Bitcoin IRA Rollover Guide USA
Last Updated on 2nd June 2022 by Jeffrey Camerda
Bitcoin IRA Rollover Guide 2021 – Walkthrough
A Bitcoin IRA is a self-directed Individual Retirement Account that allows you to invest in Bitcoin. Opening a Bitcoin IRA is easy and you can transfer funds from a 401k or traditional IRA. This way you can diversify between traditional and alternative assets. 2021 promises to be an excellent year for Bitcoin with experts predicting its value could sky-rocket as investors turn to cryptocurrency to hedge against inflation and protect their assets.
What is a Bitcoin IRA?
A Bitcoin IRA is a self-directed IRA that allows you to invest your retirement savings in Bitcoin. You can open a new Bitcoin IRA today and roll over funds from an existing 401k, IRA, or another qualifying pension account.
It is permissible to hold a traditional retirement account and a Bitcoin IRA simultaneously. This way you can diversify your portfolio by splitting your funds between traditional assets and Bitcoin.
Many Bitcoin IRA custodian companies support investment in multiple alternative cryptocurrency technologies. Among the most popular alternative cryptos are Ethereum, Ripple XRP, Bitcoin Cash, Litecoin, and EOS – more about these later.
Digital Currency Self Directed IRA
Opening a Bitcoin IRA account is easy and it is a process your custodian company will take you through. Set up is fast and straight forward. Accounts can be up and running within 24 hours of an initial online application.
Your custodian company will also assist the transfer of any funds from an existing retirement account. The transfer, or “rollover”, of funds will be managed by your custodian in such a way so as not to trigger any tax or early withdrawal penalties.
Hiring a custodian company to manage your self directed IRA is a legal requirement. There are several companies out there that specialize in managing Bitcoin IRAs. The global events of 2020, dominated by the coronavirus pandemic has seen Bitcoin IRAs become an increasingly popular option amongst investors.
Why Choose Digital Currency For Your Retirement Account?
Alternative assets such as cryptocurrency offer an excellent opportunity for asset diversification. Traditional retirement accounts such as 401k, Roth IRA, Traditional IRA, TSP, or SEP plans are entirely invested in traditional paper assets such as stocks, bonds, and mutual funds.
Should the world economy begin to stall and another financial crisis strike, the value of paper assets could plummet overnight. This scenario plays heavy on many minds, and Bitcoin may just offer the insurance needed to protect your investment.
Is a Bitcoin IRA Legitimate?
A Bitcoin IRA is a form of a self-directed IRA which gives control of investment options to the client and allows for investment in Bitcoin. The IRS has issued the following guidance regarding cryptocurrency investment: “Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply”.
This statement allows investors to proceed with confidence in investing a 401k in cryptocurrency. The virtual asset has been classed as property and will be subject to the same rules as property transactions. Bitcoin IRAs are an attractive option for investors aiming to protect and diversify their retirement portfolio.
A popular approach is to retain a traditional retirement account for traditional investments and separately open a Bitcoin self directed IRA for cryptocurrency investments. Precious metals can also be purchased using a self directed IRA. This way the account is diversified across traditional and alternative assets.
Investing in Bitcoin 2021 – Good Idea?
2021 could be an incredible year for Bitcoin. While no-one can accurately predict what will happen in the months ahead, 2021 could be a great year to invest in Bitcoin with a potential ‘Bull Run’ on the cards. We are living in times of great uncertainty and witnessing events we never imagined possible.
The coronavirus pandemic has changed the world and shocked us all. As the virus takes a heavy toll on human life and the global economy, investors rest uneasily as they consider how best to protect their wealth. 2021 could be a very big year for Bitcoin.
Financial and crypto experts believe Bitcoin could sky-rocket in value as two key events play out over the next number of months. These events are the economic impact of the viral pandemic, and the Bitcoin halving in May 2020. Either of these could see the price of the cryptocurrency increase dramatically.
The two scenarios combined could lead to a spectacular rise in value. As with any investment, the price of Bitcoin can rise as well as fall and we advise consulting with a financial planning professional before investing in cryptocurrency.
- Viral Pandemic, Hyperinflation, and a Bitcoin Bull Run – the delicate economic situation we find ourselves in today could give rise to hyperinflation. Hyperinflation can be triggered when several conditions are met. Firstly, there is a sudden and sharp drop in tax revenue.Secondly, there is a need for the government to continue spending. And thirdly, there is an unwillingness or difficulty for the government to continue to borrow money. We could be on the edge of hyperinflation today and this could drive the value of Bitcoin through the roof. As the dollar falls, and inflation sets in, investors will increase weightings towards inflation hedges.Bitcoin could see a flood of investment. Clem Chambers, writing for Forbes magazine, has predicted that in this scenario Bitcoin could explode in value if the mainstream turns to cryptocurrency when they realize they need to hedge against inflation of the dollar.Bitcoin is easy to buy, easy to store. There are fewer fees and middle-men associated with purchasing and storing it compared to gold. It is an attractive alternative asset for investors.
