Bitcoin has been gaining traction in the investment universe in recent years, so it’s only natural that it will be considered a candidate for inclusion in an IRA account.
How common is Bitcoin in IRAs? Not very. Yes, you can hold Bitcoin in an IRA, you use to have to make a number of special provisions in order to do so. But now through new providers its simple to hold your IRA in bitcoin.
Is Bitcoin a Permitted IRA Asset?
IRS guidelines on IRA investments are at least a little bit fuzzy in regard to Bitcoin, not the least of which since it’s something close to a standalone asset.
Current guidelines permit all but the following asset types to be included in an IRA:
- Metals – with exceptions for certain kinds of bullion
- Coins – (but there are exceptions for certain coins)
- Alcoholic beverages
- Certain other tangible personal property
Bitcoin doesn’t fit under any of those categories, at least not neatly. Since the IRS has yet to specifically rule on the acceptability of Bitcoin in retirement plans, the retirement industry is moving slowly – and cautiously – toward acceptance.
Remember that the IRS doesn’t specifically approve what you can hold in your IRA (but they do specifically prohibit collectibles). So be aware of anyone stating they have ‘IRS Approved‘ investments.
Find an IRA Custodian Who Will Accept Bitcoin Investments
If you want to add Bitcoin to your retirement portfolio, the first order of business will be to find a custodian or fim who will accept them. The vast majority of IRA custodians will not, including most of the companies with household names. Fidelity Investments, the world’s largest IRA custodian, had taken a brief foray into Bitcoin, but then promptly withdrew only months later.
Some of the IRA custodians known to accept Bitcoin include:
- BitcoinIRA (Our recommendation) Call them at 1-844-440-0818
- Regal Assets
- PENSCO Trust Company (read our review)
- The Entrust Group (though the site doesn’t indicate that it does specifically, the company comes up repeatedly in articles on Bitcoin IRAs)
- Millennium Trust Company (same situation here)
As you can see, this is a very short list. Most IRA custodians consider Bitcoin to be too speculative to be a retirement asset, and are probably also wary of sudden regulatory changes that can bring an end – or at least severe complications – to the trade.
Bitcoin Investment Trust
Sometimes referred to as The BIT, Bitcoin Investment Trust was established by SecondMarket, a finance startup that has helped people invest in private technology companies.
Launched in 2013, the BIT is sponsored by Grayscale Investments LLC (Grayscale), a wholly-owned subsidiary of SecondMarket Holdings, Inc. (custodian and administrator) and an affiliate of SecondMarket, Inc. (marketing and distribution partner and authorized participant). Grayscale currently sponsors GBTC:US through which it holds bitcoin. This is traded on the Over-The-Counter market place.
It has been buying Bitcoin for over a year and currently holds about $36 million worth. While SecondMarket makes is available only for accredited investors (see below) or financial institutions, it also has worked out arrangements with several self-directed IRA platforms, including Pensco and Entrust, as listed above. This enables individuals to invest in Bitcoin in increments starting at $25,000.
Here are the requirements:
- Investment Minimum: $25,000
- Investor Qualification: Accredited investor (see below)
- Annual Administrative and Safekeeping Fee: 2.0%
BitcoinIRA Direct Investing (No Need For Accredited Investor Status)
BitcoinIRA can help facilitate transferring your IRA to bitcoin without you being an accredited investor (see below for accredited investor details). This is currently the best way to hold your IRA investment in bitcoin.
The two major reason for going this route are:
- No need to comply with the requirements listed above for investing in Bitcoin Investment Trust
- No need to worry about the risks of investing in OTC markets
*I recommend not rolling over your IRA to bitcoin (or anything else) unless you have at least $20k saved. If you don’t then focus on building your IRA account balance.
BitcoinIRA is also the world’s first company to allow purchase of Bitcoins and other cryptocurrencies for their IRA or 401(k) retirement accounts.The service includes setting up a qualified cryptocurrency account, rolling over funds from an existing IRA custodian, executing a live trade on a leading exchange and then moving funds into a secured, multi-signature digital wallet. They are the most trusted.
Accredited Investors Only
The term “accredited investor” appeared several times in the last section, and it’s not to be taken lightly. It’s actually a legal definition assigned by the Securities and Exchange Commission (SEC).
Investopedia.com defines accredited investor this way:
“A term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by certain government filings. Accredited investors include individuals, banks, insurance companies, employee benefit plans, and trusts.”
The qualifications to be an accredited investor include completing at least one of the following:
- Earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.
- Have a net worth exceeding $1 million, either individually or jointly with his or her spouse.
- Be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered.
These investors are considered to be fully functional without all the restrictions of the SEC.
If there’s an accredited investor requirement for a Bitcoin IRA, then you’ll need to meet at least one of these requirements in order to participate.
*Update September 2017 – through BitcoinIRA you don’t need to be an accredited investor.
Bitcoin in Self-Directed IRAs
Most retirement platforms that offer Bitcoin do it through a dedicated fund, which is to say that you don’t actually buy Bitcoin, but rather buy shares in a fund that buys them.
Broad Financial allows you to instead buy Bitcoin directly from the exchange of your choice. This also results in lower transaction costs, allowing you to skip the middleman custodian and fund manager.
Broad Checkbook Control. You can buy and sell without any penalties, and get in and out of investments quickly and efficiently. Checkbook Control also makes it easier to diversify into assets that are sensible and profitable, including real estate, precious metals, and private businesses.
Broad Financial currently offers Bitcoin arrangements for both IRAs and Solo 401(k) accounts.
Should You Hold Bitcoin in Your IRA?
If you consider Bitcoin to be a good future investment, then it certainly makes sense to hold it in an IRA. Just understand that the investment will not be welcome with all, or even most, IRA custodians.
Also understand that the current acceptance of Bitcoin – as a currency and as an investment – is still being worked out. Where it lands, for official purposes, is anyone’s guess. This is a significant risk that applies to this type of asset.
Given the speculative nature of both Bitcoin itself, and it’s still fledgling acceptance level, it would be best to take a relatively small position, even in a retirement account. If the investment potential holds, you can make a fortune with even a small investment.
But even if the worst happens, and Bitcoin fizzles, you won’t lose a whole lot.
Disclosure: The owners of this website may be paid to recommend BitcoinIRA. The content on this website, including the positive reviews of BitcoinIRA and other reviews, may not be neutral or independent