A Bitcoin IRA works pretty much like other types of IRAs. You fill out a form and you invest. You can invest in a traditional IRA (with pre-taxed assets) or a Roth IRA (with after-taxed assets) if you’re under 70 ½. Remember, you can’t take distributions in either type of IRA – a traditional or Roth – without a penalty unless you’re at least 59 ½. Generally, employees invested in their employer’s 401K are subject to the same penalty if they take distributions before they’re 59 ½.
Whether you have a 401K (through an employer) or an IRA, it would have to be explicitly self-directed for you to earmark it for bitcoin investment. Incidentally, this is also true of precious metals or collectible investments. In other words, as a plan participant, you get to choose the investment vehicle. Although this provision is changing in many 401K plans, most plans still specify a choice of only particular types of investments – usually stocks or stock funds.
Nobody can predict the future value of any investment. At this juncture, bitcoin is speculative. But given the rapidly increasing acceptance of bitcoin worldwide, its value can increase rapidly. Since its inception, we’ve already seen evidence of this. Under the circumstances, your IRA or 401K bitcoin investment could turn out extremely profitable over time – especially after you factor in your tax savings.
As with IRAs or 401Ks in precious metals or collectibles, a bitcoin IRA is handled through a custodian. Since bitcoin IRAs and 401Ks are a recent development in the financial community, only certain custodians will handle them.
A BitcoinIRA specialist will help you choose the custodian that’s right for your particular situation and answer any questions you may have.