- Bitcoin Halving – A Bitcoin halving event took place in May 2020. This saw the number of Bitcoins awarded to those that run the service halved. It is a process that takes place approximately every four years.In an article for Forbes titled “A New Class Of Bitcoin Millionaires May Emerge”, Luke Fitzpatrick talks about how this event in the past has seen the value of Bitcoin rise dramatically and how the same may happen again in 2021.From a historical perspective, the previous two Bitcoin halvings saw the value of the cryptocurrency rise to all-time highs. The first halving event of November 2012 saw the value of Bitcoin rise from $11 to $1,000 approximately 12 months later.The second halving was even more spectacular. The value of Bitcoin climbed from $700 in July 2016 to an incredible $20,000 the following year. 2021 may be no different and it could be a great time to get on board.
What is Bitcoin and How Does It Work?
Bitcoin is a digital cryptocurrency technology first established in 2009. It is a virtual currency that is used to buy and sell products and services online. It operates using a completely decentralized network, meaning no central authority has control over it.
It cannot be manipulated by a government or federal reserve in the same way traditional fiat currency can be. The number of Bitcoins that are in circulation is fixed, and are encrypted so that they cannot be copied or duplicated.
They are issued slowly over time and once the predetermined limit has been reached, no additional Bitcoins will be issued. Traditional money can be printed and put into circulation anytime a government deems it necessary. This can lead to inflation.
Bitcoin runs on a technology called the blockchain. Every single transaction that takes place in Bitcoin is recorded in an open ledger. Transaction details can be viewed by anyone that is part of the blockchain network.
Although users can see how much Bitcoin is moving in any given transaction, users can withhold their identities to protect their privacy. Protection of identities of people sending or receiving currency is one of the key strengths of the technology.
Bitcoin facilitates payment directly from one individual to another without using an intermediary financial institution. This ensures transactions can be processed rapidly and at any time of the day.
The Bitcoin network is always open and available. The removal of an intermediary also means reduced fees for processing a payment. By cutting out the middle-man and connecting two individuals directly additional fees are reduced.
IRA Cryptocurrencies – What Other Cryptocurrencies Are Available?
Most custodian companies that support Bitcoin IRAs also support a range of additional cryptocurrency investment options. This allows customers to diversify their portfolio across several virtual assets.
The number of cryptocurrencies supported varies greatly from one custodian to another, so it is advised you review your options before committing to any particular custodian company. For more information on choosing the right custodian company, read our guide Best Cryptocurrency IRA Companies 2021, by clicking here.
Some companies offer two or three additional cryptocurrencies, while one (Regal Assets) offers an incredible 30+ additional options. The most popular alternative cryptocurrencies are listed below.
- Ethereum is an open-source, decentralized, blockchain platform that supports its own cryptocurrency, ether. The platform facilitates Smart Contracts and the building and running of Distributed Applications while eliminating fraud, downtime, and third-party interference.
- Ripple XRP is a cryptocurrency that is aimed at businesses. It acts as both a cryptocurrency and a digital payment network. It was established in 2012 and is the third biggest currency by market cap, behind Bitcoin and Ethereum.
- Bitcoin Cash is a cryptocurrency that was created in 2017 when a fork emerged in the Bitcoin project. Its creators built the technology to cater for users who wanted to use a cryptocurrency for everyday payments. Although that was the goal of the original Bitcoin, it became more difficult to use Bitcoin for everyday transactions as it became increasingly used as an investment vehicle. The large investment transactions taking place on the Bitcoin network created a strain that ultimately reduced its ability to process smaller everyday transactions rapidly. This issue gave rise to the development of Bitcoin Cash.
- Litecoin is a peer-to-peer virtual cryptocurrency. It is an open-source, decentralized global payment network. It was developed in 2011 by Charles Lee to address some of Bitcoin’s shortcomings. It delivers faster payment confirmations and has gained widespread industry support.
- EOS is a decentralized blockchain technology that supports large-scale applications. It is used to create, host, and support decentralized autonomous applications, or “dApps”. EOS supports all the features needed for development, hosting, and running dApps. Payments are processed free of charge as the technology substitutes fees with inflation.
- Binance Coin is a new cryptocurrency issued by the Binance exchange that is run on the Ethereum platform. It uses a finite number of Binance coins, which has been set at 200 million tokens. The Binance coin will be used to pay for operations on the Binance network. Operational fees include; trading fees, exchange fees, and listing fees.
Opening a Bitcoin IRA is easy. Your custodian company will walk you through the process and typically a new account can be up and running in as little as 24 to 48 hours. Remember, you can retain your existing traditional IRA or 401k when you open a Bitcoin IRA.
