How to Invest in Cryptocurrency: 401(k) Rollover to IRA and More Techniques

How to Invest in Cryptocurrency: 401(k) Rollover to IRA and More Techniques

Bitcoin stacks and piggy bank

An Individual Retirement Account (IRA) provides you with an alternative to a 401(k) and offers a wider range of options to invest your savings. When planning for retirement, many people choose to conduct a 401(k) rollover to a Cryptocurrency IRA because it typically delivers better returns than other accounts.

There are various types of IRAs, the most popular being traditional and Roth, which operate in similar ways but offer different tax benefits. For those who want more control over their investment choices, a self-directed IRA gives you the power to choose exactly where your money goes.

A Cryptocurrency IRA is a type of self-directed IRA that provides exposure to the exciting new digital asset class of cryptocurrencies like Bitcoin, Litecoin, and Ethereum. Over the past few years, Bitcoin has enjoyed incredible gains, making it the most profitable asset of the past decade. With a Cryptocurrency IRA, you can benefit from these excellent returns by investing a portion of your IRA into Bitcoin and other profitable cryptocurrencies.

Just like a standard Self-Directed IRA which commonly invests in other types of alternative assets such as real estate or precious metals, a Cryptocurrency IRA can be directed towards a variety of digital assets. With the confident backing of the IRS that deems cryptocurrency as property, American’s can safely invest in this powerful and promising new asset class.

When purchasing cryptocurrency through an IRA, you get the full backing of a trusted, third-party custodian that holds the assets for you. This ensures that your investment is always protected to the highest safety standards, leaving you free to enjoy life with the knowledge that your retirement is secure. There are several methods of funding a Self-Directed IRA, including a rollover, a transfer, and annual contributions. Here we’ll look into the various benefits and disadvantages of each option.

401(k) Rollover (or other Employer Plan to IRA)

One of the easiest and most popular ways to fund a new Cryptocurrency IRA is a rollover from an existing 401(k) or similar qualified accounts, such as a 403(b) or Thrift Savings Plan. When changing jobs, many people choose to roll their existing employer-sponsored plan to an IRA because it offers significant tax savings and better investment opportunities.

A rollover typically involves transferring the money from your old employer plan, such as a 401(k), into a new IRA, after which you can diversify it into a wide variety of investments of your choice, including cryptocurrency. Once your new IRA account is set up, the rollover request can often be accomplished online or with a phone call to your employer plan administrator.

Should you only wish to move some of the funds out of your employer plan, you can also do a partial rollover if the plan rules allow for that.  The IRS has something called the “IRA One-Rollover-Per-Year Rule”, which can be restrictive depending upon the way the transaction is completed.  Coin IRA’s IRA Specialists are experienced in working within these kinds of IRS rules and will structure your rollover accordingly.  In most instances, your previous plan administrator will transfer the funds directly to your new IRA account.

IRA Transfer

An IRA transfer involves sending funds from an existing IRA to a new IRA. This can be a full or partial transfer of funds. The funds are sent directly from your existing custodian to the new IRA custodian after your new Self-Directed Cryptocurrency IRA account is established.

In the case of a Cryptocurrency IRA, you would need to convert any existing stocks or bonds to cash before initiating the transfer. Once the transfer is complete and your new account is credited, these funds can then be used to invest in cryptocurrency assets in your new IRA.  With a trusted cryptocurrency custodian taking care of your assets, you won’t have to worry about the complex technical aspects of storing cryptocurrency.

Annual Contribution

As long as you are earning income, you can also fund your cryptocurrency IRA through eligible contributions determined by the IRS according to your age.  You simply make your annual allowable contribution or any portion of it using your earnings or any savings you have. You can do this directly from your personal checking or savings account. Payments needn’t be yearly but can be done to your own preferred schedule, whether weekly, monthly or spontaneously, as long as you don’t exceed the limit for your age.

These are known as annual contributions because the amount you can put in is given a yearly limit by the IRS. For 2021, the combined value of all your IRAs is limited to a maximum contribution of $6,000, or $7,000 if you’re over 50. However, if you choose a Roth IRA your annual contributions may be further limited based on your filing status and income and if you’re married, whether you file separately or jointly.

Even if you already participate in a retirement plan through your employer, you are also free to contribute to an IRA of your choice. In some situations, this could limit the amount of taxable deduction you’re allowed but still gives you exposure to the excellent returns that a Cryptocurrency IRA can offer.  Your CPA or tax preparer is the best person to advise you on contribution limits based on your income level, marital status, and filing status.

Discover the Benefits of a Cryptocurrency IRA Today

With a Cryptocurrency IRA, you can diversify your retirement fund beyond just cash or equities and take advantage of the full potential of this exciting new asset class. Coin IRA provides an easy method of investing in real, non-derivative cryptocurrencies through the safety of a Cryptocurrency IRA. To learn more about the benefits of starting a Cryptocurrency IRA, contact Coin IRA today.