed by the IRS or any regulatory agency. Historical performance is no guarantee of future results.
Some taxes and conditions may apply depending on the type of IRA account. Investors assume the risk of all purchase and sale decisions. iTrustCapital makes no guarantee or representation regarding investors’ ability to profit from any transaction or the tax implications of any transaction. iTrustCapital does not provide legal, investment or tax advice. Consult a qualified legal, investment, or tax professional.
iTrustCapital makes no representation or warranty as to the accuracy or completeness of this information and shall not have any liability for any representations (expressed or implied) or omissions from the information contained herein. iTrustCapital disclaims any and all liability to any party for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this information, which is provided as is, without warranties.
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