You are not required to shut one down to open the other. This way you can split your assets between traditional and alternative investments. Several documents need to be completed and signed. Most of these can be completed online. The documents include:
- Account Application Form: name, address, social security number, etc.
- Fee Schedule: details of the custodian’s fees
- Account Holder Disclosure & Hold Harmless: summarises the responsibilities of the account holder and custodian company
- Fund Transfer Document: used to transfer funds from an existing retirement account
- Government ID: proof of identity
- Direction of Investment: used when you wish to purchase Bitcoin
Rolling Over from a 401k or Traditional IRA
As this bitcoin IRA rollover guide 2021 has outlined – rolling over funds from a 401k or transferring from a traditional IRA is easy. Again, this is a process your custodian company will take you through. You can rollover as little or as much as you require, but bear in mind most custodian companies have a minimum investment criteria that will have to be met.
This can vary greatly from one custodian to the next. The funds should be transferred in a manner that does not trigger any tax or early withdrawal penalties. For more information on rolling over funds read our guide: How to Roll Over from a Regular IRA to a Bitcoin IRA.
Choosing a Bitcoin IRA Custodian Company
There are many companies out there that specialize in managing Bitcoin IRA accounts. Choosing the right one for you and your retirement fund is crucial. The services provided, levels of support and fee structures vary greatly from one company to the next. You should spend some time evaluating the options and assessing which one works best for you. Below are some of the key selection criteria you should consider:
- Specialization & Experience: Look for a company that specializes in Bitcoin. Many traditional IRA companies have begun offering crypto as an investment option. However, it may be best to choose a company that specializes in crypto investments. This way you are guaranteed to get the team of specialist professionals you need. You want a company that has the technical skills and cryptocurrency trading experience required to manage your account.
- Number of Cryptocurrencies Supported: Many of the cryptocurrency custodian companies support only Bitcoin. If you want to keep your options open, look for a company that supports a wide range of cryptocurrencies. Some companies provide investments in a range of the top virtual currencies.
- Minimum Investment: Each of the companies has set a minimum investment to open an account. This figure can vary greatly between the companies. Typical values range from €3,000 to €20,000.
- Fees: Fee structures vary from one company to the next. To get a clear understanding of how fees are charged you may need to contact a company directly. There is limited information available openly online on this topic.
For more information on choosing the right custodian, read our guide Bitcoin & Cryptocurrency IRA Custodian Companies, by clicking here.
For further reading on cryptocurrency and precious metal IRAs, visit our homepage, the wealth builder club.
Related articles and guides:
- @ Regal Assets Gold + Cryptocurrency IRA and 401k Reviewed Read here
- Are Gold IRAs Safe? Read here
- Best Cryptocurrency IRA and 401K Companies in 2021 Read here
- Best Gold and Bitcoin / Cryptocurrency IRA Rollover Company Read here
- Best Gold IRA Companies Read here
- Bitcoin Cryptocurrency IRA Account Read here
- Can I Buy Bitcoin with my IRA or 401k Plan? Read here
- Cryptocurrency in an IRA Read here
- Gold & Silver IRA & 401k Plan Read here
- Gold IRA Rollover From Your 401k Read here
- Gold IRA Storage Requirements Read here
- Guide to a Bitcoin Cryptocurrency IRA in 2021 Read here
- Guide to Performing a Bitcoin IRA Rollover Read here
- How to Buy Gold with IRA Read here
- How to Invest Your 401k in Gold Read here
- How to Invest Your 401k into Cryptocurrency / Bitcoin Read here
- How to Roll Over Money from a Regular IRA into a Bitcoin IRA Read here
- IRA Gold Physical Requirements – What Physical Gold is Eligible? Read here
- Is a Cryptocurrency / Bitcoin IRA Legit? Read here
- Regal Assets Bitcoin IRA 401k Read here
- The Best Bitcoin IRA Custodian Companies Read here
Dr. Jeffery Camerda, PhD, is a financial planner who specializes in wealth management and retirement planning.
With a PhD in Economics and Financial Planning, Jeffery represents the highest level of financial planning expertise and achievement in the USA
In addition to preparing you for a career in financial planning, a PhD in economics and finance also prepares you for academic pursuits, such as becoming a university professor in teaching or doing research.
Here at the Wealth Builder, our financial advisory company was founded in 2007 and services all across the USA with over 16 years of expertise.
In order to provide the finest advice and services, we pay close attention to the specific financial circumstances and requirements of each client.
In order to guarantee that our clients don't get a sales pitch for insurance or investments, as well as a lack of conflict of interest from a prospective commission-bearing corporations, Jeffery focuses on fee-based services. Financial planning for wealth managers, financial well-being workshops, and personal financial planning packages are all part of the company's offering.
Jeffrey Camarda, PhD, CFA, EA is also the founder of the Family Wealth Education Institute, is a member of the Financial Planning Association and serves as the Chairman of Camarda Wealth Advisory Group