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For many, the value proposition of Bitcoin is easy to understand, especially in relation to more traditional investments. Bitcoin has a programmatically fixed supply, it exists outside of any central entity’s control and can be considered truly borderless.
But the “how” of bitcoin investment can be a little more daunting. How to take part in the bitcoin ecosystem, how to best invest your dollars into BTC, how to construct this investment so that it is most beneficial and tax advantaged in the long term — in short, how to get started is often the hardest part.
The good news is that there is an easy way to direct traditional investment toward bitcoin that many don’t know about. You can join the bitcoin revolution through a very familiar investment vehicle: your IRA.
A Traditional Investment Vehicle, Made Revolutionary
Here’s how the typical process goes with IRAs: either you or your financial advisor creates an IRA in your name, and then uses it to invest in traditional investments — such as bonds or stocks. And there’s almost no chance that those IRA dollars would ever touch cryptocurrency, meaning that BTC and other alternative assets could never benefit from the tax advantages of an IRA.
Alternative IRA custodians grant you full control to invest in alternative investments beyond the traditional stock market — you make your own decision about where and how to invest your IRA dollars.
A few years ago, the IRS classified bitcoin (and other cryptocurrencies) as property, allowing it to be included in IRAs, along with other investments (called “alternative investments”) like real estate, venture capital, private equity and shares of art.
These alternative IRA accounts, often referred to as self-directed IRAs, can be structured in the forms that many investors are used to, most commonly: traditional IRAs, Roth IRAs, and Simplified Employee Pension (SEP) IRAs. Each type of IRA offers unique advantages, and determining which one is right for you will depend on your age, income, investor profile and overall goals.
Alternative IRA accounts have the same contribution limits as the other IRAs. The contribution limit through 2020 is $6,000 for those under 50 years old, or $7,000 for those 50 years old and older.
Why You Should Invest in Bitcoin With an Alto CryptoIRA
Because of regulatory changes and advances in technology, alternative IRAs are now more powerful than ever — allowing everyday investors to place funds in alternative investments and enjoy the tax-friendly advantages of an IRA.
To simplify investing in bitcoin with your IRA, Alto has created a special IRA just for crypto enthusiasts called, fittingly enough, the Alto CryptoIRA. Here are the benefits to opening an Alto CryptoIRA:
- Freedom to choose with your retirement money. Most brokerages and custodians don’t allow investments in alternative assets with IRAs, because these assets are typically illiquid. That’s not the case with Alto. You can use IRA dollars to buy bitcoin with a CryptoIRA from Alto.
- Make tax-free bitcoin trades. Active traders, pay attention: This is a huge plus to anyone who is watching the bitcoin market closely (and who isn’t?). An Alto CryptoIRA also gives you the ability to make tax-free trades. For example, you can sell bitcoin at $10,000 without having to worry about capital gains, and then buy again when bitcoin is at $8,000.
- Gains grow tax deferred. With an Alto CryptoIRA, BTC gains come to you tax free. You won’t have to pay tax if the value of BTC increases over time. If you got in years ago when the price was $1,000 and then sold when it was $10,000, you would not have to pay taxes on the gains. In fact, you’ll never pay taxes on any of those gains or whatever you invest them in next until you start to take taxable distributions later in life.
- Ease and cost. Though it hasn’t always been this way, Alto has built a unique and easy platform to simplify investing into alternatives. They have even created a dedicated IRA just for cryptocurrency investing, no LLC required, called the Alto CryptoIRA. In addition to investing in bitcoin with an IRA, you can create additional IRAs for investing in other opportunities, including those offered by their many partners.
One thing to keep in mind: Your total IRA contribution amount spans across all of your IRA accounts. You can have multiple IRAs, but all of your contributions can only equal $6,000 for the year. You are also limited from contributing to a Roth IRA, depending on your annual income. That said, you can rollover any amount of cash from an existing IRA to Alto without being capped and without penalty.
Conclusion: The Growth of SDIRAs and Alternative Investments
Investing in alternative assets with self-directed IRAs is only gaining in popularity with leading investors. Research made exclusive to AltoIRA showed that 27 percent of those with a household income of $1 million or more are interested in alternative assets, including cryptocurrencies like bitcoin. Other industry analysts expect the market for alternative investments to hit $14 trillion by 2023.
And it’s simple to join this growing trend at an opportune time, and begin investing in this market with an Alto CryptoIRA.